Over the past few years, Silicon Valley has become enamored with a new kind of e-commerce: auctions dime. On sites like Bidrivals.com and Bidcactus, flat-screen TVs, laptops, iPads, and other products that sell for a fraction of retail price. There is a catch: Students pay a little money every time you bid, and any delay in the bid of the auction end time by several seconds.
The first player in the auction pen, the Munich-based Entertainment Shopping, racked up torrid gains after it was founded in 2005, according to investors and entrepreneurs who studied the performance of the private company. Copycat acts popped up all over the world. Now move on auction sites dime reduced, and companies looking for a business model that works.
Entertainment Shopping called Swoopo.com in the U.S. and parts of Europe, has more than 150 opponents with names like BidCactus and PriceSaver. Some of them backed by venture capital. Atomico, the investment firm of Skype founders Janus Friis and Niklas Zennström, invested 6 million U.S. dollars last month in a London-based startup called Madbids.com. venture company Google CEO Eric Schmidt, tomorrow Ventures, which also recently an unknown amount oohilove.com, a penny auctions site specializing in luxury women like bags.
The audience for this combination of shopping and gambling has grown with the sector and the regions have led to an increase in the price of keyword advertising on Google, as "cheap iPad." Buying keywords on search sites is the main way to auction sites advertise products for sale. Traffic USA, Swoopo fell 62 percent between January and July, according to Web tracking firm compete. Beezid is below 50 percent and BidCactus less than 37 percent during the same period. "There was no other business out there manufacturing these kinds of profits, and leading the competition," says Paul Tsyrlin, co-founder of Atlanta-based penny auction site called Wavee. «A lot of people were unprepared for how difficult for a company that has been done. " Wavee traffic has declined steadily since the beginning of the year, partly because they stopped advertising.
Some customers decided that the offer on auction sites did not do a damn good economic sense. Participants will spend a total of $ 1,500, so one of them could win a $ 1.000 lap-top for $ 50. The sites found that many customers are left unhappy after paying for bids, but losing auctions. Last year, many auction sites, including BidCactus, Swoopo, Bigdeal and Oklahoma City-based Quibids, said that losing bidders could "offer to buy, or apply the amount spent on an offer subject to buy in retail price. They destroyed the profit margins of companies. "These companies went from cutting money to make money rather than people who offer to buy, and then lost money for the man who won" says Tsyrlin. "The swing was massive, and the company became unbearable."
Some of the biggest attractions are rolling back the rule changes. BigDeal, based in San Francisco, no longer offers a "Buy Now" feature for popular items like iPads, citing restrictions census. Swoopo now lets customers apply the money spent on losing bids for only 25 percent of the price of final markets; Before the spring, users could apply the money to 100 percent. CEO Swoopo, Frank Han, declined comment.
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