Haggle - Under the radar penny auction site

Penny Auction Insider has been taking a break to get some much needed work done, but I came across a penny auction site by accident today and wanted to share. Haggle (which to my knowledge has not been discussed on Penny Auction Watch nor is listed on Penny Auction Traffic - as of this post), is running a Facebook ad that caught my attention just long enough to make me want to investigate whether it was a penny auction or not. Verdict: penny auction. However, they make no mention of the industry phrase in the ad or on their site, which suggests they are going after new customers, not existing penny auction players.

That is all. Hope everyone is having a lovely holiday season.
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Busy, Busy

I'll be very busy studying/working through early December and won't be able to post daily/frequently like I have in the past. In the meantime, if something truly interesting happens in the penny auction industry I'll cover it, but won't be able to write as much as I previously have. However, I'm looking forward to discussing the holiday shopping season, its impact on penny auction sites and the broader economy and will share these thoughts whenever I get a moment.

Thanks

PAG
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Penny Auction Insider Now on Twitter

Follow us at twitter.com/pennyauctionguy
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Bidcactus Overtakes Swoopo After Just Five Months

Bidcactus overtook Swoopo in unique visitors in July according to data collected by Compete.com. This is surprising news to the penny auction universe where Swoopo has long been seen as the industry leader, both in the US and Europe and is the oldest penny auction website, having launched four years ago in Europe and one year ago next month in the US.








Bidcactus, a Connecticut based company, launched on April 23 of this year and has experienced phenomenal growth. The company reached 693,013 unique visitors in July, to Swoopo’s 578,712, despite being in operation for less than five months and launching with only 36 users on its first day. Swoopo's growth in terms of unique visitors for July was 13.34%, BidCactus’s was 275.38%.

Penny Auction Insider spoke with Bidcactus Director Marjorie Almansi earlier today to discuss her company’s breakout success in a marketplace than has become crowded with competitors, knockoffs and scams.

“We’re growing in leaps and bounds,” she said. “We have great customer service; we’re the only [penny auction] site that offers 24/7 customer support and 9 a.m. to 5 p.m. phone support.” Almansi also credited ... player referrals, satisfied users who become repeat players, a strong engineering team and successful online marketing strategy that targets Google and Yahoo as key components to her company’s success. “We’ve surpassed every monthly goal we’ve ever set,” she added.

However, Bidcactus also appears to have spent slightly more than Swoopo on keyword advertising in July, an advertising method popular with penny auctions that drives significant traffic but can also be expensive. According to data collected by Spyfu.com, Bidcactus is spending between $991 and $7,370 on keyword advertising per day, while for Swoopo the number was between $725 and $6,530.

In turning to questions about the state of the penny auction universe, Almansi said she is concerned about rumors of fraudulent practices at some penny auction sites. “Unfortunately many people who are getting into [the penny auction business] are questionable. With box software you can get [a site up] for next to nothing. There are a lot of new sites out there and I don’t know what is going on behind the scenes,” she said. Almansi said she would be happy to lead the push to develop an audit panel that examines penny auction sites and certifies them as being legitimate. She also said she would welcome auditors to inspect her company and hopes others would be willing to do the same. “I’d be happy to carry the torch,” she said.

Almansi is optimistic about the future of Bidcactus and the penny auction industry as a whole. “There are very few people who know about us or who use penny auctions, but I think this could be a whole new way for the masses to shop,” she said. Amazon.com and Ebay, the two preeminent ecommerce storefronts on the internet each get about 70 million unique visitors per month, or about 14 times the number of visitors Swoopo and Bidcactus receive.

Bidcactus is currently running about 150 auctions per day and will soon expand operations to offer bidding around the clock.

Correction: An earlier version of this article quoted the advertising expenditures of Swoopo and Bidcactus in dollars per month, the figures given were actually for dollars per day. Thanks to Weronika Cybulska over at BidRodeo for pointing this out.

