Quibid and Swoopo.com are two relatively new “auction” sites. They claim to offer new items such as iPods, Macbooks, PS3, and other high-ticket popular purchases at bargain-basement prices through an auction-like process.
Here’s how it works – Every time you bid on an item, the price goes up (usually by 5 cents) and the auction is extended by anywhere from 5 to 15 seconds. This, in itself, isn’t too bad. At some point, someone doesn’t react quickly enough, so the last bidder wins, right?
Here’s the catch – it costs 60 or 70 cents to bid – every time you bid. So a $1000 laptop that finally sells for $200 has cost 4000 bids ($200 / 5 cents) times 60 cents per bid = $2400. Now, the winner doesn’t pay the whole 2400. He just pays for his bids. He’s probably clicked through, at a guess, 500 bids, so he’s paying $200 winning price, plus $300 for the bids (500 at 60 cents each). He got a good deal, but here’s the rub – everyone else bidding on the item has also paid 60 cents per bid – probably hundreds of bids each on average – and they got nothing for their bid money – zilch.
So unlike eBay and similar auction sites, where there are winners, but no actual losers (aside from the occasional scam or shoddy merchandise), Swoopo.com, Quibid.com and the like depend on many losers to make up for the one winner.
I’m currently watching this auction on Quibid –
We’ll do the math later. It’s currently at about $35 – about $420 in bid fees.
2009/ 12/02 13:51 – Now at $105. So it’s still going strong, and they’ve already collected $1260 in bid fees. Most of the bidders at $35 appear to have dropped out.
2009/ 12/02 15:03 – Now 159 – they’ve collected 1900+ in bid fees, over and above what they’ll charge the ‘winner’. Not bad for a $1699 laptop.
2009/ 12/02 16:18 – Auction ended. The MacBook Pro went for $216.50. Quibid took in $2598 in bid fees, plus the $216.50 price, for a total of $2816, for a laptop that retails for $1699. Great deal for the winner, as long as he didn’t bit more than 1480 times. Not so great deal for everyone else who bid on the laptop, and thus spent $2382 for the privilege of clicking “bid now” many times.