Why penny auctions are not a scam

[mokimarket]

Penny auctions have garnered a bad rep due to several bad apples that either "shill" bidded auctions (bid on their own products) or simply did not ship items. Similar to bitcoins, many people dismiss the concept as a scam without even considering the potential. I thought i'd write this post to address some of the concerns that were brought up in this forum.

First, the penny auction industry has gotten very savvy about identifying sites that shill bid or fail to ship products. The independent site allpennyauctions.com aggregate data from all the major penny auction in the industry, it collect data on usernames who are bidding, how many sites they are registered on, who's winning, etc. It's very easy to determine which sites have bots as there are often a few winners that just so happen to only be registered on one site; also sites that fail to ship can never survive in the penny auction industry as bidder will instantly report them and they get bad stats. Even though we track our own feedback rating on our site, you can also check out http://www.allpennyauctions.com/site/MokiMarket.com/ for an independent analysis of my site.

Secondly, penny auctions is not a scam but rather a skilled based strategy game similar to poker. There a users that consistenly saves lots of money on penny auction sites and there are several well known strategies in the industry. I'll mention a few here:

1) Never bid on an auction with more than a minute remaining: Chances are high that you will be outbid so you are wasting bids
2) Chose an intimidating username: most powerbidder have names like "idontquit" or "neverendingbids" as a tactic to scare bidders from bidding on items
3) Earn a reputation: This is a very balsy strategy, but many powerbidders are willing to bid up a $20 gift card to $1000 bucks if they have to just to establish a reputation as a crazy bidder that will never stop bidding on an item they set their sites on. Once they have this reputation, other bidders simply avoid bidding on auctions that these users bid on and they get even better deals on products
4) Bid on new sites: This is also a risky strategy as many new sites are known to not ship items and shill bid on their auctions. However, new and honest penny auction sites will be losing money because they do not yet have a userbase large enough to cover the cost of their items. Many powerbidders will completely take over a new penny auction site, winning everything. This has become such a big problem and many sites have started to limit the number of wins you can have on a site in a month.

Hopefully this helps address some of the concerns. Register on Mokimarket.com and get free credits with coupon code "bitcoin". It's completely risk free and you could win some great deals!

[1714173865]

1714173865

[1714173865]

1714173865

[1714173865]

1714173865

[jwzguy]

 

[btc_artist]

Interesting. Any more strategies for winning an auction?

[mokimarket]

Interesting. Any more strategies for winning an auction?

1) If you aim to be earn a crazy power bidder rep, always bid right after someone bids over you, this creates the psychology to the other bidders that they will be losing credits the very moment they press the bid button.

2) Never bid on the main page in the last seconds of an auction as you could easly lose due to simple server delay. So for instance, bid on the direct page of auction: "http://www.mokimarket.com/auction_details/295", and not on index page "mokimarket.com". There is less delay in auction timer on direct page as it's only updating one auctions as opposed to the 12 on the main page.

3) Check out the pennyauctionwatch.com or pennyburners.com forums; there's a large community of bidders on these sites and many will share tips and strategies with you.

[mckoss]

I disagree.  I think it relies on many users not understanding what they are getting in to.  Since it's a winner-take-all model, and you can risk an arbitrary amount to win, most bidders are going to lose all their money.

I would never place a single bid on a penny auction site, nor would I advise anyone to do so (just like I don't buy lottery tickets - it's a losing proposition).

[mokimarket]

I disagree.  I think it relies on many users not understanding what they are getting in to.  Since it's a winner-take-all model, and you can risk an arbitrary amount to win, most bidders are going to lose all their money.

I would never place a single bid on a penny auction site, nor would I advise anyone to do so (just like I don't buy lottery tickets - it's a losing proposition).

You are comparing two very different things. The statistical expected payout of a lottery is pre-definied to be negative, meaning if you play long enough, no matter who you are, you will lose money with absolute certaintly.

Penny auctions do not have a pre-determined statistical advantage similar to poker; thus good strategic players do have an advantage in the system over poor players and it's possible to make money in the long run. Also my site allows users to post auctions as well so you can choose to be on either side of the fence, either way a statistical advantage cannot be defined on either side.

Are penny auctions for everybody? Of course not, but neither is poker. They are both fun strategic games that some people like to play and other don't. Just because you have bad poker players that consistently lose money doesn't make poker a scam.

I think many people prejudge penny auctions in the same way people prejudge bitcoins by just calling it a scam without even considering the concept.

[RaggedMonk]

good strategic players do have an advantage in the system over poor players and it's possible to make money in the long run.

