The Auction Squirrel Merges with BidMyDreams

The Auction Squirrel announced on their website that they have merged with BidMyDreams, another penny auction site. Auction Squirrel also stated that their closure was due to, "as some of you know" a "family crisis," unless the family crisis was running out of money, this is news to us. I never saw The Squirrel say anywhere that their closing was due to a family crisis.

This is a bright spot for Auction Squirrel customers because bids will be transferred and honored by BidMyDreams. Also, all Squirrel customers to register with BidMyDreams before Oct. 31st will receive 5 free bids.
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Bidcactus and The Squirrel

As many are aware, I've been extensively covering the birth of The Auction Squirrel over the past few weeks in an attempt to provide the community and myself with a better understanding of what it takes to start a new penny auction site. In many of these posts I've made some comment comparing The Squirrel to Bidcactus and yesterday I received some feedback from Bidcactus that I wanted to share.

At one point I said Bidcactus was "really good at being average while spending thousands per day on AdWords." Understandably, Bidcactus was not fond of this comment and I wanted to explain what I meant because I feed the context is not all that clear as I reread my own post.

What I meant to say is that Bidcactus is really good at being an average ecommerce site. They are, in my opinion, exceptional at being a penny auction site. If one compares Bidcactus to it's own industry, Bidcactus and Swoopo clearly shine. They have all of the details down and their sites are well functioning. However, when compared to ecommerce sites internet-wide, both Bidcactus and Swoopo are second tier. This is no strike against them, no one is expecting Bidcactus to compete with Amazon, eBay or Gilt on an aesthetics front. It takes a lot of resources to create such a site. This is all I was trying to say.

Criticizing Bidcactus for not looking like a top ecommerce site would be like criticizing Penny Auction Insider for not looking like Slate or the Huffington Post, which as a comment might hold some value for gaining perspective, but clearly does not compare the site to its relevant peers. I wouldn't take any offense if someone told me my site wasn't nearly as good as Slate, I'm not trying to compete with Slate, and I hope Bidcactus takes no offense when I point out that there are more sophisticated sites on the web.
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Checking in on The Squirrel: Week 2

One might think that on its 14th day of practically giving away items, The Auction Squirrel would have generated enough buzz to get some reasonably competitive bidding on the site. Not so. I just looked at the last 30 ended auctions there and estimate the cost of acquiring and shipping those won items (bidpacks cost nothing) to be about $975. Revenue from sales of won items amounts to $8.97 and bid revenue is about $717.6. In total, The Squirrel took a loss of about $245 on these last 30 items, which is on top of mounting losses from the past 13 days. On average, The Squirrel has been losing nearly $10 on every item it ships, and this only accounts for variable costs, not fixed ones like rent for the office or site hosting and assumes the owner is willing to work for free.

However, with an average of 30 bids per item, the Squirrel is coming close to breaking even. If you stripped all non-$25 gift card items as well as the five worst performing auctions out of this bunch of 30, the Squirrel would be about $20 in the black (assuming all bids were paid for, which they were not). Perhaps a few simple tweaks could help the site go cash flow positive.

Many people have won and received items from The Squirrel so we know they are a legitimate business and I think their performance to date characterizes the challenges of operating a successful penny auction site.

As I mentioned in my last post about The Squirrel, the site needs a plan. An "I have built it so they will come," philosophy is not working in this space. The Squirrel needs to focus on building traffic and building trust, both of which require significant cash outlay. A new visitor to The Squirrel is frankly not going to be impressed with the user interface of the site - and the less professional a site looks, the less people are going to trust it.

However, maybe I'm being anxious, the site has only been up for 14 days. If the owners can afford to give it another month, perhaps they will go cash flow positive without the help of AdWords or a site redesign. BidCactus has been doing very well without much sophistication for quite some time now.
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