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The Sunk Cost Fallacy

Penny auction critics say these auctions exploit the sunk cost fallacy, ie "throwing good money after bad." I don't know if the average user experiences the pitfalls of sunk cost (irrational) psychology, but Zorro2612 certainly did in this recent auction over at Swoopo. This user spent $108 on bids and $155.40 on this iPod Nano worth $199 retail. Swoopo gives users a hand by automatically calculating their savings on an auction (retail price - (bids +cost)). Too bad this calculator only goes to $0 because you can have negative savings, they're called losses. Zorro2612 had savings of $199-$155.4-$108 = -$64.4. Didn't exactly slash a bargain now did we Zorro?

Here is what I bet Zorro was thinking:

Aye corrumba, i've already spent $100 on this auction, now I have to win it no matter what. If I back-off now, I'll have wasted that $100.

The problem with thinking about sunk costs this way is that it leads to irrational decision making. Having "sunk" $100 worth of bids into an auction does not make you more likely to win, therefore Zorro would have been best off to walk away after his total money spent on bids + cost of the item passed the retail price of the iPod. However, he did not do that, and in this case did end up winning the auction. Note that the outcome he received ie paying $263.4 for an iPod (including bids) is a better outcome than walking away at say $90 in bids and then buying the iPod at the street price of $199. However, when he made the decision to "go for it, all or nothing," there was no way of knowing he would be the winner. There very well could have been only one competitor on that auction who's strategy was also "go for it, all or nothing," and who got nothing. Zorro could have easily been out $200 with no iPod, instead of out $90 with no iPod as in the hypothetical situation I construct here.

To maximize value in all things; cars; houses; investments; penny auctions, users need to ignore sunk costs. As many critics point out, this seems especially hard to do in penny auctions, institutional investors (who I'll assume to be more sophisticated, but perhaps undeserving of the distinction) are known to be more likely to sell portfolio holdings that have appreciated in value by a certain amount to "take some profit," then they are to sell holdings that have declined in value by a similar amount, which they should do to minimize downside risk if the same standard of logic is to be applied evenly. This comes from a field called behavioral finance, which I find to have much in common with penny auctions, and is part of what initially drew and continues to hold my interest in these types of auctions.

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Attack of the clones

"Craig", presumably Craig Pratka, part-owner of Zoozle.com, wrote to us to correct the timeline we have up about bid-fee sites. I'll leave it to my co-blogger, who likes doing stuff like that, to make the correction to the graphic, but I'm always excited to hear from other people in this industry.

In doing some research about Zoozle, I came across the press-release they put out on the occasion of their going live. It included this shocking paragraph about their experience with the standardized "turnkey" software so many penny-auction sites use.

The software came with an 'Autobid' feature and instructions for the site admin to set fake user names and autobid timing from the back end. The feature can be disabled.. but when disabled, the sites critical functions, like bidding, did not work properly.

Shocking, but candidly, not surprising. It's very easy to be dishonest in this business -- even the word "dishonest" is somewhat euphemistic, here; "autobid" is shilling and in a bid-fee auction, shilling is outright fraud.

Cynical as I am, I was still shocked that the commercial software had shilling built in, had defraud-your-customer built right in. Wow, how do the people who develop that software justify what they do for a living to themselves?

So stay away from clone sites. They're easy to spot, they look just like Swoopo. Same green buttons, same unmistakeable red flicker when the timer is pushed back. They are all using the same software underneath. I have no idea what fraction of clones are actually using the shilling feature (or doing anything else dishonest), but why take the risk?
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In the mailbox: BidHof

I got an email from someone calling herself "Victoria Blechman". On the Internet, you always have to be suspicious about names (my parents didn't name me "Malvolio", for example), but would anybody pick "Blechman" as an alias?

In her somewhat eccentric English, the presumably-authentic Ms Blechman plugged her new Germany-based auction site, BidHof ("hof" is "yard" or "court" in German). The pitch involved eBay-like consumer-to-consumer (C2C) auctions. Now, I've always been a little dubious about C2C penny auctions, so I was curious to see her site.

Sadly, the site was still embryonic at best. It offered a set of ordinary bid-fee auctions, using what is obviously same software used to implement a lot of other auction sites. It talked in vague terms about C2C but didn't actually support it as far as I could tell (the site implementer has the same English-as-a-second-language style as Ms Blechman; it might have been Ms Blechman).

Ah, well, the search continues.

UPDATE: See here for more on Ms Blechman and BidHof.
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If It Sounds Too Good to be True, It Probably is, Unless it's a Penny Auction

(What do you mean these TVs don't cost $10?)