The money is coming from somewhere.  It's a scam to exploit poor players who don't understand the rules to make 'good players' and the auction site holder money.

[DeathAndTaxes]

You are comparing two very different things. The statistical expected payout of a lottery is pre-definied to be negative, meaning if you play long enough, no matter who you are, you will lose money with absolute certaintly.

The same is true w/ penny auctions.  No auction house can stay in business long term selling $100 for $99 or less.  Thus on average the auction must bring in more than the cost of the item.  While one can play "smart" it is much like playing "smart" in Blackjack.  You can reduce the negative expectation but it is still a negative expectation.

Variance can be fun in the short run but eventually one will reach the long run w/ penny auction and that is negative expectation.  I don't think you are going to convince anyone that Penny Auctions are a sold investment.  It is a dubious sell.  Just like lottery people play them for entertainment, and the chance to score a huge win.

[mokimarket]

good strategic players do have an advantage in the system over poor players and it's possible to make money in the long run.

The money is coming from somewhere.  It's a scam to exploit poor players who don't understand the rules to make 'good players' and the auction site holder money.

I'm a capitalist, and I believe those that take the time to learn the rules should be rewarded for their efforts. It's a game of strategy, learn the game and have an advantage. You don't hear poor poker player complaining about the game being a scam.

[DeathAndTaxes]

good strategic players do have an advantage in the system over poor players and it's possible to make money in the long run.

The money is coming from somewhere.  It's a scam to exploit poor players who don't understand the rules to make 'good players' and the auction site holder money.

I'm a capitalist, and I believe those that take the time to learn the rules should be rewarded for their efforts. It's a game of strategy, learn the game and have an advantage. You don't hear poor poker player complaining about the game being a scam.

To compared it to poker makes you look silly.  In poker knowing the rules isn't sufficient.  Someone who knows the rules isn't going to have a +EV against a poker pro.  In penny auction there is only the rules.   If you are bidding on the same item as someone else who knows the rules then it simply comes down to who blinks (or runs out of bids) first. 

To pawn this off as anything more than gambling or entertainment makes you look bad.  I had interest in your company and playing some auctions for fun (especially Bitcoin related items) however you trying to justify them as some kind of investment leaves a bad taste in my mouth.  It feels scammy and get-rich-quick-ish.  You lost a potential customer before he made his first bid.

[mokimarket]

You are comparing two very different things. The statistical expected payout of a lottery is pre-definied to be negative, meaning if you play long enough, no matter who you are, you will lose money with absolute certaintly.

The same is true w/ penny auctions.  No auction house can stay in business long term selling $100 for $99 or less.  Thus on average the auction must bring in more than the cost of the item.  While one can play "smart" it is much like playing "smart" in Blackjack.  You can reduce the negative expectation but it is still a negative expectation.

Variance can be fun in the short run but eventually one will reach the long run w/ penny auction and that is negative expectation.  I don't think you are going to convince anyone that Penny Auctions are a sold investment.  It is a dubious sell.  Just like lottery people play them for entertainment, and the chance to score a huge win.

First of all I have never said that penny auctions were anything close to an investment, your are absolutely right that is a dubious sell. It's a game, plain and simple.

The point I'm trying to make is that penny auctions is a skill based game. Now you happen to be right....most penny auction business don't stay in business long. I would guestimate close to 99% fail. Why? Because penny auctions used to be extremely profitable to site owners, but as bidders learned the game it became more profitable to be a bidder in many cases.

http://www.pennyauctionwatch.com/2011/04/over-150-closed-penny-auction-sites-is-the-model-sustainable/

There are no pre-determined odds like a casino. I can't mathematically write down my expected loss or variance like any casino or lottery can. It's an ill-defined problem like poker.

And once again, my site allows users to sell items as penny auctions as well, so you can play both sides of the coin.

If penny auctions aren't your thing that's cool with me, everybody has their game preferences. I just think it's unfair to attack penny auctions as scams without the facts.

How many people do you know just blatantly call bitcoins a ponzi scheme without taking the time to understand what bitcoins are?

[jwzguy]

It's a game the way the a booth on the carnival fairway is a game. Rigged.

The winners are the people running the game and the losers are anyone dumb enough to play.

Does running a business that's only successful by preying on ignorance make you a criminal? No, but you sure come off like a scumbag. If that's the way you want to make money, go ahead. I find it sickening.

[mokimarket]

good strategic players do have an advantage in the system over poor players and it's possible to make money in the long run.

The money is coming from somewhere.  It's a scam to exploit poor players who don't understand the rules to make 'good players' and the auction site holder money.

