and Penny Auctions… my take

I recently noticed an ad for while browsing gmail. It was advertising LCD tvs for $1, no doubt because I had been bidding on such items on trademe, and the keywords would have been fairly prominent in my inbox (don’t you love targeted advertising?). Normally I ignore crap like this, but it looked like a New Zealand auction site so I had to check it out – anything that competes with Trademe is good for the market in my book.

Except perhaps, in this case.

I visited the site and at first glance it looked promising – $1 reserve auctions for high value electronic goods. The problems become apparent quite quickly when you dig deeper.

Grababid is a “Penny Auction” site, and placing bids on is not free. You have to pre-purchase a quantity of “bids” in packages. The site encourages you to buy larger packages of bids in two ways – by giving you more bids for your dollar in larger quantities, and also by giving you 30% extra on your first purchase.

I’d encourage you to read the following wikipedia article (which is not up to the usual wikipedia standard but informative none the less). What it comes down to is that bids are placed which increase the sale price by a fixed amount (say 10c, not sure what it is in grababid’s case). The last bid placed wins the auction, but each bid extends the auction to give other “players” (let’s be straight here, you’re playing a game) the chance to bid. The final sale price is usually well below RRP, but since each bid that is placed has already been paid for, the auctioneer collects fees for each bid in addition to the sale price. So for a $1 start auction with a bid price of $1 and an increment of 10c that finishes at $100, the auctioneer has actually collected over $1000. The “winner” probably got a good deal, but the other bidders/players all have lost out. Note that the price appears to be fixed at $1 for many of grababids auctions, so it’s basically just the last person to bid $1 that wins…

In game theory terms the players are playing a game of brinkmanship, where each bid placed lessens the reward. But in the case of a website there is a third party – the webmaster – and they hold all the cards. The potential for abuse is huge as the webmaster can easily deprive any player of a win simply by placing a shill bid, which would be almost impossible to detect as only the webmaster truly knows who placed each bid. It would also be rather easy to create the impression of a busy site by running a whole lot of bots, and grababid actually does seem rather busy at first glance…

The point is, that unless you like games where the odds are stacked against you (i.e. you’re a gambler), you’d be wise to avoid sites like grababid. I’d sooner do my research and shop around than throw money away trying to “win” a game of brinkmanship. The fact is that if they weren’t making a margin on the goods they’re selling, they wouldn’t be in business. Given that margins are already rather low on electronic goods it makes far more sense to shop elsewhere.

You might also be interested to know that despite the .nz domain name and the skytower graphic in their logo, was registered by someone in Hong Kong with a German registrar:

query_status: 200 Active
domain_dateregistered: 2008-07-08T12:38:27+12:00
domain_datebilleduntil: 2009-07-08T12:38:27+12:00
domain_datelastmodified: 2009-05-01T11:14:51+12:00
domain_delegaterequested: yes
registrar_name: Key-Systems GmbH
registrar_address1: Prager Ring 4-12
registrar_city: Zweibruecken
registrar_province: RP
registrar_postalcode: 66482
registrar_country: DE (GERMANY)
registrar_phone: +49 6332 791850
registrar_fax: +49 6332 791851
registrar_email: [email protected]
registrant_contact_name: Jerry Reddig
registrant_contact_address1: Flat 5, 10/F, Yuen Shing Ind. Bldg.,, Yee Kuk West Street
registrant_contact_city: Hong Kong
registrant_contact_postalcode: 1033
registrant_contact_country: HK (HONG KONG)
registrant_contact_phone: +852 4246860 7
registrant_contact_fax: +852 11111 1
registrant_contact_email: [email protected]

Also note the existence of,, they’re all the same thing (it doesn’t appear that much localisation was done other than the graphic).

I’ll leave it to you to decide whether or not you want to join this site, but it should be fairly apparent that I won’t be buying my LCD TV from there.

9 thoughts on “ and Penny Auctions… my take

  1. Jane

    I kept some statistics for about 24 hours on how the auctions were running and thought I’d give it a go. That Saturday night/Sunday morning an xbox was on auction for around 2 hours before it was won and I though I’d have a go at a similar auction the next night.

    I got up Monday morning at 2am to bid. I though this was a good choice as noone else would be around to bid compared to a Saturday night/Sunday morning auction. I lasted from 2:30 to 7:20 in the morning when I had to stop with the auction still running. I checked back a little later and the auction only lasted about 15-20 minutes more.

    The optimum strategy is not to bid until you have to i.e. to bid when the counter gets down to 1 or 2 seconds. In using this strategy over 3 auctions that night I only bid around 15 bids. “People” were bidding at the 30 second to go mark which is really sub-optimal. I suspect the reason is that the problems with timing issues over the internet would become apparent if all bids went down to the wire and we’d all realise that the sight was dodgy.

    I saw some other dodgy stuff. I bid before the timer ended on the summary page but when I went to the auction page the bidder before me won. I followed auction 11602 and thought it had been going for a while so I kept track of it – it lasted at least from 16/05/2009 to 30/06/2009 which was when I stopped tracking it. The auction over 1 1/2 months had only 434 bidders. Hmmmm!

