Saturday, June 21, 2014

Vidfall Review: A New Penny Auction Like Group Buy Site

This Vidfall review with explore all the features of a new penny auction-like website, which allows you to buy discounted gift cards and other discounted products, but crucially, without paying for bids. It's a new site that I find very promising in this space. More technically, Vidfall is a "Group Buy" website which isn't a traditional penny auction, but the basic idea is similar - you get products at a discount, and the discount is applied through the efforts of the group but there is only one winner. However, Vidfall is far less riskier, since you don't pay for the bids. Let me explain how the process works.

How Vidfall Works

  • The price starts at the market rate, so $10 for a $10 Amazon gift card. 
  • 'Bids' are video ads watched. Each video advertisement that you watch on the website, you get one 'bid' which is then automatically placed on the auction. Each 'bid' reduces the price by $0.01. So after you watch the video ad, the price of the above Amazon gift card would be $9.99. 
  • There could obviously be multiple 'bidders' on the auction. Lets say there are 10 people, all watching ads and reducing the price. This means, on an average, the price of the gift card is dropping by $0.10 each duration of an ad. 
  • Anyone can jump in at any time and just buy the deal. Lets say people collectively watched 100 ads, so the price dropped by 100X$0.01 = $1. This means the $10 Amazon gift card is now selling at $9. Someone thinks this is a good deal and buys it. That person gets the $10 Amazon gift card for $9, and rest of the bidders get nothing (just like in penny auctions). 
  • Each auction, just like in penny auctions, has one winner. However, unlike penny auctions, all the other auction participants only pay with their time rather than money. The losers in the auction don't really lose money at all. 'Bidding', therefore, is completely free. Instead of paying with your money, you pay with your time/attention by watching advertisements. 
If you want a more visual explanation for this, check out the official Vidfall video to learn more. Also, if you want to keep up with the latest news from the site, check out their official blog.

How Vidfall Makes Money

I always like to discuss how the site makes money, because if the business model isn't sustainable, it might very well close down, especially in this space (although in this case, people won't lose money if they shut down, just lost time and lot so frustration).

The way Vidfall makes money is very simple - through selling video ads on its website. Right now, it needs to get at least $0.01/ad from advertisers, which is a little high in my opinion. They'll need to make something a little more sustainable. However, that being said, also remember that gift cards almost always sell at a discount to their market value, so they have some leeway there.

However, I also believe that if Vidfall can gain more customers, it can find other ways to monetize the site for itself. Besides, right now, Vidfall seems to be a funded startup, so they shouldn't be thinking about their bottom lines at such an early stage. The bottom line is, if the model turns out unsustainable and the site closes down, you won't lose any money.

More About the Company Vidfall

Vidfall is very different from many other penny auction sites, in that it is being run more as a tech startup than a get-rich-quick scheme. This means there's a lot more room for organic growth and exploring new business models and ideas.

Vidfall is being funded by Wasabi Ventures, which means they should be able to spend money and expand their business without thinking about profits from day one. The site is started by Joel Robinson, who is one of the 'Entrepreneurs in Residence' at Wasabi Ventures.

Vidfall just completed their alpha testing in May 2014 and the results seemed very promising. They also won $30,000 in a startup competition recently, which should give them money to expand their user base. They were also on the top spot on Reddit's r/startups for March. All this is a very promising start for a young company and hopefully they can keep the momentum going (I've seen too many promising ideas in this space that have now gone into the history books, but I think Vidfall might just pull it off if it can make its long-term business sustainable).

My Experience

I tried Vidfall, and won a $5 Starbucks gift card for $2.54. Not too shabby I would say.

Right now, there seems to be low competition, so it's possible to get some nice deals, especially on gift cards. The site is very new, so don't expect a lot of variety of products, but my guess is, this will change soon in the future. There's no downside to it, really, so you should definitely give Vidfall a try