How to Win a Penny Auction

.... but only when I win them. As I tend to recommend this auction style to people, it's only fair that I provide some advice for beginners. First, how is this different from a "real" auction? Basically it is only 10% buying a product, 90% gambling. They disguise it as a legitimate purchase, and try to play the gambling part as "fun" or "even cheaper" but it is not (unless you play it right). So let's get into the main differences.

Well first, the bid is only a penny. Why? Because you buy the bids. The bids do not represent real money. They represent "tokens" and it is best to think of them as such. You are not bidding money, you are paying money to bid. There is a difference. You do not get back your bids if you do not win the auction. When you bid on an item, you lose 1 bid from your account and it is gone forever. That is the single most important thing to remember.

The auction price of the item is only a tiny part of the true price. Let's dissect the "winner" of a penny auction.

This is something I actually saw recently, so I remember it well.

Okay, so $75 is our base price. The winner is sending $75 and getting a Visa gift card.

Price #2 : the bids. Each bid costs a certain amount of money. Somewhere between $0.05-$1.00 but once you buy it, it magically is worth only 1 penny. I'll just put my first tip in here. NEVER PAY FOR BIDS. You should always get bids as a "bonus" for buying something else. Unless the bids are priced extremely low, do not pay outright for bids. Buying bids is a fool's game.

If this item sold for $75, and each bid was worth only a penny, how many bids went in?

75.00 = 7500 pennies = 7500 bids

Let's call the average cost $0.10 per bid.

(it varies hugely based on how many suckers the site can get to actually pay)

So at $0.10 per bid we see how much money was given to the site for this gift certificate.

7500 bids X $0.10 per = $750.00

How do penny auction sites make their money? There you have it. A total of $750 was spent on a $200 Visa gift card.

And it is, if you actually paid for bids. So don't do that. Seriously. It is rule #1. However, the winner did not pay that cost alone. All persons bidding had a part in it, but only one of them got the gift card.

So what if you "snipe" the auction at the last second, and only put in a few bids?

Say you come in, place 10 bids in the last few seconds, and win.

$0.10 per bid X 10 + $75 cost = $76 price tag

Yes, that's the strategy which must be used obviously. Many eBay bidders are familiar with "sniping," the practice of bidding at the last second and simply winning instead of creating a bid war that drives up the price.

So sniping in the traditional sense doesn't work. Don't get sucked into that either. Every online penny auction place adds about 5 seconds to the clock every time someone bids.

This means it is impossible to avoid a bidding war.

If I bid, everyone sees that I bid. The 5 second countdown restarts. Since they paid for bids and don't want to lose their investments, they all bid again. And repeat for upward of 4 hours for most auctions. The last 5 seconds of a penny auction usually repeats upward of 100 times before the auction is actually won. It's theoretically possible for it to last infinitely.

There are a few things you can watch to predict when an auction is "really" ending. Here are my tips for spotting a good time to bid.

1. Choose an under-populated site.

You can find these by signing up for incentive sites like Swagbucks. A new auction site needs to build a userbase quickly, so they send out "incentive" offers to get lots of members quickly.

(imagine having only 1 bidder on the $200 Visa auction. They only get $0.10 for the $200 gift card)

Seeing one of these all-calls is a great way to avoid paying for bids, and also gives you a great site with few users. Fewer users means that when Bob can't hold it anymore and goes to the bathroom, you win the gift card because it was just the 2 of you bidding.

2. Don't go for Amazon, Visa, etc.

If you are a newbie to auction sites, the big ticket items will bankrupt you quickly. Don't try swimming with the sharks until you have experience. This guide is nowhere near as comprehensive a course as you'll need to win a Visa card. The best item is something niche that you'll actually use. For example, if you love American Eagle, their gift certificate is worth just as much (to you) as an Amazon card, and will have far less competition. While 20 people are bidding on the higher value items and wasting 100 bids apiece, you can quietly win a niche item with only 5-10.

Remember that bids are money. If you have to spend 100 bids for a 1-in-10 chance on a $50 item, but could get a $25 item easily for 10 bids, go for the cheaper option with a better win chance.

3. Look at the bid list.

Look at how many people are bidding. Now consider that there are probably another 5 just like you waiting silently on the sidelines. You want the "war" to be down to 3 people at most before you jump in.

Another thing to watch for is "auto-bidding" which many sites offer. NEVER USE THIS. Bids are money, and the sites want your money. The auto-bid options will bid every time the clock hits 5 seconds, and if anyone else is using autobid, you'll just bid against each other passively for hours. This wastes real money and makes it easy for active snipers to wait you out.

If you see autobidding, watch and count how many people are doing it (if you can). Some sites mark users who are on auto, but on others you can tell because the person will be bidding like clockwork at 5 seconds. Either this user is on auto, or they are just really dumb. Wait until auto-bidding is down to 1 user plus an active bidder, or the total is only 2 autobidders, then begin bidding yourself. There is no point bidding with 2 auto-bidders plus an active, or 3+ auto-bidders, as they can easily wear each other out without you spending bids.

4. Check the details first

Some auction sites like to nickle and dime you with fees. Usually there is a shipping charge, even if your item is delivered electronically. There will be an auction closing fee. Depending on how scammy the site is, these may easily bring your purchase price up above the item value.

If a site only offers lame items that aren't worth the auction price and shipping, and then has only a few big-ticket items, don't bother signing up. Every user on the site will be bidding on only a few auctions, driving up the total cost and making competition useless unless you are extremely sure you can win.

Additionally, the more hidden fees and "games" a site plays, the more likely it is to be rigged. Imagine you are the site owner. You can easily give yourself unlimited bids and then "win" enough of the auctions to keep a tidy profit. In fact, NBC ran a report recently about just that problem.

5. Bid around 4-7AM EST

Many auction sites literally don't schedule any auctions to end past 7PM EST, but if a bid war is stretching out, eventually someone will quit and go to bed. When they do, be ready to jump in. Don't get into a bidding war at 4PM, as the number of users bidding will only grow as people get off of work and log on.

If the site actually schedules an auction ending in the middle of the night, a small ticket item can sometimes be sniped the traditional way or with only a small fight.

Seriously. If you spend real money on them, you're a chump. I figured this would be the best advice to leave you with. If this guide helped at all, or you need further clarification, feel free to comment below. No registration required.