Infuriating, Addictive, Crazy “Bidding” Sites

Was playing around with new site BigDeal.com, similar to some others like Swoopo.com – it’s an auction site where you pay a small amount ($0.75) for the right to bid in an auction. The price increments by $0.15 and the auction continues for another 30 seconds, or if there are less than 30 seconds left, the timer goes up to 30 seconds.

There’s a lot of crazy in this – you may end up spending money to bid and having nothing in return. The winner’s curse is certainly prevalent here – in order to win you not only have to keep a watchful eye and keep bidding, but you also have to be very cognizant of how many bids each of your rivals have put in, and gauge their commitment to winning. As an example, I placed a few bids in an auction where the winner ended up having bid 1306 times for a $1700 imac – they finally won the auction at a price of $538 but had racked up $980 in bidding charges meaning they’d only saved about 10 percent versus the retail price here.

Someone else swooping in could have gotten it for cheaper since they had “invested” a lot less in terms of bids – but that’s the issue, you are struggling against guys who have sunk a lot of time and money into the auction. Your bid dollars can be used for discounts on gift cards (though a max of 25% only so you have to shell out more money), but at least it’s not all lost. Kind of interesting model. Here’s the Techcrunch writeup. These types of systems are very very smart from a consumer behavior/dynamics perspective.

The site is still fairly new, so prices may be lower than they will at scale but here are some stats. On the above auction there were 3589 bids at $0.75 each = $2691.75. The product sold for $538 meaning that BigDeal.com was supposedly out $1162 on buying the product from Amazon. If we assume they break even on the 25% discount on the gift cards, and they get maybe 30% breakage on people not buying gift cards, then they get to keep $807 less the net price of the item of $1162 meaning they will end up losing a few hundred dollars, though it will take some time for that to happen of course as I’m sure the cycle times are a few weeks at least and probably months. Not bad for someone who just started – the margins get better with more bidders and more breakage. Fun stuff and interesting to play around with these ideas.