I'm a capitalist, and I believe those that take the time to learn the rules should be rewarded for their efforts. It's a game of strategy, learn the game and have an advantage. You don't hear poor poker player complaining about the game being a scam.

To compared it to poker makes you look silly.  In poker knowing the rules isn't sufficient.  Someone who knows the rules isn't going to have a +EV against a poker pro.  In penny auction there is only the rules.   If you are bidding on the same item as someone else who knows the rules then it simply comes down to who blinks (or runs out of bids) first.  

To pawn this off as anything more than gambling or entertainment makes you look bad.  I had interest in your company and playing some auctions for fun (especially Bitcoin related items) however you trying to justify them as some kind of investment leaves a bad taste in my mouth.  It feels scammy and get-rich-quick-ish.  You lost a potential customer before he made his first bid.

My comparison to poker was meant to suggest that they are both skill based game where not everyone has negative expectation. I did not mean to suggest that "knowing the rules" will make you an expert, I was meaning to suggest there are certain informal rules (as i mentioned above) or "tricks of the trade" powerbidders use to get an advantage.

It's not an investment; I too think it's ridiculous to say so. I never said that and I'm not trying to say it is. What I'm saying it that it's not a scam; to me a scam suggest everyone is an equal-opportunity loser and that's not the case. Just like poker, good players have an advantage over poor players.

There are no 'better" players when purchasing a lottery ticket but there are when playing games like these. I was simply pointing out a few strategies that I thought could help bidders gain an advantage in this thread.

[mokimarket]

It's a game the way the a booth on the carnival fairway is a game. Rigged.

The winners are the people running the game and the losers are anyone dumb enough to play.

Does running a business that's only successful by preying on ignorance make you a criminal? No, but you sure come off like a scumbag. If that's the way you want to make money, go ahead. I find it sickening.

You never have to spend one cent/bitcoin to use the site...ever. In fact, the purpose of the site is for bartering. Post items as penny auctions, earn all the credits from the items you posted, and then use those credits to bid on other items.

Some users can choose to purchase credits if they don't want to post items but it's not required. But you don't see alot of people other than MokiMarket posting stuff because it's not as easy as people think; in fact I recommend not posting any high value items because you will probably lose money.

If the sites not for you that's fine; this thread is just giving users some tips on how to get better use of their credits.

My goal with the site is not to continually be posting stuff as penny auctions, but rather have the users posting more and more of the auctions and using the site as a bartering platform.

[legolouman]

On the other hand, it helps to have auctions that are 'hot', like look at deal dash. You can only bid within 60 sec of an auction close, then it resets to x sec after a bid is placed, that way it is fun. Not 127:5:23 before the auction closes. Things people want also helps, I know that it costs money to buy them, but honestly.

[mokimarket]

On the other hand, it helps to have auctions that are 'hot', like look at deal dash. You can only bid within 60 sec of an auction close, then it resets to x sec after a bid is placed, that way it is fun. Not 127:5:23 before the auction closes. Things people want also helps, I know that it costs money to buy them, but honestly.

Sorry, we wont be posting any ipads anytime soon lol. My niche in the industry is posting lower value items and introducing the bartering concept. The problem with posting all high valued products is that you get many powerbidders on your site, also everybody wants the product so you have 50 bidders on one auctions resulting in 49 losers. But with lower value products, you have only a few people interested in the item so it's alot easier to have a larger variety of winners without much cost to the site.

Big ticket items is why many sites shut down, they auction off products they can't afford, don't make enough money to cover their losses, then cut and run with everyone's money. I definitely would be cautious of any new sites with big ticket items.

[legolouman]

On the other hand, it helps to have auctions that are 'hot', like look at deal dash. You can only bid within 60 sec of an auction close, then it resets to x sec after a bid is placed, that way it is fun. Not 127:5:23 before the auction closes. Things people want also helps, I know that it costs money to buy them, but honestly.

Sorry, we wont be posting any ipads anytime soon lol. My niche in the industry is posting lower value items and introducing the bartering concept. The problem with posting all high valued products is that you get many powerbidders on your site, also everybody wants the product so you have 50 bidders on one auctions resulting in 49 losers. But with lower value products, you have only a few people interested in the item so it's alot easier to have a larger variety of winners without much cost to the site.

Big ticket items is why many sites shut down, they auction off products they can't afford, don't make enough money to cover their losses, then cut and run with everyone's money. I definitely would be cautious of any new sites with big ticket items.

