Online Auctions. The Good, Bad and the Ugly.

I'm sure by now you've had at least a small experience with online auctions.  You know the ones I'm talking about.  You bid a "penny" at a time, and when you win the auction, you are able to buy items at a fraction of the price.  So, if this is true, how do the auction sites make money?  Easy, you are bidding one "penny" at a time, but remember, each "penny" bid costs you, on most of these sites, 75c per bid.  You buy bid packages in groups of anywhere from 10 to 500 bids per package, depending on the site.  Each bid package is given a value based on the base cost of each bid.  This means, you are actually bidding 75c + the penny of the bid for each bid...at least that's what the actual cost to the bidder is.  If you place 10 bids on a 10 bid package, you are spending $7.50 + 10c = $7.60 for a package that they value at $7.50.  That's not how they make the money though.

Everybody Wins
Now, if you have half a brain, you will figure this out quickly...although I've been on these sites and I'm amazed how how many people don't have half a brain.  Let's say that you only had to bid 3 times for this package at a cost of 75c/bid = $2.25 total.  Obviously, since you would never bid against yourself, there must be others bidding too.  Let's say there are 5 others doing the same bidding.  That means, if they all bid the same, there would be 5 bids from each for a total of $11.25 + 15c for the bids (1c/bid) and the auction site gets $11.40 income on a product worth $7.50...but the winning bidder only had to pay $2.40.  The auction site wins, and the winning bidder also wins since that bidder gets 10 bids (actually nets out at 7 since they had to use 3 bids to acquire the 10) for a little over the price of 3.  This means, the average cost for bid for that bidder is less than 75c...right?  Bidding on bid packages is important since it reduces that average cost per bid in your possession to use.  From the company's standpoint, it works for them too.  The more bids in play, the more money they make.  Keep in mind the bids are a true form of "Monopoly Money".  They are imaginary and have no real cost associated in "making them".  Unlike real money, where there is something backing it...even if it's just credit, the auction sites can "make" as many of these bids as they want...at no real cost to them.  Virtual bartering.  I love it.  Capitalism at it's best.

Now, let me say here, I love these sites.  
I participate in these auctions all the time.  I win some, and I lose some, but I'm ALWAYS ahead...although not in the beginning.  First, I had to learn the rules of the game, then I had to apply them.  First rule, leave emotion at the door.  There are always more examples of the SAME ITEM that will follow.  Don't get emotional and get into a bidding war...especially with another bidder (or two) that can't control their emotions...and can't give up and move onto the next one.  They win the auction alright, but they always pay more in the cost of bids and end price than the item is worth.  These bidders are usually found in casinos...and they bid/bet the same way there.  "Just one more chance/bid.  I know my number will come up next."  Trouble is, by the time it does, they are out of money and in the hole.  These are the gamblers that come back from Vegas telling people they won over $5000...but fail to mention they also lost $6000 in the process.  The net being a loss of $1000...but somehow they seem to forget that.  Don't fall into that trap.  If you have no discipline, or are a Vegas junkie, avoid these sites at all cost, but...if you are more of an investor type, you can come out ahead if you use the same "investor" logic.  The most basic investor logic reads something like this:

"It isn't how many wins/loses you have that counts as long as your winnings total is greater than your lose total".

True Story:  Earlier today I watched two "out of control" people go "head-to-head" on of all things a bid package.  What did these two people of questionable IQ do?  Are you familiar with the expression "Spend a dollar to save a dime"?  Here is a perfect example of that.  The two of them were the only bidders on a 30 Bid Package. Now, remember, if you win this package you win 30 bids.  The two of them bid this package up to $2.50.  Do the math.  If they were the only two bidders, and a price of $2.50 means there were 250 bids placed, how many bids did each bidder place?  Right...125 bids each.  This means the "winner" spent 125 bids on 30 bids.  Let's get out the tape measure, right?  What's worse, they did this for 5 different bids at the same time...and another bidder bid 1c (1 bid) on a 30 bid package right in the middle of this mess...and got it...for 1c.  Can you say "brain dead"?
  

LEAVE YOUR EGO AT THE DOOR OR YOU WILL BE LEAVING YOUR MONEY THERE INSTEAD!

