Fighting with computers

Computers are not always friendly.

Wednesday, December 03, 2008

Pay-per-bid auctions


Like many of you, I'm familiar with auction sites like eBay that allow you to bid on a certain item following the model of an auction: Winner is the user that makes the highest bid. Item price is just that winning bid.

eBay makes money charging a fee for each transaction. (I know there are many details, happy and unhappy sellers and bidders but that is another story).

What surprises me is that several companies are advertising their sites as auctions with a certain twist. Apparently they offer a real bargain, where "winning bidders" may save more than 90% of the retail price of a brand-new item.

I prefer not to include any link to these companies, but they all share a common feature: While they use the word auction they are not really meaning that. The fine print details explains (to the attentive reader only) that you have to pay to make a bid and that only your bid can become a winning bid by chance (without you having all the information at all times). Instead of the item price to go up because of your bid, it may even go down. These companies make money not on the final sale price of an item but on the many bidders that won't make it (in fact, all but one lucky bidder will get the product). It's actually a lottery in disguise: The more tickets you buy, the higher the chances of winning the bid. The problem is that, like lottery, buying many tickets may become expensive, even much more than the real cost of the item. After all, how do you think they can give away a very expensive car for just one dollar?

I've come to the term of pay-per-bid as what I thought it was a thoughtful term, Google shown it is not a new term at all. Of course these auction sites will avoid that term at all times because it explains it all. They want customers to be fooled by the amazingly low prices winning bidders are getting. Given the way they work, these companies may give away products and still make a profit.

Greedy bidders don't realize they've been outsmarted by a dubious business model. Apparently it is a legal business in my country and, for the happy winning bidders, it is a great way of buying things cheaply.

1 Comments:

  • At 6:33 pm, Anonymous Japan Auction said…

    Great site! I bet you’d also like Japan Auctions for there are cheap and good items being auctioned there not to mention that it's so easy to navigate in the site. Tell your friends about it.

     

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