    The other thing was that it chewed through data at great knots. We have a large cap and we are never in trouble with going over but this site put us right up to our limit with about 8 hours continuous monitoring.

    Trademe loses out if someone doesn’t win an auction. For grababid (or any other penny auction/pay up front site) it’s in their interests not to have you win. My recommendation is to stay away from these sites.

    1. al40


      Jane, thanks for posting that comment, it’s very informative. From what you’ve said, the site appears to be nothing more than a scam, and it may not be possible to win at all. The problem is that without access to the web server records it’s actually impossible to prove.

      Would it be worth bringing this to the attention of the commerce commission?

  2. Jane

    Yes. I did bring it to the attention of the Commerce Commission. They e-mailed back and said there was nothing they could do. I queried that and was asked to ring the CC back but by that stage I thought I’d spent enough time/money on this and flagged it.

    The other thing that was that I google-earthed the support address that was given on the grab-a-bid website and realised it was the MacDonalds building in Johnsonville, Wellington. The building backs on to two streets and it’s official address was the other street address. I have only visited McD a couple of times in J’ville so there may be other businesses in that building but I don’t remember them.

    Anyway, I see grababid has shut down now but looks like the same content repackaged.

    The interesting thing is that they don’t put auction id numbers on the auctions anymore so you can’t track how long the auctions run for.

  3. Shane

    After watching the site grababid for 10 days, I decided to test the waters, it was odd that when I did bid I was as stategic as Jane was and picked a time when others should be in bed lol, I w=even tried items that I didn’t think would attact a lot of interest. it was odd approx 10- 15 mins after I stopped bidding, the aution was won by another, this happened on all the auctions I tried. there was a 42cm lcd tv under perpetual bidding for 23days! I worked out that on that RRp $2500 item they creamed approx $60000NZD! its a good business but.. when the site (.NZ) dissapeared I watched the .com site to see it was ‘under maintenance’ after 4 weeks I email tem – no reply, I then emailed the Credit card server and managed to get suspicious replies, finally I email the commerce commision to get a ” you have been scammed’ reply. now the .com site has dissapeared and one that looks soooo like it has sprung up called bidrivals. well well need i say more? my bank is trying to redraw my funds prob no luck there tho as the time frame is getting too far out.

  4. Pingback: Penny Auctions, take 2 « Al4

  5. The guy who lost 50


    Grab a bid bastards stole $50 from me.
    I bid a little then I understood it is Impossible to win and gave up on my money.

    I wish they become sick and spend all the money they stole from people for pain killers that won’t work.

    Sign: (-50)

  6. Nick

    I agree with the overall tone of this post and I feel sorry for the people that were scammed by grababid, Seeing all these penny auction sites popping up all over the place has prompted me to start we are devoted to uncovering the truth and rating these penny auctions so they stop rippping people off.

  7. David

    I have to disagree with your concerns regarding BidRivals. Although new to their site and very, very sceptical at first, it didn’t take me long to find examples of openness and disclosure.

    Every auction result is posted for all to see with the successful bidders total costs to purchase including bid price, courier fee and individual cost of the successful bidders bidding.

    Every auction result from the first ever auction has been posted. There is nothing to hide and it is not difficult to calculate the BidRivals profit margin.

    It was however staggering the lengths some people would go to secure a successful bid, including paying near to, and sometimes well over, retail price.

    The rules of bidding are all over the webpage. Bidders are prohibited from winning more than 2 successful bids in one 24 hr period and no more than 6 in any calendar month. There is an online assistant to answer any questions and on the two occasions I have requested advice, I have been answered immediately and accurately.

    I have only ever used the two free bids that were emailed to me and both bids were unsuccessful. I have not, nor will I ever foolishly waste money in a bidding war with a BidAgent. If I want to bid on something, I will be as strategic about it as if I was buying anything at auction.

    If you have wasted money bidding unsuccessfully, don’t whine about it. Learn from it. BidRivals is as open and transparent as a business should have to be.

    I hope to bid on, and be successful in purchasing my wife a Nikon D90 camera but it may not be the next camera along or the one after that.

    And if I should fail after spending a sum of money bidding, BidRivals will allow me to purchase the item at retail LESS the amount I have spent on my unsuccessful bid. It cannot be fairer than that.

    There are numbers of BidRivals auctions that result in a loss for BidRivals. THEY DO NOT WIN EVERY TIME; sometimes they do but everyone has the chance to bid for premium products at bargain prices and most times, the auction winner has snapped a bargain.

    Fools and their money are parted on lots of ventures. I am sure some of the penny auction sites are scams. I have yet to see anything unethical about BidRivals in fact I have seen examples of amazing openness but I will continue to be vigilant and judgemental and I hope you will be too.

    Yahuweh’s blessings to you all

  8. Pingback: It’s Time to Ditch Gmail | Al4

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