So, what are the rules to make this work, and can it work for you?
Well, the second part is really in your hands.  I don't think anyone can really answer that but you, however, the first part does have an answer.  Here are the rules I follow...they work for me.  Notice how they compare to the same logic used by successful investors:

1. Emotion is your enemy.  Leave them in the trash...or you will find yourself there instead.  See above.
2. Do research on your competition.  Find out who the "out of control" bidders are and when you see them bidding...run.  Run fast, run far, but run.  These bidders will ALWAYS bid the price up higher and higher until they get the win...or run out of money...and these bidders are always rich in bids, so don't even try to beat them.  You won't.  Keep in mind though, if you wait  for it, that item will come up again very soon.
3. Know your limit (the day trader in me wanted to say "stop limit").  Base your limit on how much you want to bid on that item based on:
1. How much you are willing to walk away from
2. How much you are willing to spend based on the products value
3. How much that particular item has gone for in past auctions.
4. Do research on different times of day, and how that effects bids and bidders.  You'll find that different times of day will have bidders of different mindsets.  Vegas winners understand this.
5. Always, I mean ALWAYS know exactly what your "cost per bid" value is for the bids you own.  This plays a huge role in how much you can bid.  Say the base price is 75c/bid, bud you've won 100 bids at a cost of $50.  That means, that while others using "bought" bids (full price) at 75c per bid, you are using bids won at bid package auctions that cost you only 50c per bid.  That's power, that means your "penny bids" cost less than some of your competition.  Think about it.
6. Only bid on Auction Sites that are completely transparent.  This means, they show you the actual cost of the item the winner paid at auction, including the cost of the bids, and how that works out to a savings, or loss, and how much of a savings or loss to the winner.  This is where you find the "out of control" bidders since they stand out.  They're the ones that are constantly showing a loss, or a very small savings.  This is probably the most important rule to follow.  There is nothing more powerful than the will of an out of control bidder.
7. Don't bid for the sake of bidding.  I'm shocked at how many times I see not just one, but many bidders bidding on a product when the clock (that tells you how long the product will be up for bid) still has time left on it.  Why?  You really don't need to place a bid until the clock says "1 second" ...so don't.  It doesn't matter how many bids you place before then.  The only bid that matters is THE LAST ONE.

There's more to it than this, but everyone should work out their own methods and rules that is best for them...I know, sounds like an investor talking.  That's right...and that, my friends, is the reason why investors make money and gamblers lose.  It's all in the rules they each follow, and the research they do.

Now, I'm not going to leave you hanging.  
Like I said, I've been on many of these sites and I have found good and not so good ones.  The ones I like allow me to see all the info I need to make sound decisions in bidding (see rules above).  This is my favorite.  


PLEASE SEE LATER POSTING COMMENTING ON THIS STE.


I'm bidding there all the time and getting great deals on many things.  Just remember...discipline yourself to follow the rules and you should be OK.  One more thing, before you jump in you should monitor the site so you can get a feel for all of these things I've mentioned above.  If you are going to do this, do it right...or not at all.  Happy bidding.

There's Another Plus to This Particular Site
Here's another big reason why I like this auction site over the others.  They have a way that allows you to apply the bids you make on auctions you don't win to discount a direct purchase of the item.  Lost?  Here's how this works:

1. Products Retail Price is - $250
2. You bid (credits placed) - 100
3. Value of credits placed (100 x 75c) - $75
4. If you lose the auction, you can buy the item at a cost of Product Retail Price (-) the Value of the Credits Placed...in this case, $250-75 = $175+A/H

Now, the Bid/Credits cost you to begin with.  If you bought them at cost, they would be 75c/credit...so you didn't get a discount, you just were able to not lose the value of that cost.  You were able to use it for bidding, and then, if you lost the auction, you could apply it to buy...at your option.

Here's the fun part.  

Remember I mentioned above that you can get bid packages at auction, which would let you own these bids at a reduced cost per bid.  In other words, get a 30 pack for 5c (of which you used two of your own bids), and you would have paid $1.50 (2 x 75c) + 5c (your winning bid) = $1.55.  That would work out to about 19c/bid.  As you do this more often, that cost per bid decreases even more.  For this example, let's just use 20c/bid cost.  In the example above, the following numbers would apply:

1. Products Retail Price is - $250
2. You bid in credits - 100
3. Value of credits to the auction site - $75 (this is what's applied to the price you will end up paying)
4. Actual cost of the credits you paid - 100 x 20c/credit - $20
5. When you buy this item at the end, you will pay the Retail Price ($250) - the credits Value ($75) + your actual cost of the credits ($20) = $195.