Late last night BestBuy accidentally set the price of a 52-inch TV on its website at $9.99, instead of the true retail price of $1,699, allowing shopping pandemonium to ensue. Consumers who noticed the deal in the wee hours of Wednesday morning jumped at the amazing offer, with many buying several or more of the sets. However, as age old wisdom goes: if it seems too good to be true, it probably is. BestBuy quickly fixed the mistake and told customers who purchased the $10 TV that the sale would not be honored.

While no one expects to get a 52-inch HDTV from BestBuy for $10, readers of this blog probably know of a few good sites where they might be able to snag such a deal. In the world of penny auctions, $9.99 doesn't sound like such an unrealistic price for a 52-inch TV, maybe a little low, but not unrealistic. Swoopo recently sold a similar TV for just over $100 and some of the lesser known sites can have even better deals.
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GoBid.com Is Blessed by the Gods of Publicity

Local ABC affiliate WPVI in Philadelphia ran a story about GoBid this past week and had nothing but good things to say. The story, which runs about two minutes, profiles what in my opinion is one of the lesser penny auction sites out there in the station's "Saving With 6" segment.

ABC describes GoBid as a site where users can get amazing deals, but where they might spend more than they realize. An ABC reporter talks with who I will assume is a GoBid executive, but I say "assume" because the guy's name and title are never mentioned. The report never even mentions whether or not he works for GoBid.com.

I thought it was interesting that ABC chose to profile GoBid without any mention of other penny auction sites. GoBid is one of dozens of small penny auction sites that cower in the shadow of Swoopo and Bidcactus. Ok, "cower" is a bit of an exaggeration, but they're certainly much smaller than Swoopo and Bidcactus from a traffic perspective.

So why did ABC choose to profile GoBid?

Is GoBid doing something unique that warrants media coverage?
No, they're just like 15-20 other penny auction sites.

Is GoBid from the Philadelphia area, and ABC wanted to focus on a regional business to better connect with their audience?
No, GoBid has offices in Miami and San Francisco.

In other breaking news, ABC WPVI sucks.

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Penny Auctions Aren't the Only Place to Get A Great Deal

We at Penny Auction Insider enjoy penny auctions, obviously, and while we don't play as often as many of our readers, we get just as excited about the savings that can be had. However, penny auctions aren't the only sites on the web where online savvy consumers can get great deals and a little entertainment. Woot and GroupOn are two social media entertainment shopping sites that allow users to get a fabulous, if not completely random deal of the day.

Woot offers a "Today's Woot," which is a product the site has managed to buy in bulk at an extremely low price. Take a scroll down their blog for an idea about past Woots. They offer everything from mid-range laptops (today's Woot) to golf bags and talking smoke detectors. It seems like a lot of Woot-ers buy the deal of the day just so they can share their experience in the online forum. Woot also displays statistics about how fast the product is selling and how long it takes to sell out (sometimes it does, sometimes it doesn't, but there is always a new product the next day).

GroupOn is a collective buying site that features a new deal each day for 17 cities around the US. Today in San Francisco it was a bay cruise for $26 (50% of the list price). The site negotiates with the supplier and they agree that if a certain number of people buy the item, the deal goes through at the list price and if it doesn't, the deal is void. GroupOn leverages the power of the masses to get good deals. However, most of the stuff is local, so you have to be in the geographic area to take advantage of the deal.

For an interesting economic analysis of GroupOn, Evan Miller goes to town here.
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Living in SIN

I've been following Swoopo's new feature "Swoop It Now" (SIN) with considerable interest. This is a feature that allows non-winning bidders to apply the cost of their expended bids toward the outright purchase of the merchandise. My prediction was that it would drive the bid levels way up, as a bidder who was interested in buying the merchandise would have no reason to stop bidding once he had invested enough bids to make buying the item a good deal.

This has not happened. At all. At least, it hasn't happened yet. And I want to know why not.

Right now, Swoopo is selling a Nikon D90, a very nice camera, I happen to have one myself. Amazon sells it for $1,139.95 and by what is certainly not a coincidence, Swoopo shows $1,139 as its list price. So if you want the Nikon, instead of going to Amazon, go to Swoopo, buy 1900 tokens at 60¢ each, $1140.00 bucks works, and load them into the BidButler.

