I recently noticed an ad for www.grababid.co.nz 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, Grababid.co.nz was registered by someone in Hong Kong with a German registrar:

domain_name: grababid.co.nz
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
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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]
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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 grababid.com, grababid.co.uk, 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.