Now that's a true discount...and in the process, you might win the auction anyway and it would only cost you the end auction price plus the cost (your actual cost) of the bids you used.  I like that, how about you?  Try it out...it's fun, and can be very rewarding.


Now, here is an example of my first win on this system.  I won a 16" HP Laptop valued at over $600...and my total cost, using the above system and rules, came to a little over $20.  How you might ask?  Simple, the numbers went like this:

1. The final bid was $85.80 + $1.99 for handling for a total of $87.79.  Now if it ended right there I would have been happy, but it gets better...
2. I bid 315 bids of my own, but I got 25 bonus bids over the bidding time just for bidding, so that meant I really only placed 290 bids (315 - 25), and it gets better...
3. As a bonus, for picking this particular product (from about 30 options on this auction win) I was gifted 380 bids...for FREE.  So, I actually didn't spend any bids at all and was credited with a net of 90 bids back in my account.  With each bid valued at 75 cents a piece, that means I actually got a value on this back in credits worth $67.50...which means I really only paid $20.29.
4. What does this all add up to?
• Value of $607.11
• Paid out $20.29
• Saved 96.7%.  Not a bad deal, wouldn't you say?
• Paid $87.79...or did I?  I actually only paid 

Here is an example of my second win on this system.  I won a NIKON 14 Mega Pixel digital camera valued around $272...and my total cost, using the above system and rules, came to a little over $16.  How you might ask?  Simple, the numbers went like this:

1. The final bid was $83.20 + $1.99 for handling for a total of $85.19.  Now if it ended right there I would have been happy, but it gets better...
2. I bid 260 bids of my own at an average cost of only 7.5c per bid...remember, I'm bidding on bid credit auctions and using the above system, I'm getting them at an average of only 7.5c my cost. I got 1 bonus bid over the bidding time just for bidding, so that meant I really only placed 259 bids, so my cost for bids used was only $19.49.  Add that to the above cost of and the total is $102.69.
3. As a bonus, for picking this particular product (from about 30 options on this auction win) I was gifted 115 bids...for FREE. With each bid valued at 75 cents a piece, that means I actually got a value on this back in credits worth $86.25...which means I really only paid $16.44.
4. What does this all add up to?
• Value of $272.95
• Paid out $16.44
• Saved 94%.  Not a bad deal, wouldn't you say?

Here is an example of my third win on this system.  I won a desktop valued at over $1000...and my total cost, using the above system and rules, came to a little over $2.  You read that right...just $2. How you might ask?  Simple, the numbers went like this:

1. The final bid was $47.48 including bid cost and the $1.99 for handling.  Now if it ended right there I would have been happy, but it gets better...
2. As a bonus, for picking this particular product I was gifted 60 bids...for FREE.  With each bid valued at 75 cents a piece, that means I actually got a value on this back in credits worth $45.00...which means I really only paid $2.48.
3. What does this all add up to?
• Value of $1140.74
• Paid out $2.48
• Saved 99.9999%.  Not a bad deal, wouldn't you say?
• Paid $47.48...or did I?

Here is an example of my fourth win on this system.  I won a Kindle 3G Wireless with FREE WIFI valued at over $180...and my total cost, using the above system and rules, came to...actually, I made money on this one.  I received more value in credits back than my outgoing costs...$17.50 worth.  How you might ask?  Simple, the numbers went like this:

1. The final cost was $8.75 including the actual bid cost ($5.71 + the used bid cost at 7.5c per bid + $1.99 for handling for a total of $8.75.  Now if it ended right there I would have been really happy, but it gets better, much better...
2. As a bonus, for picking this particular product (from about 30 options on this auction win) I was gifted 35 bids...for FREE. With each bid valued at 75 cents a piece, that means I actually got a value on this back in credits worth $26.25...which means I really got back more value than I paid out. 
3. What does this all add up to?
• Value of $184.28
• Credited back to me a value of $17.50
• ...and, I have a new Kindle...for nothing.  Not a bad deal, wouldn't you say?
• I ended up with a Kindle and $17.50 more than when I started.  I just followed the rules I set out above...and stuck to them.