I saw a commercial for beezid.com this morning. If you haven't seen the ad or aren't familiar with the site, it's online auctions site advertising HUGE discounts (like $2000 tv's for $100). It intrigued me enough that I did some digging. Turns out they have an elegantly simple, and potentially highly profitable, business model.
It works like this...
You sign up to be a member at no cost.
You buy bids (example, a 50-pack of bids for $40. A 200-pack for $120) Some auctions are for additional bid packs.
You bid on products (auctions begin at one penny and increase at a penny per bid)
Most of the auctions have a time-to-end counter. The trick is these also have a reset on them if a certain number of bids come in during a set period of time, meaning the time will count down to zero unless a certain number of bids comes in within the final countdown reset period. If the reset limit is triggered, the time goes back to the reset period. (example, the auction is a "20 second" auction. If a certain number of bids come in within the final 20 seconds, the auction countdown timer resets to a full 20 seconds.)
The products all seem to be name-brand top shelf items.
When you think about it for a bit, it's a devilishly simple way to make a ton of money.
Scenario:
The offered product is a widescreen TV, MSRP $1000. Someone wins it on the auction for $100, having spent $100 to buy bids. Total of $200 for a $1000 TV. Whoopee, they got a bargain! Word gets around and everyone is clamoring to join, meaning more and more people buying bids so they can get in on the action.
Now consider this... There were enough bids to get the sold price to $100. The bidding began at one penny and increased at the rate of one penny per bid. That's ten thousand bids. Including the promo giveaways and different bid pack prices, I figure they're averaging somewhere between fifty and seventy cents per bid in realized net income. That's between five and seven grand in revenue for a TV that cost them probably $750. Now THAT's a return!
Damn. Wish I'da thunk of it.
Brad