Adventures Into the World of Penny Auctions

So this isn’t exactly an inspiring story but it’s an interesting one for those who have always been curious about penny auctions. I decided that one day I should investigate and see what it was all about and if you could really get some prizes.

For those of you who are not familiar with the concept of penny auctions, basically you have a site that has 15-20 live auctions going on. Each thing being auctioned off starts at $0 and goes up a penny whenever someone bids on the item. Every bid in the last 20 or so seconds will add time back to the timer. The last person that bids wins. Here’s the kicker. You have to pay to be able to bid. Each of these sites sells bid packs for around $.50 to $1 a bid and you use these bids for each of the auctions. Once you use a bid, it’s gone and you’ve effectively paid 75 cents for the right to bid on an item.

Now what usually happens at these sites is that if you win, you’ll get a really good item for a very low price. So you might be thinking to yourself, how exactly does the website benefit from this? It would seem that they’re not making any money since they sell items for really drastically low prices. Well, the truth is, you have to look at it from the perspective of bidding. For example, I saw an iPad sell for around $89. That’s a pretty good price for the person that won the iPad but let’s look at it deeper… $89 means that 8900 people bid on the item. If the bids are bought at a rate of $0.75 each, that means that the total amount that all people spent on the item is 8900 x 0.75 = $6600.

$6600! This is for one iPad who’s retail value is around $700. That’s almost $6000 of pure profit for the site. Whenever these big items come out, people go absolutely nuts because they think oh I have a chance at the big one, I’m going to go all out for it. That’s how they make the money.

Now that you’ve gotten the basic gist of how it works, I’m going to tell you about my experience. Now I spent the first couple of days just observing how the bidding process worked and how people behaved. What I quickly learned were the following:

1. Everyone goes for the big items. It’s almost impossible to get it unless you dropped a lot of money into it.
2. There are certain auctions that a certain person claims and will keep countering your bids almost automatically.
3. There are certain auctions that people don’t pay too much attention too and get sold for ridiculously cheap prices.
4. Too many people go for the bid packs usually.
5. There are not as many people on the bid sites really early in the morning when people are asleep or getting ready for work.

With these basic facts in mind, I bought a simple 30-bidpack and chose a time in the evening when at least 7 auctions were ending. While everyone was in a frenzy over the iPad and other bigger gift certificates I took a look at what else there was and found a JC Penny gift card that didn’t have too many people bidding on. I quickly went to that one and put a bid in. Time ticked down to 3..2..1 oh and someone else bid. I immediately put another bid in. This went on for a few rounds but I continually kept putting my bid in. At 11 cents, I was declared the winner! WOW!

My first reaction was, I can’t believe I actually won on this thing. I kept thinking to myself, alright well if I apply this same strategy and maybe try my luck in the morning, maybe good things will happen.

The next morning I got up at 5:45am and took a look at what was out there. I noticed that things were going for an average of $0.20. So I decided alright I’ll try for a $25 iTunes gift card/25 bidpack combo. There had only been one bid on it so far. Low and behold, no one else bid and I got it for 2 cents! The next item I tried for also didn’t have many bidders and was a beginner’s auction (this means only players under 5 auction wins could participate). I decided to go for it and use the tactic from before. Bam! I got a Barnes and Noble giftcard for $0.12!

The subsequent days, I also ended up winning a 50 bidpack though I used a considerable amount to get that and then another $50 giftcard to Bed Bath and Beyond. So in total this is what I spent:

30 Bidpack – $22.50
30 Bidpack – $22.50
Shipping and Handling for 4 gift cards ($4.90 each) – $19.60
Amounts on the Winnings for those items – $1.91

JC Penny Gift Card – $50
iTunes Gift Card – $25
Barnes And Noble Gift Card – $50
Bed Bath and Beyond Gift Card – $50
50 BidPack (valued at like $37.50 but I won’t count it in the earnings here)

Profit ~$105

It’s not a bad haul don’t you think?

Now before everyone runs and goes to these auction sites, I will warn you of a couple of things.

1. If you don’t like risks, don’t do this. This is a risky thing and you have to be ok with losing the money you initially invest.
2. If you’re not a patient person, don’t do this. You have to stick with an item even in the face of losing your bids. If you can’t do that, you won’t win.
3. Don’t expect to win every single time you try. More often than not, you can make a better approach to winning but sometimes you just won’t win.
4. If there’s a person that almost automatically outbids you, you’re better off giving it to that person. You’re always in a better position if you’re the one outbidding and everyone ends up waiting till the timer is almost over to bid again.
5. Don’t get addicted. Know your limits.

With that, those are my adventures into penny auctions. I don’t think it’s something I will be consistently doing mainly because in reality it’s a game. But with careful strategy, you can come out on top and get some decently priced things. Hope this has been eye opening and interesting for everyone!

-The Lermz

The Lermz

Michael Lerma graduated the University of Notre Dame in 2009 with an Information Technology Management degree. He is currently a senior Project Manager with the Nielsen Company.

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