That's It, That's All: The Auction Squirrel Has Left the Building

It is with great sadness that I report The Auction Squirrel shuttered its doors today. The penny auction site auctioned 516 items and lasted just shy of one month, it opened on Sept. 23rd. I initially mocked The Squirrel, saying it was foolish to open a new penny auction site without having a "special sauce" when there were nearly 100 other sites competing in this market. However, as time went by I was impressed by The Squirrels apparent honesty and dedication to being an upstanding business. There were a few times when it seemed like The Squirrel was a few small tweaks away from bumping up against the break-even point, however after one month of losses, the site has decided to throw in the towel.

I applaud their honesty and want to point out that, as Obama would say, this is a teachable moment. If The Squirrel couldn't make it what does that say about a lot of similar penny auction sites out there? Are they legitimate, are they shilling, do they intend to ship your products? Anyone can open a website and anyone can cheat you. It has become very difficult to make it in this business and I suspect that a lot of people who would open a site in this environment have the intention of cheating you, or even if they set out with good intentions would turn to fraudulent practices after the losses start to mount. This is a strong argument in favor of only shopping at the most established and trustworthy penny auction sites.
Read more!

Reader Comment on The Squirrel: Shills?

Here is a new comment I received from an Auction Squirrel user that you might find interesting:

"I think [The Auction Squirrel] turned to shills. My wide did one auction with her pack of 30 and I did another with a total of 31 bids. Both were for $25 or less items. We both got outbid by one bidder (who obviously also overbid to win) and the auctions all around those two went for next to nothing...no bidders. the one just before mine, for example, went for ONE bid. Sour grapes I'm sure...just suspicious enough to keep me from buying another pack though I can tell you that much."

This is suspicious and had I been the bidder I expect I would also be weary of The Squirrel. I don't know for sure if The Squirrel is using shills, I am fairly confident they are not. I see lots of names on the ended auction page that I know to be real bidders and I myself have won.

Last night I watched the auction for the Shell gas card and it seemed normal. There were only three bidders and the card sold for 18 cents. The winner was rbw63, who I believe is a real person. I'm sure readers can confirm whether this is true or not since he is very active on The Auction Squirrel.

I think the reason why some items go for cheap and some go for over $1 has to do with the resilience of the competition. Some people give up early and others are determined to win no matter what. As has been discussed in much detail here and elsewhere, there is an incentive for users to convince other players that they are willing to win at any cost, because if other players believe this person they won't challenge him and the item will be won on the cheap. People on the Penny Auction Watch Forum love to berate bid-to-two-2-too-win for winning at all costs, he is trying, with much success, to develop this kind of reputation.
Read more!

The Auction Squirrel Looking Healthy

Today I took a look at the last 30 ended auctions on The Auction Squirrel, and it looks like they may be making a profit (or close to it!). A few physical products aside, The Squirrel sold 24 gift cards and bidpacks for revenue of $677 (assuming 15% of bids are free) and a total COGS of $550 + $120 for shipping (24 products @ $5 each), for a profit of about $7 (EBITDA). In looking at this estimate I would say that my estimate for number of free bids is too low, meaning the Squirrel is probably not cash flow positive quite yet. I'm also not factoring in all of their fixed costs, mainly hosting the site. I'm also ignoring a promotion The Squirrel is doing which gives winners free bids if the price of the auction goes over $1.00 (Squirrel, why are you torturing me?). And this also ignores the fact that The Squirrel has been bleeding cash the last few weeks and has some serious ground to make up from losses early on. But maybe The Squirrel has passed the lowest point on it's J-curve and is heading toward break-even and then on to more profitable pastures. The holiday season is also coming-up and I'm sure there will be an abundance of people looking to fill Christmas wishes on the cheap this year, so if The Squirrel can make it till then it might be OK.
Read more!

Case Study: The Auction Squirrel needs to go cash flow positive

This is part of an ongoing examination of The Auction Squirrel, a penny auction site I decided, almost at random, to analyze on Penny Auction Insider.

The Auction Squirrel has been bustling along for a while now after launching last Wednesday and now has 202 ended auctions. As a new site, The Auction Squirrel suffers from two problems, 1. convincing users that it can be trusted and 2. getting enough traffic to make the business cash flow positive.

