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Aug
22
2012

Greed is your weakness? Well, many standing by to make most of it…

Often i come across the adds from TV, Internet even e-mails about buying latest gadgets for deadly cheap prices. ‘Get apple iPad for $29.99!!’ I bet so as you. If you ever wondered how this is possible and tracked them you will most likely end up in some penny auction site such as quibids.com

First of all i am not trying to say all these penny sites are scams. There might be real winners, you might win one day as well. But the chances of you win something really worth could be like winning a lottery.

Let’s see how these companies make money (it’s not a rocket science to understand of course).

These businesses are like modern lottery. Think how lottery works? The lottery owners try to sell as many as tickets possible for every draw. If the prize money is $1000 and if a ticket costs $1 then they will try to sell at least 5000 tickets and there is one winner. The winner gets $1000 and lottery agency makes $4000 (doesn’t matter who won!).

These penny auction sites works the same way.

What would you do first before you attempt to try these sites? First you would visit that site and try to understand how it works. These websites will do a very good job in making you believe that all is legit and so many people winning it every second and their users are really lucky! There would be tutorials, attractive case studies, great feedback etc. etc. all with one objective. They will give it their best shot to get you in.

All they need is more people, fresh people, in other words more greedy people!

In these sites you will be required to pay to buy ‘bid packs’. A bid pack of 50 will allow you to place 50 bids into some thing you like to buy. Every time you place a bid you spent about $ 0.6 (each bid costs usually less than a $) and the time will be keep ticking and will come down to the last few minutes may be less than a minute always. Just like you there are 1000s of people watching the auction and will be ready to bid at the last moment. Every time someone places bid, the time ticks forward for few seconds and of course everyone from many thousand in watch will be ready to spend their few bids as well. Every time the time ticks forward it’s not just one person spent his/her one bid, there could be 1000s of bids could have been placed at once.

Just like the rest of the world you would be interested in the most latest and greatest gadgets. So all the popular gadget auctions will be of course crowded. So say a minimum of 3000 people from all over the world standing by to win the same. Obviously you wouldn’t know how many thousands trying to win the same gadget along with you (that is what these bidding sites want as well). If you know that there are probably about 5,000 people standing by with their bids and your chances of winning that gadget is 1 of 5,000 would you be spending a lot of money in there?

You would probably make about 50 attempts at a minimum every time few seconds left and hoping that others will leave the race at some point. Moreover when you are about to exhaust with your limit of 50 bids someone else could well start with their first bid. Let’s take an apple iPad. The lowest model costs somewhere close to $500. Whether you are a risk taker or not you wouldn’t be afraid to spend about 20 to 30 of your bids causally for a latest gadget like that. Multiply your 30 bids with another 3000 people participated in the bid. Collectively a minimum of $5400 spent here from 9000 bids. Your contribution could have been just less than $20 (just like buying lottery ticket).

Some lucky guy won the auction, yes! So does the company. They have also made profit of about $5000 on a $500 gadget that no retailer could possibly make. Doesn’t matter who wins the race, they always win every time. It’s not a big deal to understand, isn’t? So you keep participating in few auctions you might be lucky enough to win some as well. At the end if you calculate the total money outgo against what you won, you wouldn’t have probably made any real profit there (99.9 % would have lost the money before they quit)

So ultimately one day you would realize the fact that you are one of those millions of greedy people who have made that penny auction site owner a billionaire and you will quit. But less crowd means these companies can’t make money, right? They need fresh supply of people every day, every hour! So they go out to social media, TV ads, internet ads, news paper ads, encourage referrals, you name it!

So the moral of the story – don’t expect anything comes free, you could probably buy some real lottery instead. The investment you have made on the real lottery against the chances of winning would be probably better than these penny auction sites.

Read the title of this post once again!

Note: I am not one of the guy who burnt the fingers with these sites! I just did a little research and stayed away :)

 

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