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Getting sick of eBay’s repeated security breaches? New EBay Security Breach: Time To Reconsider Your Membership? New EBay Security Breach: Time To Reconsider Your Membership? Buyers shopping for new iPhones have found themselves scammed by criminals employing a cross site scripting vulnerability on eBay listings. Find out how to avoid being caught out by the security weakness. Read More You’ve probably considered some alternatives, one of which might have been the penny auction site Madbid.com.

Amazing prizes at remarkably low prices are available, but is winning an auction at this site really possible, or is it just one step away from gambling?

What Is A Penny Auction?

The idea of the penny auction is simple: each time you make a bid, the price of the item increases by a penny. When the clock finally makes it to zero, you win. Offering low prices prices to the winner is an interesting gimmick; an iPad Air might sell for £20, for example.

Yes, really.

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Because each bid you make is a “penny” or credit (although often multiple credits are required to make a bid), the auction site makes money on each bid placed, which customers have pre-paid when they set up their accounts.

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With this model, the auction house can make astonishing profits.

For instance, The Guardian reported in 2012 how Madbid.com made around £151,744 (around $240,000) on an Audi A3 Sportback which was retailing at £18,700 (in the region of $30,000). That’s 600% more than the price of that car, and is just one example of the vast profits the site makes. Now, we’re not criticising their endeavour, but it is worth noting that 252,907 bids were placed on that auction!

Other penny auction sites include Bidson.com, Swoggi.com and Orangebidz.com. There are many others, all operating in the same way.

How To Win At Madbid

With that many bids placed, you’re probably thinking that the Audi auction was a one-off, but a similar volume of bids are placed on lower ticket items.

Placing a single bid on an item is unlikely to get you the result you want. So how on earth does someone win an item on Madbid?

With difficulty. After spending money on credits for bids, and factoring in the final price of an item as the auction progresses, you’ll find that things can get expensive. Loading up on credits (either buying them or winning them, if you’re lucky) and using the site’s Autobid feature are the only sure-fire methods of success.

Unless you just outright purchase the item, which kind of defeats the object of the exercise!

With Autobid set up you can bid while you’re away from your computer. While researching this article, it struck me that one of the few ways to win an auction on Madbid would be for the people you’re bidding against to fall asleep. This was before I discovered Autobid, of course!

The strength of Autobid is that there is no way for other bidders to tell how big it is. The only tell-tale sign is that the same names will appear again and again as the auction is closing, a clue that they are using Autobid. Also, Autobid bids are guaranteed to be placed, whereas a manual bid isn’t.

This video illustrates the point.

Basically, even if you win at Madbid or any other penny auction, you’ve already spent a lot of money.

Are Penny Auctions A Form Of Gambling?

Although Madbid does not require a gambling license, this doesn’t mean that penny auction sites are not chance-based games. Rather, it means that legislation hasn’t yet caught up with the Internet (again).

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Says Dr Mark Griffiths, professor of gambling studies at Nottingham Trent University:

“Winning a penny auction is essentially chance-determined and does not depend on any discernible skill – a person can bid again and again with no certainty that they will ever win the product. If there is no real skill in participating and it is essentially a chance activity, how is this not a form of gambling? The vast majority of people who bid on penny auction websites do not get anything for their money, except the hope of winning.”

We’re inclined to agree.

Looking For An eBay Alternative? Penny Auctions Are Not It

eBay has an image problem. It has been repeatedly proved to be less than secure during 2014 and is littered with Google ads. You need a competent, professional alternative. Heck, the whole world needs one.

Unless you’re an auction junky and have the cash to splash, penny auction sites like Madbid are not the alternative you’re looking for.

Instead, consider eBid or if you’re a fan of Buy It Now, Amazon. Our list of eBay alternatives for sellers Fed Up With eBay? Here Are Some Worthy (And Cheaper) Alternatives For Sellers Fed Up With eBay? Here Are Some Worthy (And Cheaper) Alternatives For Sellers When you want to sell your excess junk online, where do you go? For most people, the one and only answer is eBay. With millions of daily users, it only seems logical to use the... Read More should help, along with Joel’s excellent collection of non-eBay auction sites for buying computers Computer Auctions And Why eBay May Not Be Your Only Option Computer Auctions And Why eBay May Not Be Your Only Option For most of us it's the only online auction site that matters, but if you're browsing through ebay to find great deals on computers, you may be better off using an alternative auction platform. Read More .

