July 27, 2010
By the ZippyCart Shopping Cart Reviews Content Team
A new breed of online auction sites has been gaining in popularity with a pay-to-bid model that adds a sense of gambling to the auction environment. Swoopo.com is one of the more popular pay-to-bid auction sites online, but now they face serious competition from MadBid.com who just received over 6 million in Series A funding from Atomico Ventures. The way the pay-to-bid model works is consumers buy packages of bids that they can use on future auctions. Typically when a consumer chooses to buy a higher volume of bids at once, it brings down the price per bid that the consumer has to pay. Once a consumer has purchased some bids, they can then jump in and try to become an auction winner in the pay-to-bid model. MadBid is based out of London, so all the pay-to-bid auction prices are in pounds. Each auction has a countdown clock which ranges from 20 to 120 seconds, and each time a bid goes in the price is raised by one pence and the clock resets.
MadBid reports that auction winners are saving an average of 80 percent on items, but at the same time MadBid is also raking in money as consumers pay-to-bid. Since it costs £0.75 to £1.00 per bid, MadBid is able to make a nice profit on each auction. However this new type of pay-to-bid model has drawn lots of controversy, as these types of auctions are still not regulated in a way that similar types of gambling sites are subject. The local Gambling Commission has not yet ruled on the matter, as it is currently looked at as a game of skill. It might be a game of skill, but if one has a gambling addiction, this type of pay-to-bid auction could be quite dangerous. As more competitors jump in the space and investments continue to pour in, it will be interesting to see if this ecommerce model will survive long term.
Amy is the co-founder of ZippyCart. She went to school for film in Cleveland, Ohio and ended up working in the field of viral video marketing, which eventually led her to her real profession: SEO. When she's not writing for ZippyCart, she can be found out and about Seattle, WA.
