Twist to Penny Auctions in South Africa

Penny Auctions are very popular in South Africa. Recently there were some lawsuits against the biggest penny auction players in South Africa like Smokoo. This hasn't really deterred people from trying out new innovations to the existing penny auction model. The bidders are already there and some new innovation can help them get back.

Here is a new innovation: Bidding with SMS! Text messaging is very popular in SA and people are comfortable with it. In the new model, you don't need to give out your credit card details - you just SMS a code to bid on an auction. Also, you don't need to register on the site to bid - your phone number is all the information that the site needs! The model is still the same: the cost per bid is R5 and this is the charge you incur for that SMS.

The site is called Yastic and it does have some good features like Buy It Now and free delivery of products. After you win, the site will contact you at the phone number you use to place the bids through SMS.

Can we see such innovation for US based penny auctions as well? I am not too sure. It will be a good way to connect with the younger generation. Personally, I don't think I'll use this feature even if available, but that's just me.  It sure could be helpful for some.

Penny Auctions are Gambling, says South Africa

There was a recent stir about the legalities of penny auctions in the United States. They are perfectly legal in Europe that has much leaner laws on gambling. However, this question was raised when a class action lawsuit was filed against Quibids.

Now, South Africa seems to have classified penny auctions as gambling. The news report can be found here. Smokoo seems like the most famous penny auction in South Africa, along with sites like Bidchaser, Kooldeals, Viaziz etc. So now, Smokoo is illegal in South Africa.

The officials say that "(penny auctions are)similar to gambling and can be regulated under gambling regulations". Even though online betting is legal in South Africa, interactive gambling is not. So this would mean that these sites will have to shut shop. As of today, the sites are still running but I suspect it won't be long.

I am not sure whether this ruling will have any influence on the Quibids lawsuit at all. In any case, since it is a first against a major penny auction, it is likely to influence how the industry progresses in the United States. By all counts, Quibids is much larger than Smokoo. Perhaps they can find a ruling in their favor owing to their size, I don't know.

What are your thoughts on this?