Have you used Madbid or another penny auction site? How did you find the experience? Did you develop an addiction? Let us know!

Image Credit: via Shutterstock

  1. Jeremy C
    April 1, 2015 at 9:48 am

    Like many others no doubt, I also took a look at Madbid after a eulogising article appeared in the DM (which may have been a put up job on the part of the journo responsible, with a likely bung from Madbid itself).
    The best way to describe this is to use a funfair analogy: imagine the penny cascade machine replete with IPhones or shiny must-haves instead of folded-up fivers as tempting prizes.
    Now imagine having to buy your pennies or two-pees from the fun fair operator in advance, since Madbid requires you to buy and use its own ‘credits’ which change in value depending on the tempting goody on offer.
    So your penny might actually have cost you 8p by the time you put it in the slot and watch it cascade pointlessly down to no effect whatever.
    Imagine that all the other players are doing exactly the same thing and you’ll soon see that the machine itself will be earning the operator (Madbid) many times more than the value of the prize being offered.
    The machine (auction) will keep accepting pennies until the countdown between bids runs to zero, but this is very unlikely to happen while there are other bidders, and auction price is below the buy it now price (okay the analogy falls apart here), as people being greedy and venal want the item at literally ANY price below RRP.
    Factoring auto-bid and all the other (credit-sapping) features on offer, you would either have to deludedly think of yourself as the luckiest (and only) participant on the site, or else have a grip on money and common sense which is shaky to say the least.
    I’m not averse to having a bit of harmless fun on the penny cascade, but I for one (and I admit my experience is not universal) have never once managed to get even one of the folded fivers to cascade down the prize chute, let alone win anything more than a bit of old tat.
    They must be doing something right (or at least not detectably illicit) over at Madbid, as they’ve been operating since 2008, but I suggest approaching it with the same caution as, say, as street scammer with 3 cups and a dodgy mate in the crowd, before shelling out big cash.

    • Christian Cawley
      April 2, 2015 at 9:58 am

      Great analogy, Jeremy! Disappointing to see newspapers still trumping Madbid, though.

  2. Fred
    November 23, 2014 at 8:01 am

    Hate Quibids and any Penny auctions total waste of time? Any real alternatives to the bay thanks leme know

    • Christian Cawley
      November 23, 2014 at 6:29 pm

      Several alternatives are linked to in the final paragraph.

  3. Andrew B
    November 20, 2014 at 8:14 pm

    Hi all, and how about social e-commerce based on social networks? For those of you that haven’t heard of it, inSelly.com is instagram based market place that is quick and easy to use. Seems like decent Ebay alternative

  4. KT
    November 4, 2014 at 2:38 am

    Those websites advertise late night along side the sex chat, fake testosterone, super towels, amazing food preparation devices and miracle leak prevention fluids commercials. You can tell a lot about a company by the company it keeps.

  5. Doc
    November 4, 2014 at 2:12 am

    Another of this type is Quibids.com - you have to use bids (credits) to place a bid, plus you pay the price you're bidding for the item; the downside is, every time someone places a bid, the auction time limit automatically extends so others can outbid you.

  6. DalSan M
    November 3, 2014 at 2:46 pm

    A long time auction site (since 1997), ubid.com is a good alternative as it offers good prices on products over 25 different categories, and must items have a Buy it Now feature. However, this is a U.S. based company and does not ship outside of the U.S.

    I never understood why people would go for penny auctions since you pay to bid, and then pay the price of the item on top of the price for the bids. Most times the company makes at least four times as much money as the item is worth, and well over double the manufacturer's suggest retail price. I only wish I could get in on this money making scheme. But then again, I have ethical values and would hate myself for scamming so many people.

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