In 2019, the entire world has become aware of the power of ‘fake news.’ Now that the internet has become a place where absolutely anyone can have a voice, it’s become easier than ever for someone to make claims that may or may not be true in an attempt to trick or deceive someone into doing what they want or thinking how they want them to think.
The result? It’s become harder than ever for the average person to tell what’s real and what’s fake. This includes everything from political messages and news reports to online businesses and their big claims.
With that in mind, there’s one type of business that has been the subject of plenty of debate over the last several years — penny auctions. These fast-paced and low-priced auctions have existed for over a decade thanks to sites like DealDash. You might even have seen some of their claims yourself: “Buy new products from companies like Apple and Sony for 10% of their retail price!”
We decided to take on three of the biggest myths about these penny auction sites and determine what’s real, and what’s just ‘fake news.’
Penny Auctions: A Brief Primer
First, a quick introduction is in order. Appearing on the scene around 2008, penny auctions are online bidding platforms that involve extremely small bid increases — usually just 1 cent per bid. These auctions differ from other sites like eBay because each bid placed by a bidder costs a certain amount that’s separate from the bid. On DealDash, for instance, each bid you place costs around $0.15. This fee is owed whether you end up winning the auction or not.
This is what allows penny auction sites to auction off products for such low prices and still survive — they receive the price of the highest bid plus the sum of all fees paid by bidders to place their bids. This system is also designed to keep those prices as low as they are — bidders are discouraged from bidding to much and raising prices, as every bid costs them a minor charge. A few bids will only add up to a couple of dollars, but driving up the price with dozens or hundreds of bids comes with consequences.
Now that we understand a little about how penny auctions work, let’s bust three of the biggest myths surrounding them.
Myth #1: Penny Auctions Are a Scam
Many of the claims made by penny auction sites in banner ads and social media posts can sound too good to be true.
“90% discounts on brand-new products!”
iPads available for $12.45!”
This has led many cautious internet users to believe that penny auctions are simply a scam. They believe that if they click on these ads a virus will be downloaded to their computer immediately, or they’ll be redirected to a site that requests their bank account information and then steals all the money out from under them.
But the surprising truth is that most penny auctions are legitimate. The fact that they offer such low prices is simply a result of their business model — they don’t just make money from winning bids, but also from the fees paid for each bid placed. Once you understand this, you realize they’re just a business with a distinct type of auction model — one that can benefit both them and bidders.
Myth #2: You Can’t Really Get the Low Prices They Advertise
Another claim that’s often made against these auction sites is that while the auctions on them might be real, no one ever actually pays the low prices they advertise.
The truth is that a wide range of factors go into the final price on a specific auction, from how desirable the product is to how many people are bidding at a given time, and how often. This means that while some auctions may reach prices that are just barely below retail value, others finish with a price that’s as much as 90% lower than you’d pay in a store. No single site can guarantee exactly how much you can spend on a specific auction, but they can advertise real prices that have been paid for products in the past — even when these prices seem insanely low.
In fact, one of the ways that penny auctions can result in such low winning prices is that it’s possible to win an auction with a single bid, something that happens frequently on sites like DealDash. If a bidder finds an auction without other bidders present in the ten-second bidding window, they can place a single bid at $0.01, a bid which cost them $0.15 to use, for a total paid price of $0.16 for the item.
Myth #3: Auction Sites Are Misleading and Make You Spend More Than You Planned
There has been some talk online that penny auction sites mislead their bidders, not making clear that they’ll have to pay a small fee for each bid whether they win the auction or not. But reputable penny auction sites like DealDash require their bids before they engage in an auction, not after. This approach is designed to be as transparent as possible about the fees associated with bidding. Bidders can buy bid packs separate from specific auctions, which they can then put to use when bidding on specific items.
This means that by the time they actually win an auction, the only fee left to pay is the winning bid price.
Like Any Auctions Platform, Penny Auctions Require You to Bid Responsibly, Set Limits and Know What You Owe
When bidding on penny auction sites, the key is to set limits for yourself on how much you’re willing to spend. No one can force you to spend more than you’re comfortable with for a given item, and legitimate auction sites don’t have hidden fees or ways of taking more money from your account than you expect.