I first heard about Madbid through a friend. Although there are lots of other popular penny auction websites around, Madbid have taken centre stage with television advertisement campaigns and reviews from popular magazines and tabloids. I’ve read some articles about them being a scam so I decided to check it out for myself. As soon as you visit the website, the current auctions are displayed on the homepage so you can see just how cheap products are going for. I’ve just been on then to find an iPhone 4 with a current bid of 26 pence! That’s enough reason for anyone to create an account and start bidding but before you do, be aware of the rules. To bid on an item, you simply raise the price by one penny, and if the time expires without anyone else bidding, you win! But bidding isn’t free. This is where Madbid actually make a profit. You have to buy credits to bid with. Cheap products like an alarm clock may only require 4 credits to make a bid, whereas televisions cost around 6 credits to make a bid. And this isn’t just your initial bid, but every single one you make on the product.
Here’s the numbers:
I’ve just seen an iPhone 4 previously sell for just over 50 quid so we’ll use that for an example. Let’s assume the cost to increase the bid by a penny is 6 credits, and that the cost of each credit is 10p.
This means that every time a user chooses to increase the bid, it costs them 60p. (6 multiplied by 10)
So to reach £50 from a zero starting price, that requires 5,000 bids. (50 multiplied by 0.01)
So the cost of all the bids equal 3,000. (5,000 multiplied by 0.60)
This means from the bidding alone, the website has earned £3,000 from one product worth roughly £500. Plus the extra £50 from the winning bidder! So, as you can tell, it’s genius!
In conclusion, technically it’s not a scam at all. Expensive items are won by people for really small prices, just like it says on the tin. Although the cost of bidding should be stated clearly on the website. So if you are planning to use a website like Madbid or My Little Bird, be sure to understand the rules and actual cost of bidding, and be prepared to face the possibility of losing lots of your hard earned cash.