I have been informed The Squirrel is not shill bidding and quickly shipping won items. Most people who are bidding at the site probably know this, meaning they will become repeat customers. Since I've been informed of this by a credible source, I am willing to confirm the legitimacy of The Squirrel on this blog, meaning my readers should feel comfortable bidding on the site also. This helps to solve problem 1 above.

For problem 2 - getting enough traffic - The Squirrel is clearly struggling. To give them the benefit of the doubt, they've only been live for a week, however by looking at ended auctions anyone can see that most items don't have much bidding competition and are selling at a loss for The Squirrel. To solve this problem, I think The Squirrel is going to have to think outside the nut shell. If The Squirrel goes the way of Bidcactus - that is to be really good at being average while spending thousands per day on AdWords - then they're going to struggle. There are already a half dozen good penny auction sites with significant traffic and positive reputations with bidders. The Squirrel is either going to have to take significant, month after month losses from ad spending to get site traffic, find a way to differentiate its self, or be content with coasting along staying cash flow neutral (if it's lucky).

I doubt The Squirrel has the cash reserves to start a massive AdSense campaign, most penny auction sites don't. Competing with the big guys is not a good strategy for The Squirrel, they need to find a way to differentiate themselves. My next Squirrel post will address this issue, but I should say upfront, I certainly don't have all the answers.
Read more!

The Auction Squirrel Ships Products

I have been fairly skeptical of The Auction Squirrel since they launched last week for reasons I blogged about here. Namely, I'm getting tired of new penny auction sites that launch yet do nothing different. I know it looks like easy money, but even if it was it no longer is. If there are nearly 100 sites competing with you and you aren't special you have a fundamental business problem. If your plan to address this problem is to call yourselves "new and exciting" or "the best penny auction site" or "the number one penny auction site," you have an even bigger problem. The fact that there are big sites like Swoopo and BidCactus makes it even harder to compete (FYI - I keep mentioning these two because their traffic is 10 times as high as the next closest competitors).

So, needless to say, I was none too excited to see The Squirrel pop-up last Wednesday. However, while their site traffic is low and bidding activity meager, The Squirrel appears to be a legitimate business with no shill bidders and one that actually ships products. I spoke with two people last week who won items on The Squirrel and one person today reported that they received the gift card they won. In the penny auction industry being able to confirm that a site is shipping items and not shill bidding is a substantial victory it its own right.
Read more!

Update from The Auction Squirrel

The Auction Squirrel recently posted this announcement on their site:



Read more!

More on The Auction Squirrel

I don't know what happened but The Auction Squirrel doesn't have any live auctions right now. They ended all auctions last night and then earlier today posted a message on the site that said they were switching to a new server. After a period of down time they are now back, but still with no live auctions. I spoke with two people yesterday who said they won items on The Squirrel, and for extremely low prices, which makes me think they have no shill bidders. However, I don't know what the lack of auctions means.

The Squirrel, which opened for business on Wednesday, has sold 92 items so far with a total cost to the site of approximately $3,400 (assuming they buy at retail and bidpacks cost nothing) and collected about $39 in auction fees. Since all Auction Squirrel auctions are of the 1 cent variety this means about 3900 bids were cast. Each Auction Squirrel bid costs $0.80 (slightly less if larger bidpacks are purchased), meaning The Squirrel collected at most about $3120 (rounding). Total bids + auction fees = $3159. However, I believe The Squirrel made much less than this because it gave away three free bids to every new user and because about 1/3 of all auctions were for bidpacks, meaning many placed bids were actually won not purchased. Based on these calculations I expect the site made very little money from bidpack sales, maybe $1000.

If my assumptions are correct, The Squirrel took a hit of over $2,000 from their first two days in operation. Given that they paid $800 for the SwoopoClone software, maybe $80 for a month of hosting + domain registration and $20 for the Squirrel graphic, that would bring total costs to date to $4,300 on revenues of $1,039 ($39 from auctions and $1000 from bids).