You might win and get the camera for something around $76.00 (1900 of your 2¢ bids plus the same number of 2¢ bids from whoever is foolish enough to bid against you). In fact, you'll probably win, because you have the huge war-chest to discourage rivals.

And if you don't win? You buy the camera for the same price you'd pay on Amazon.

Somebody should try this. I'll wait here.
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Comprehensive Review of Penny Auction Sites

To follow-up on my last post about the importance of picking a credible penny auction site, my next few posts will feature a comprehensive review of all the penny auction sites we know about. If you know of another site, feel free to add it in the comments or send me an email (pennyauctionguy1@gmail.com) and we'll add it to the list. Let me preface this post by saying I was really surprised by the findings of this study. Over the past few months that I have been following penny auctions, I feel there is a new penny auction site popping up every time I turn on my computer. In looking at the data however, the majority of these newcomers have awful user interfaces which appear to come from the same box software package, low site traffic, frustrating practices and polices and many appear as though they could go out of business at any moment.

Here is a timeline of the 24 penny auction sites we were able to get hard data on. Note that we know only the month auctions started significant operations and not the day. Therefore, the placement of sites within a month does not indicate the order in which sites started in that month, but is an arbitrary placement for aesthetic value.






An earlier version of this timeline incorrectly placed Zoozle's start date as June, 2008. We have been informed by the founder that Zoozle actually launched in March, 2009.
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Picking a quality site has never been more important

As I dig further into penny and online auction sites my conviction that users need to pick a reputable company grows stronger. If they are not careful, users risk losing their money through fraudulent practices or sites going out of business. Here is a good example I came across today:

Jungle Cents - This site claims to offer both traditional penny auctions and seat auctions. The latter is where users spend bids to buy a spot in an auction with a finite number of bidders. Once all of the spots are taken the auction begins in the traditional brick and mortar sense. That is, bids are free and the highest bidder pays that price for the item. I really like this idea in theory because it limits the number of people who can come in over the top of your bid, unlike at sites like Swoopo where anyone can poach the auction at the last second. However, I'm not saying it will be easier to win or that the prices will be lower in the seat auction, actually I don't think they will be because bids are free. I registered at Jungle Cents today and was given one free bid. Since there are no live penny auctions I went to the seat auctions of which there are six. The only seat costing one bid was for a iPod shuffle, so I went with that one. So far 12 of the 75 available seats are taken in this auction. The auction won't start until all of the seats are taken and as I got looking I noticed that the first seat was purchased on July 8th! So that person has been waiting weeks for this auction to start and only a small fraction of the seats have been sold. This isn't fair! People who buy bids to compete in these auctions expect their auction to start in a reasonable amount of time. At this rate it's going to take months before anyone can bid on that iPod!

I'm working on a study of which sites look legitimate, however in the meantime PennyAuctionWatch.com seems to be vigilant about exposing fraud and dubious practices.
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The Penny Auction Paradox or Why Users Flock to Swoopo

In earlier posts I began to flesh out ideas of safety in numbers and group dynamics surrounding the penny auctionosphere ("penny auctionosphere" term coined here and now by me: Thursday, July 30, 2009) and how the economic idea of pooling is present and how this concept makes auctions safer but also harder and more expensive to win.

The idea that the QWERTY keyboard, Blu-ray dvd players and English as the language of business have evolved to be (virtually) universally accepted is because certain products or situations require that all users behave the same way; this is the idea of pooling. The QWERTY keyboard has been proven not to be the most efficient layout of keys for quick typing, so why don't we change to a more efficient layout? The reason is that re-training millions of people to use the new keyboard would be more trouble than the gains are worth. Why Blu-ay as the standard for high definition DVD? Because electronics companies don't want to have to make a DVD player for each new format (remember HD DVD, It lost), consumers don't want to have to worry about getting the correct disk from Blockbuster, and content providers don't want to worry about making the correct number of each format, exc., exc. English has become the "universal" language because the world needed one and as the largest economy and most influential country, the US probably seemed like a good choice. I don't know the specifics on how English came to be the "universal" language, but it did, maybe it has to do with all that colonization. In penny auctions, a kind of pooling is also starting to take place. However, this pooling is less like Blu-ray and more like Ebay and Craigslist, perhaps the two best examples of "e-pooling." If you want to sell your old coffee table you post it on Craigslist. All people who want to sell old furniture sell on CL and all who want to buy also look there. There is no other practical way to sell used furniture anymore (newspaper classified are dead). Ebay is the same way.

