Thursday, November 3, 2011

Penny Auction Websites

Penny auction websites sell high dollar items like laptops, iPhones, iPads, etc, for extremely cheap prices.  Every time someone bids the price goes up 1 penny and 10 seconds is added to the count down.   But here’s the catch, you have to buy bids for 60 cents apiece.  The bidding process is also a cycle that really no one can hardy win, because every time the timer gets down to a few seconds left other people will quickly place bids which bumps the timer up a few more seconds.   Also, say if 20 people are fighting for an item a couple will eventually give up, but there are hundreds of other people jumping in and start bidding and adding time to the clock.  These websites are not scams and are extremely profitable, say the website sells an iPad for $100 but it is worth $700, the price only goes up 1 penny every time someone bids….That means 10,000 people bided on that iPad!! Each bid costs that individual 60 cents so that means in total $6,000 worth of bids were spent trying to get that iPad plus the $100 that the person who won had to pay.  The website made $5,400 by selling one iPad and the variable and fixed costs are minuscule, the buyer pays the shipping, and the website only needs less than a dozen employees to operate.  Kind of makes you want to own one of these websites.
Jack Leonard

2 comments:

Niko P said...

I always wondered how these websites worked, I've always seen them on TV but never actually went to look at one. This is a great idea to profit from because the website doesn't spend money making the products, but they are making more than the marginal price of the product. However, the only downside to this website would be if a product wasn't highly demanded, but still expensive to buy, the website would lose money if few people bid for that product. Say they buy a iPad for a couple hundred dollars, but nobody has much interest in buying Apple products anymore. Then if only one person bid on it, they would only pay 61 cents for it and the website would have to pay the difference.

Anonymous said...

I agree with Niko that as long as this site is popular and the items that are being sold on it are profitable then this site is a great idea but once the site losses it's bidders due to loss in interest or the produts that they start selling become unpopular then the chance of the shutdown decision of total revenue becoming less than variable costs goes up exponentially. The owners of this site just have to watch out for that through advertising and keeping up with the latest fads and they should be able to continue making a profit.
Lauren Edmond