Interesting, last night I was surfing the Web and came across and ad that got my attention. It was an ad for a new type of auction. Not so new as I found out a bit later as it has been around for a while. It is called penny auction. The site I found is called Dealfun.com but there are many more. Being curious by nature and a consumer of expensive technology (mainly Apple), I wanted to know what these guys had to offer so I click on the link. I was brought to a site that promises to get you just what you wanted for a fraction of the price. Everyone like a good deal and if I can pay only $25 for a new iPod touch, why not! But you know what they say "If it is too good to be true"...... So I became immediately suspicious because you had to register to the site in order to see the deals. Then I did what I usually do when I want to find out more about a business or product, I typed "dealfun scam" into google. The first results surprised me as I came across a bunch of site that were all saying how fantastic penny auctions were. Sure they also said that some site where dishonest (especially competition as I found out later). The only problem I had with these sites is that they were more or less saying the same things and they were all having a bunch of links that would send you to a penny auction site. That made me more suspicious so I made another search and found out a few sites that were highly critic of penny auctions. In one of the blogs I read, I even found out that some penny auction sites were creating site such as pennyauctionscam.org to promote what they are doing. That explain why my first search wasn't successful. These site are misleading and are also loaded with links that would connect you to penny auction sites.
So how does it work?
Apparently when you register, you have to pay a fee usually around $150 that gives you 300 bids (about 50¢ per bid depending on the auction). According to a few people who were scammed, it is not clear that you are paying this fee. I didn't try it myself as I don't have money to trow away, so I have to trust what they said. Still not a bad deal you think. If I can get a Canon camera for 10 bid ($5) plus the price of the auction it is very good. But this is not that easy because each time you bid the clock will jump by 10 second and if not enough people are bidding, the site itself will bid on the auction just to raise it and get the clock ticking again. At the end, only one person will win the auction (so someone wins but all the others lose). The cost for the winner will be whatever price the auction went to (for example $38) plus the total amount of bids you did (for example 12 X .50¢). Not bad! you get a brand new Canon camera for $44. Maybe, but that is if you are the winner of the auction. Remember all the others are actually subsidizing your prize. Good deal!... for the penny auction site. The math is not difficult if for example 40 people put in 500 bids on an iPod touch 8 Gig and it went to $ 30 that means the company is making $280 for something you can buy for $230 on the Apple store. To make sure they make a profit, the site will bid on the item until it is paid for. So all the bidders will pay for the product. Simple! So in a way it works a bit like a lottery. Yes someone will win but ultimately the real winner is whoever runs the lottery. So beware and when you see something that is too good to be true, check the Web an find out. You can also check with the BBB (http://www.bbb.org) to find out about a business. I check one penny auction site on BBB and it was rated F (the lowest mark you can get). Lots of complaint on price, delivery, etc. You get the picture!....