With penny auctions the market is still highly fragmented (37 sites in the US and counting at last check) however, Swoopo is without doubt the standout industry leader. But this is an industry still in its infancy, so will the kind of expansion we have seen over the past year continue, or will one or several penny auctions come to dominate the industry? I think one would be hard pressed to argue that penny auctions require the type of pooling seen in Craigslist and Ebay, however there are benefits to going with the industry leader that are becoming more apparent.

Users flock to Swoopo because the site has a professional layout and is perceived to be trustworthy, especially when compared to many of their peers who's penny auction sites look like they are being run out of a garage in Mexico. I won't name names here but just go down the list in the directory on PennyAuctionWatch.com and you will see what I mean about quality. With Swoopo, users can feel safe that they will get their products and that the site is not manipulating or gaming the system on the back-end to cheat them - others have been accused of doing so. In this sense, Swoopo represents a type of pooling, one based on safety in numbers.

Yet the concept of safety in numbers in the penny auctionosphere is kind of ironic because the more users who to go to Swoopo, the harder and more expensive it becomes to win auctions. There are deals to be had at the lesser known sites, like RockyBid selling a car for little more than $1, but there is also risk. So does herd mentality make sense in penny auctions? Sure, humans always do what others are doing when they know no better, but the key to being successful at penny auctions is finding the credible and less popular sites. How does one do this? I just analyze the market, I don't play the game.
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Why I don’t Like PriceDrip

While not a penny auction, PriceDrip is a social shopping website and therefore warrants discussion on Penny Auction Insider. For those who are not familiar, PriceDrip is a site that sells a variety of electronics equipment from iPods to LCD TVs, however what makes it unique is that prices slowly go down over time and users place anonymous bids for the most they would pay for the product. Bids are kept secret from everyone and when the falling price reaches the highest bid, that person wins the auction at their bid price. PriceDrip claims to be able to offer users “amazing deals” because advertising on the site offsets the falling price. Apparently, the more users who visit the site, the faster the prices fall.

So why don’t I like PriceDrip? Well, for one, a simple Google shopping search yielded lower prices on almost every item they sold. Take a recent auction for a Sony LCD TV which sold on PriceDrip for $1,082.19, representing a 23% savings over the $1399 retail price, the site claims. That same TV was found the same day on Amazon for $874.99 after tax and free shipping (PriceDrip also offers free shipping). So PriceDrip’s “amazing price” really is amazing, amazingly high. I don’t know why consumers are buying items on PriceDrip, but I think it has to do with not using the web effectively. Unfortunately, shopping comparison sites have been around a lot longer than PriceDrip but consumers don’t appear to be using them in this case.

A second reason why I am suspicious of PriceDrip is that their claim to offer lower prices through advertising seems impossible. The site has only one ad, a banner on the bottom (for BidStick.com when I checked today) and does not have much traffic. The amount of revenue generated by this advertising must be miniscule.

I have another problem with PriceDrip, which is that they posted a very suspicious press release announcing venture capital funding. The press release does not say what amount was raised, and the investing firm, 2G Associates, has no trace on the web, except for in the press release in question and a website with a “under construction” page. The press release also offers no contact information for either PriceDrip or 2G Associates.
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eBay for penny auctions?

A subject that comes up in conversation (when you spend as much time talking about penny auctions as I do) is "Why isn't there a consumer-to-consumer penny auction, an eBay/Swoopo mashup?"

The dialectic goes something like this:

Socrates: Why, in all the wide world, isn't there a site where one person, not previously engaged in commerce, can offer for sale to passersby some personal possession -- and be assisted by another person, an auctioneer, that auctioneer being compensated not by the seller, but by each would-be buyer, who pays a small fee even to make an offer.

Plato: I think, Master, that auctioneer would collect the lion's share of the money -- and what man would offer his property for sale, knowing he would receive only a tiny fraction of its true worth.