As I have previously stated, there are two major problems with penny auctions. 1) They can easily cheat you by using shill bidders and 2) They could go out of business and never send you any of your winnings or refund your money. The Auction Squirrel falls into the second category. If The Squirrel folded up shop today and never came back there is nothing anybody could do about it. No one is going to sue the owner of the Squirrel for a $300 XBox 360 (the most expensive item sold), which means the owner of The Squirrel could simply walk away today. Of course they would suffer a loss of $800 spent on software and maybe $100 on other miscellaneous things.

The real question is whether the owner of the Squirrel thinks they can turn their losses these first two days into a sustainable profit going forward. After all, the sunk cost fallacy applies to auction players as well as site owners.
Read more!

Penny Panties - Nope I'm not kidding

"Think Swoopo meets Victoria Secret," the latest penny auction site (sigh) is none other than Penny Panties - a niche site akin to PennyPurses and PennyLaptop, which specializes in, you guessed it, women's panties. Penny Panties hasn't launched yet and they have Google Adwords on their site which makes me wonder if they are serious.

I've often dreamed of making a spoof penny auction site. I almost did after seeing The Auction Squirrel, I was going to call it The Auction Beaver with the tagline "Woodn't you like to win!" Penny Panties has the tagline "Not how your grandmother bought panties." If I hadn't just seen sites like The Auction Squirrel and Poor Daddy's Penny Auction House go live I would have certainly believed Penny Panties to be a spoof, but alas I don't think there is anything in the penny auction universe that can surprise me anymore.

Penny Panties has an email sign-up list if you feel so inclined.
Read more!

Day 2: The Auction Squirrel

So today is the second day of operations over at The Auction Squirrel. I've been following the site with an unexpected degree of interest since it's launch at noon yesterday. I think The Auction Squirrel holds my interest because I've never watched a penny auction site go from pre-launch into open-for-business mode before. I also don't see how the Squirrel could possibly make it (with nearly 100 similar sites out there), which gives it a bit of an underdog feel. I am also very curious to see what the Squirrel's strategy is because as I've loosely monitored it's progress these past two days I've seen it sell everything for less than $1. Clearly this cannot be sustained for very long and I don't see them spending any money on Adwords so I don't know how they are planning on getting enough traffic - and bidders - to make the site sustainable. I think with penny auctions the most important thing for bidders is not that they can get a good deal on your site but that they can trust you. Bidders need to believe there are no shill bidders and that they will actually receive there winnings before they spend money. This is the biggest hurdle for a penny auction site and I think the several largest sites, namely Swoopo and BidCactus, have been able to win customers' trust, this is why they are so successful. I would like to see if and how The Squirrel is able to build trust with users.

I'm going to make The Auction Squirrel my little case study. I'll monitor their progress and share my thoughts with the community. If you have any experience with The Squirrel, please share it with me. I am especially interested in hearing from people who have won things on the site. Thanks for your help with this!
Read more!

The Auction Squirrel Goes Live

I spent a few minutes over at The Auction Squirrel shortly after their launch at noon today. There were only three or four people bidding at most and I noticed a few usernames from other auction sites like janyce16 and drbud57, however, I also read on the Penny Auction Watch forum that there are now some copycat usernames out there, so I don't know if we are talking about the "real" janyce16 and drbud57. I also noticed that on the auction for the Bed Bath & Beyond giftcard (pictured below), the site stalled at 1 second and never recovered. I stayed on the page for about 30 seconds and when I hit refresh the card was gone. I suppose drbud57, who was the high bidder at the time, won that one. It's hard to fault the site for being a bit glitchy on the first day, if Blogger wasn't writing the code on this site I'm sure there would be lots of bugs. Either way, with such low bidding activity it looks like there are some good deals to be had, that is if drbud57 let's you win anything.


Read more!

Swoopo's Days are Numbered: Auction Squirrel is Here!

This placeholder for the soon to be launched penny auction site The Auction Squirrel speaks for itself. I hope Swoopo has a contingency plan. For more on The Auction Squirrel see my earlier post Does the world really need another penny auction site?. FYI I added the "Our prices are nuts!" bit, that wasn't really on the Auction Squirrel page - but it probably should be.
Read more!