Why Penny Auctions Are Not The Ebay Alternative You’re Looking For

Getting sick of eBay’s repeated security breaches? You’ve probably considered some alternatives, one of which might have been the penny auction site Madbid.com.

Amazing prizes at remarkably low prices are available, but is winning an auction at this site really possible, or is it just one step away from gambling?

What Is A Penny Auction?

The idea of the penny auction is simple: each time you make a bid, the price of the item increases by a penny. When the clock finally makes it to zero, you win. Offering low prices prices to the winner is an interesting gimmick; an iPad Air might sell for £20, for example.

Yes, really.


Because each bid you make is a “penny” or credit (although often multiple credits are required to make a bid), the auction site makes money on each bid placed, which customers have pre-paid when they set up their accounts.

With this model, the auction house can make astonishing profits.

For instance, The Guardian reported in 2012 how Madbid.com made around £151,744 (around $240,000) on an Audi A3 Sportback which was retailing at £18,700 (in the region of $30,000). That’s 600% more than the price of that car, and is just one example of the vast profits the site makes. Now, we’re not criticising their endeavour, but it is worth noting that 252,907 bids were placed on that auction!

Other penny auction sites include Bidson.com, Swoggi.com and Orangebidz.com. There are many others, all operating in the same way.

How To Win At Madbid

With that many bids placed, you’re probably thinking that the Audi auction was a one-off, but a similar volume of bids are placed on lower ticket items.

Placing a single bid on an item is unlikely to get you the result you want. So how on earth does someone win an item on Madbid?

With difficulty. After spending money on credits for bids, and factoring in the final price of an item as the auction progresses, you’ll find that things can get expensive. Loading up on credits (either buying them or winning them, if you’re lucky) and using the site’s Autobid feature are the only sure-fire methods of success.

Unless you just outright purchase the item, which kind of defeats the object of the exercise!

With Autobid set up you can bid while you’re away from your computer. While researching this article, it struck me that one of the few ways to win an auction on Madbid would be for the people you’re bidding against to fall asleep. This was before I discovered Autobid, of course!

The strength of Autobid is that there is no way for other bidders to tell how big it is. The only tell-tale sign is that the same names will appear again and again as the auction is closing, a clue that they are using Autobid. Also, Autobid bids are guaranteed to be placed, whereas a manual bid isn’t.

This video illustrates the point.

Basically, even if you win at Madbid or any other penny auction, you’ve already spent a lot of money.

Are Penny Auctions A Form Of Gambling?

Although Madbid does not require a gambling license, this doesn’t mean that penny auction sites are not chance-based games. Rather, it means that legislation hasn’t yet caught up with the Internet (again).


Says Dr Mark Griffiths, professor of gambling studies at Nottingham Trent University:

“Winning a penny auction is essentially chance-determined and does not depend on any discernible skill – a person can bid again and again with no certainty that they will ever win the product. If there is no real skill in participating and it is essentially a chance activity, how is this not a form of gambling? The vast majority of people who bid on penny auction websites do not get anything for their money, except the hope of winning.”

We’re inclined to agree.

Looking For An eBay Alternative? Penny Auctions Are Not It

eBay has an image problem. It has been repeatedly proved to be less than secure during 2014 and is littered with Google ads. You need a competent, professional alternative. Heck, the whole world needs one.

Unless you’re an auction junky and have the cash to splash, penny auction sites like Madbid are not the alternative you’re looking for.

Instead, consider eBid or if you’re a fan of Buy It Now, Amazon. Our list of eBay alternatives for sellers should help, along with Joel’s excellent collection of non-eBay auction sites for buying computers.

Have you used Madbid or another penny auction site? How did you find the experience? Did you develop an addiction? Let us know!

Image Credit: via Shutterstock

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