If you are looking at this post, it is because you are doing some comparison shopping or trying to find out more information about Nitrobids.com or dubli or any of the other dutch auction sites. Here’s the skinny and why I think they are sneaky, sly, and should be put out of business: they are deceptive.
Here’s how it works at nitrobids.com.
You have two choices, nitrobids or bid2buy.
Nitrobids are auctions that start at $0 and increase by a penny every time someone bids. Each bid resets a timer on an undisclosed amount of time, and if you happen to be the last person that bid when the timer expires, you win the auction and can buy the product for the listed price, which should be much lower than the retail price.
Here’s where it gets sneaky: you pay for every bid you use. In the best case scenario for you, you pay $.57 for every bid, worst case $1.
Let’s start doing some math. If an auction for a Nike + iPod kit (live as I write this) retails for $29, and the current auction price that you can “buy” it for is $1.40, that means that 140 bids have been placed on that item from the beginning of the auction until now. So, every bid, spread out over how many people, has generated between $.57 and $1 per bid. Worst case scenario, Nitrobids.com has just made at least, AT LEAST, $79 on that item, which has a retail price of $29.
So, yeah, you might win, and you might be able to buy it for $1.40, but the truth is nitrobids.com is cleaning house with this method of auction.
Worse yet, there is absolutely no transparency. They don’t say how long the timer lasts They don’t allow you to buy the item for a specified price. You never know how many people have bid on the item, or if their software is bidding against you. You never know whether or not you are going to win the item at the price you want. They don’t provide any clarity on what they are doing. And what they are doing could be considered illegal gaming. Dubli.com is facing class action lawsuits because of the deceptive nature of what they do.
Then the second kind of auction, the bid2buy, is the same thing, but in reverse. The auctions start at a retail price, and then go down one penny per bid, and it costs the same to bid on each auction as the other.
There is an iPad that finished the auction at $456.50 on the site right now. The auction started at $499. Let’s do the math again…
If the price went down $42.50, then there were 4,250 bids on the iPad…. which means at WORST case nitrobids.com made $2,422.50 from the bids PLUS the $456.50. On a $499 iPad nitrobids.com clears, WORST CASE SCENARIO, a cool $2,300, and only one person got to take it home, while hundreds of people may have “bid” on it. Nitrobids probably clears something like $4,000 on an auction like this…for something worth $499 on the open market. Is this right? Ethical? Moral? Legal? Certainly not the first three, but the legality of it has yet to be tested.
What makes me sick about Nitrobids.com is that I know one of the owners. And he seems like a decent guy…but come on people, this is a scam through and through. If you want to gamble, go to Vegas, I bet your odds of winning are better there than on Nitrobids.com.
What you say on how the auction works is true. But I don’t agree with you about the transparency. You say there is no transparency about the action timing before expiration. At the beginning of every auction there is a timer clear as day how much time each auction is. Also you can’t bid until you buy some bids. Therefore the price of each bid is transparent. I know Nitrobids has a tutorial that shows exactly how the site works and how it is a possible benefit to you. I don’t see how this site is a scam. If you are willing to buy bids and risk bidding and win the item then you get it for the price you win it for. How is that a scam? Who cares how much the company makes. The winners still get a great deal on the products they win. A company could not stay in business long if they don’t make a profit. I know the site that this article is written about. While the business model allows for the business to make a great profit it also takes a big risk. When this company first beta tested their site they gave away all kinds of products for way less than retail at a big loss to the company. I saw many auctions that people won with only one or two bids that a best case scenario the company made $2 on the transaction plus shipping of $5 but lost the most retail price of the item. I guarantee they were loosing loads of money when it first started. I’m sorry but I can’t agree that this is a scam. It may be risky but if you take the time to look at the tutorials before buying bids then it is fully transparent and you know the risk you take before participating in auctions like these.
Yep just like you would know the risks of using a slot machine. But slot machines are regulated. These auctions aren’t. Thus the complaint about transparency.
Yeah, I’d have to disagree myself. Many of these “auction” sites are now out of business due to the fact that they do lose a ton of money on many of the auctions. It kind of makes me laugh that you write a whole paper on why you think there’s no transparency, but go on to essentially explain exactly how it works. I too am familiar with this site and they do indeed have a tutorial that explains how it works. It’s almost as if you’re just ticked that you didn’t think of this first. There is a ton of potential for the company to make money, but there is absolutely a high risk of loss as well. It’s obvious from the amount of companies that have failed with this business model, that the risk of loss is great. Sure, as you break it down, 140 people (or bids) could bid on a $29 item and the company makes bank. The winner could’ve bid once and won the item (I’ve done this on another site)…that’s great! The winner is happy and the company is happy. The flip side is (as pointed out on previous post), there are 140 bids on a $1000 laptop computer, so the winner gets it for $1.40. Do you think the company scores on that deal? That’s why you “buy” your bids, to help the company “pad” these losses. That’s clear as day to anyone that actually reads the tutorial and actually has some common sense. So you’re mad that a company has a business plan where they could potentially make a lot of money? Take my advice, never start a business…someone might get mad at you for trying to make money.
You must have owned or own one of these dutch auction sites. My complaint isn’t that these are legitimate companies attempting to make money on a fun thing, but that the marketing information they employ is very misleading. If they were explicit about what they really were, on their front page, then happy day. And, in my opinion, there is no transparency about who you are bidding against. They could be corporate stooges set up to keep bids coming. They could be part of the software. You are right, companies need to make money, and one way that I have seen these dutch auctions hedge against their losses is to bid on their own items until they break even. Terrible. Until these kinds of sites are explicit about what they are, I’ll be writing against them.
When you go to Vegas, you know what you are getting in to. Dutch auctions aren’t the same. They masquerade as auctions, and they aren’t.
BTW, I’ve been self employed for the last ten years. If you don’t have the stones to own a business, you shouldn’t, but you are going to see a share of criticism in any business you are in.
And I’m not mad at their desire or plan to make money, but the lack of explanation of how it actually works. And the gaming nature of the deal. I think it should be regulated like any other online gambling website.