Socrates: Is there no solution to that objection?

Plato: Perhaps, the auctioneer could share with seller a portion of the fees he collects?

Socrates: Is there not an epistemological problem with that proposal?

Plato: I do not understand.

Socrates: Does the auctioneer know how much a bid has earned him? Are not the bids themselves a chief stock-in-trade of the auctioneer? Each bid has been itself bought in auction, and in those auctions, bids that were bought in auction were expended, and so on.

Plato: And so on, Master, but not ad infinitum. Careful, painstaking bookkeeper would tell the auctioneer just how much was brought in by each bid and its ancestors.

Socrates: It would tell the auctioneer, but not the seller, who would have to rely on the auctioneer's diligence and honesty. And this world is full to bursting with lazy and dishonest men who would pose as auctioneers.

Plato: Perhaps the auctioneer could pay the seller some fixed price per bid expended, regardless of how much that bid truly brought. Or perhaps the auctioneer could guarantee a price for each good. Or perhaps ...

Socrates: Perhaps we have reached the limit of philosophy. Perhaps we just have to attempt it.

Plato: Perhaps.
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One of my many, many readers writes

Jeff H. writes:

I have read all of the recent (good and bad) comments about Swoopo and penny auctions in general. Let me give everyone a point to ponder. If one day, a company like Swoopo said ok! we will no longer list our own items on the site, from now on, anyone who wishes to list their own items for sale may do so, you can keep all of the profits you make using the Swoopo bidding method, all you have to do is pay Swoopo a listing and final value fee just like ebay charges, these fees are for use of the site.

I can't help but wonder how many of you who are against the penny auction concept would suddenly be listing your own items for sale with the hope of pulling in the same kind of profits on your item that you say Swoopo is pulling in on theirs?

It follows then, that for those in favor of the Swoopo method, they obviously would jump at the chance. It also follows, that for those who are presently against the Swoopo method, they also would suddenly see a clear road to make a profit on any item they list on Swoopo.

Methinks in the latter case, there will be double standards flying all over the place and the naysayers will suddenly be saying things like, "You know something, Swoopo is not such a bad deal after all." LOL.

It appears to me that the overall mentality is, if it is new and has never been thought of or done before then it has to be crooked, that type of mentality is a clear demonstration of idiocy at its best. Those of you who are agianst the penny auction concept may not like what i have just said, but it is nevertheless true and you know it.

Whoever it was that originated the Swoopo (penny auction concept) most definitely has the millionaires mentality, those of you who criticize the concept are demonstrating that they are economic illiterates, (special emphasis on the word economic) at least until they would be allowed to list their own items for sale, then they would suddenly become financial wizards, LOL (sarcasm intended).

Come now you guy's, be honest and fair, tell it like it really is, you know that what I have just said is true and would happen in a heart beat if Swoopo allowed you to list your own items. When you bad mouth Swoopo and the like, you are opening your mouths just to change feet, if Swoopo gave everyone the opportunity to list their own products for sale you would jump at the chance and not one of them would give a rats ass for all of the losers that they presently feel sorry for in their blogs.

Now be nice people, respond to my post and admit that what I have said is true, put the sense of fair play back into your lives and start thinking of how you can make a buck instead if coming down hard on those who are at least trying to make a better life for themselves.

If all you naysayers are so concerned that there are people out there who are easily influenced, then stop trying to be a Mother Teresa by trying to influence them.

If you are still against it then simply keep your mouths shut and stay away, then no harm done.

I don't agree with everything Jeff says, but I'll respond in posts of my own.
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Yottabid? More like Nottabid!

I always liked YottaBid. First of all, I liked the name. "Yotta" just means "eight", but because it is used in the metric system to mean 10²⁴ (that is, 1000 to the eighth power, or for those of you bad at math, 1, 000, 000, 000, 000, 000, 000, 000, 000) it has come to mean "really big". I like really big, so I liked YottaBid.

Second, YottaBid is one of the few penny-auction sites with user forums. Now, I suspect that user forums are a bad, bad idea. They're an open invitation for bluffing ("I have loaded 1000 bids into the automatic bid-bot!"), collusion ("Bob, if you don't bid against me on this auction, I'll won't bid against you."), and other misbehavior.