While it makes perfect sense, I didn't even say you needed big ticket items. Just things that I can bid on, and win within 10 minutes. I'm fine with bidding on BTC or some of the other little things you have, but not one of the auctions has less than an hour and a half left on it. You even said not to bid with more than 1 minute left.

[mokimarket]

On the other hand, it helps to have auctions that are 'hot', like look at deal dash. You can only bid within 60 sec of an auction close, then it resets to x sec after a bid is placed, that way it is fun. Not 127:5:23 before the auction closes. Things people want also helps, I know that it costs money to buy them, but honestly.

Sorry, we wont be posting any ipads anytime soon lol. My niche in the industry is posting lower value items and introducing the bartering concept. The problem with posting all high valued products is that you get many powerbidders on your site, also everybody wants the product so you have 50 bidders on one auctions resulting in 49 losers. But with lower value products, you have only a few people interested in the item so it's alot easier to have a larger variety of winners without much cost to the site.

Big ticket items is why many sites shut down, they auction off products they can't afford, don't make enough money to cover their losses, then cut and run with everyone's money. I definitely would be cautious of any new sites with big ticket items.

While it makes perfect sense, I didn't even say you needed big ticket items. Just things that I can bid on, and win within 10 minutes. I'm fine with bidding on BTC or some of the other little things you have, but not one of the auctions has less than an hour and a half left on it. You even said not to bid with more than 1 minute left.

Good point. Well, as we grow we will be posting more auctions at higher frequency and hopefully have more posters as well so you don't have to wait for auctions ending soon. Many sites overpromise and underdeliver with late or non-shipment of wins. I just want to make sure that I can deliver the products I do auction off in a timely fashion to the winners.

[mckoss]

Here's the problem with penny auctions, from a rational perspective.

All your past bids are sunk costs.  You can rationally increase your bid (as small increment) if you think you have a probability of winning the item.

If you have two "rational players" like this, then will continue bidding to infinity.  At each step, they realize that all their past bids are "lost", and then are willing to risk the small increment in order to win the (high value) item.

It's like a game of chicken.  The only "correct" strategy is never to start playing at all.

One wrinkle that some penny auction sites add is that you don't actually "lose" your bids, but rather you can apply them to buy other products.  The terms are probably not that great, but at least you can spend your sunk costs on something.

So, if you want to buy one of the consolation products, and don't mind sinking up to that amount in the off chance you can win a random lottery, that sounds fine.

I've not looked at your site to determine if that's what you're doing, or are just a "traditional" penny auction site.

[legolouman]

On the other hand, it helps to have auctions that are 'hot', like look at deal dash. You can only bid within 60 sec of an auction close, then it resets to x sec after a bid is placed, that way it is fun. Not 127:5:23 before the auction closes. Things people want also helps, I know that it costs money to buy them, but honestly.

Sorry, we wont be posting any ipads anytime soon lol. My niche in the industry is posting lower value items and introducing the bartering concept. The problem with posting all high valued products is that you get many powerbidders on your site, also everybody wants the product so you have 50 bidders on one auctions resulting in 49 losers. But with lower value products, you have only a few people interested in the item so it's alot easier to have a larger variety of winners without much cost to the site.

Big ticket items is why many sites shut down, they auction off products they can't afford, don't make enough money to cover their losses, then cut and run with everyone's money. I definitely would be cautious of any new sites with big ticket items.

While it makes perfect sense, I didn't even say you needed big ticket items. Just things that I can bid on, and win within 10 minutes. I'm fine with bidding on BTC or some of the other little things you have, but not one of the auctions has less than an hour and a half left on it. You even said not to bid with more than 1 minute left.

Good point. Well, as we grow we will be posting more auctions at higher frequency and hopefully have more posters as well so you don't have to wait for auctions ending soon. Many sites overpromise and underdeliver with late or non-shipment of wins. I just want to make sure that I can deliver the products I do auction off in a timely fashion to the winners.

I still get what you are saying, but as you are a small site (so far), I'd be willing to compromise as a casual user. I play for the fun. On other sites, I bid and usually lose, but I have fun playing the game for a few minutes. After I win, I don't usually care how quickly my item ships.

On the other hand (and you should work on this) I don't find it fair how the site capitalizes and makes money on so many fronts, such as:
Bids bought
bids used, even if the bidder loses the bid war. Forcing the user to buy more bids to use.
After bids are bought, and used, the user must pay for the item they were bidding on. Effectively buying it multiple times.

By 'saving money' on the front of the end price I pay, I might still be spending more on the bids I used to win, and then pay for the item.



Still, I'd work on having more auctions in the near time frame, I'd have more fun.