Friday, October 24, 2008

Auction, Lottery, Auction, Lottery?

We all know how eBay and its auction system took the internet world by storm. A seller puts something up for sale, set an (undisclosed) minimum price, and bidders enter what the maximum price is they are willing to pay. The computer checks all bids against the outstanding price, and if there is more than one bid the computer automatically increases each bid on the bidder's behalf by the minimum increment over and over until the bids are above all maximum prices but one, and thus only one bidder remains. Bidders who lost out are encouraged to increase their maximum price, and there's a time limit to how long the auction runs.

Since I have moved to the UK and am, as always, looking for cheap stuff here, I have found many other online auction models being used. Like:
  • No time limits on auctions: every bid makes the auction price go up by a penny and the auction extend just a little longer. This means everyone gets to bid over and over and over and over. Oh, by the way, you have to pay £1.50 or so per bid. Basically you win when everyone else but you involved thinks they have spent enough on buying bids, including people who just logged on and are now bidding fresh this minute on something you have been spending pounds and pounds to bid on for the last hour. On eBay you are only out of money when you win the auction, here you could make 100 one-penny-increment bids, thus be out of £150, and be sniped by the person who just logged in today. Are you gonna make another bid and pay £151?

  • Lowest unique bid wins. There is a time limit on how long the auction runs. Place as many bids as you like for various price points, but it costs to place a bid. The costs to place a bid differs per item, placing a bid on a high-ticket items costs more money. The winning bid is the lowest bid at a price point that nobody else has put in a bid for, a.k.a the lowest unique bid. Right now one of the items being 'auctioned' is £100, and placing a bid costs £0.10.

  • Buy At A price You Like. Not strictly an auction format. An item is offered initially at an undisclosed price, starting at the list price. It costs £1,- to click on the hidden price and find out what it is. Every click that someone pays a £1,- for lowers the price by £0.30. If you like price disclosed to you for your £1,- fee, you can immediately buy the item. Else you can wait some amount of time and pay a £1,- to see what the current price is, perhaps other people have lowered it by multiple of £0.30 by paying to click and it may be at a price you like now.

There are more, but these give you the idea.

These 'auction' sites aren't for getting rid of crap in the attic. These sites only have new merchandise on offer, mostly consumer goods like iPods and cars and holidays, the kind of stuff people are told to invoke The Secret for if they want it for nearly free. And of course these aren't auctions, these are more or less raffles. Every 'bid' is just a ticket, a chance to win, and they never stop you from buying as many tickets as you want, of course not. The twist to each site is just how they select the winning ticket. The site organizers of course make out like crazy from all these little 'rights to bid' they sell. If you can get a flat screen TV whole sale for £400, then all you need is to sell 500 bids. Just make it as addictive as possible, by for example, having little stretches of time where you can feel like a winner until a new 'bid' makes you a loser, a feeling you can make go away by placing another bid.

Is this gambling? Is this illegal gambling? Depending on the laws in a country the answer to this is yes or no. I think that is why I have only seen 'auction' sites like this in the UK, I bet in the US these sites would have to be clearly marked as lotteries, and even then there would be plenty of demand for it.But well, I guess they are ok for now in the UK, so here they are: new ways to abuse the word 'auction'.