But the fact that YottaBid is doing something that isn't in YottaBid's own best interest doesn't mean they're not fun to watch.

Until today (or recently -- again, I only noticed today). You go to their site and all there is is:

We currently have no auctions posted as we evaluate the type of format we will have in the future. Until then, please feel free to comment in our forum at this link, or email us at support@yottabid.com

Not good news. Either the message is the truth, and the YottaBid management is completely dazed by whatever is going on in their corporate life, which is bad; or the message is not the truth, and YottaBid management is just lying to us. Two bad choices.
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Countries aren't the only entities that print their own money, penny auctions do it too!

Bidcactus is a decent site, they've been around for a while and they seem to be stable. However, they offer a fairly limited product list and only run 8 auctions at a time and these 8 auctions are often dominated by bidpacks and giftcards. Earlier today 5 of the 8 auctions were for bidpacks, leading us here at Penny Auction Insider to joke about Bidcactus "printing its own money." Penny auction sites are getting people to spend money to buy bidpacks that cost the company nothing to produce. This is pure cash inflow for the penny auction sites in much the same way that the US Government can turn on the printing press and start churning out cold hard cash.

This leads to the issue of credibility and reliability. US dollars are a fiat money, ie they only have value because they are backed by faith in the US Government. People are willing to accept compensation for services rendered in dollars and stores are willing to trade goods for dollars, not because they want dollars or because those green pieces of paper have special meaning to them, but because the rest of society will also accept those dollars. This is a faith based system. If people feared that the US government might become unstable they would have serious concerns about their dollars. With penny auctions, people who have bids in their account have faith that the site they purchased from will not go bankrupt, discount the value of bids or otherwise hurt the value of their investment in bids. This is a strong argument in favor of participating in penny auctions only at the most reputable companies with the smallest likelihood of running into trouble. However, it is at these heavily trafficked sites where bidders also face the most competition.

Oh shucks, it looks like that with penny auctions, like in finance, there really is no free lunch - if you want a higher return, you're going to have to accept higher risk.























On Friday morning 5 of Bidcactus's 8 auctions were bidpacks. I would like to see a penny auction site go for all bidpacks and see how long people stick around before realizing the only thing they can use their bids for is winning more bids. In Bidcactus's defense, I have noticed that one of the items users ask for the most is bidpacks.
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Why do fools

Frankie Lymon & The Teenagers had a big hit in 1956 with "Why Do Fools Fall in Love"

Why do fools fall in love?
Why do birds sing so gay?
And lovers await the break of day
Why do they fall in love?

Always the rationalist, I wanted to answer, "Because pair-bonding improves the survival chances of offspring in any K-strategy species, especially ones that have long gestation times!" (OK, arguing evolutionary biology with a song on an oldies station may not be my most rationalistic moment, but let that pass.)

I believe that people really do have good reasons for the things that they, even the things that seem completely irrational and counterproductive. We fall in love because it's genetically advantageous to provide a stable home for child. We root for sports teams because pack-instincts improve our chances of survival in the wild.

Like Anne Frank, who wrote "Despite everything, I believe that people are really good at heart," I've had some reason to reconsider my beliefs about people.

Why do people pay more than face value, often a lot more, for bid packs?

One possibility is rational ignorance. A person is busy, and it may be (overall) more efficient to make guesses and approximation rather than do the work of research and calculation. Once in a while, the theory goes, you lose money that way -- in this case, by not understanding you could get the same bid-pack much more cheaply -- but in the long run the time you save will supposedly compensate you for losses and inefficiencies.

I don't know if this really explains it. The bid-packs are marked "$30.00" in big bold type. The effort of reading and understanding that line, which is right in the center of the screen, is minuscule compared to the effort of actually bidding.

Another possibility is that winning itself, regardless of what is won or at what cost, is pleasurable for the bidder, enough so that he ignores or discounts his self-interest.

It might even be superstition. The universe is a complex place and it's difficult to trace causality. A bidder having a bad day might think that if he "wins" even one auction, at any price, he will be moved into that golden cohort called "Winners", people that universe favors in all things.

None of these explanations is particularly convincing and more and more I feel the appeal of my original, knee-jerk conclusion: some people are just nuts.
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