Thursday, May 26, 2011

How do Penny Auctions Differ from Ordinary Auctions

How do penny auctions differ from ordinary auctions? This is an important question to answer because it determines what penny auction strategies you should use to win these auctions. The strategies of penny auction are vastly different from strategies of winning on say eBay.

First, you should read my post on How do Penny Auctions Work to fully understand the kind of business model penny auctions use.You might also like to read my Quibids Review, which is the largest penny auction, to get a perspective. My post on Quibids vs eBay is also a good read for beginners and pros alike.

Now, back to the topic of how penny auctions differ from ordinary auctions. Here are some major differences that you will notice:

Paid Bids at Penny Auctions 
At every penny auction, the bids are paid for in advance, You can only place as many bids as you purchase initially. This is quite contrary to a site like eBay where bidding is completely free. There are a few sites like HappyBidDay that give you a ton of free bids when you register but usually you need to buy bids in advance.

This is perhaps the most important aspect which beginners should really know about. If you want to bid at penny auctions, you need to buy bids. You might or might not win the auction, but every bids needs to be paid for. Thus, the losers of an auction lose more than just the product - they lose money. The upside of course is that if you are indeed the winner, then you will end up with a huge discount in most cases.

The Timer Increment, and Not Knowing When an Auction Ends 
The timer increment is also a confusing feature of penny auctions for beginners. People new to penny auctions think that the timer run down will show when the auction ends. However, at every such site, the timer will be reset every time a bid is placed. This is to ensure that the maximum number of bids are placed, which make the site profitable in the first place.

This is also the reason why you should never bid hours in advance - simply because others will outbid you. Of course if it is a new penny auction, you might do so but don't even try in established penny auctions.

Potential Losses: Part and Parcel of the Game 
In penny auctions, you can always have potential losses. This mostly happens when you fail to win the item you are bidding for. You will spend money on the bids you place and don't win the item, so you are at a loss here. Some sites like Quibids offer a Buy Now feature but even this is restrictive, like not working with voucher bids and overpriced items like Quibids jewelry.

You should know the risk before joining and investing money in any penny auction. Different sites have different rules, so make sure you know them. Be prepared for losses as well. Of course if you follow my penny auction strategies, your chances of a loss will be greatly reduced but no one can ever guarantee a win at a penny auction. Ever.

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