A Successful Penny Auction Business

29 replies
How to start a successful penny auction business? I mean, what are the correct steps of starting one in terms of stocking up your products first? or SEO/adwords your site first? or building your customer list first?

What are your opinions about starting a successful penny auction business. Although there are already way too many competitors and failures out there, but as internet marketers, we should have some advantages to do this.

So, what would you do?
#auction #business #penny #successful
  • Profile picture of the author Dan Allard
    Oh man the owners of penny auction sites are pro internet marketers. I did freelance work for BidsTick.com and it's just crazy competitive, they even do ddos attacks on each other. Competition at a whole new level. The amount of backlinks each site has is just ridiculous as well.

    Anyways they didn't have any inventory, once an item was won they would order thru Amazon and ship directly from Amazon to the customer.

    The most important thing will be building your customer base. IMO this business model would be very difficult without an investment. Many of the big companies started out with investment backing including the company I worked for. Although you don't need inventory you'll still lose money at the beginning until there's enough customers.

    But if you can think of a way to do it without losing money all the power to you, the profit model is very lucrative. I'm still friends with the owner on Facebook and every week he posts pictures from a different country. Makes me wish I would've stayed in that industry but it's a very grey area in terms of integrity and honesty. For a while there I had other potential clients tell me they wouldn't work with me just because I worked with a penny auction website.
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  • Profile picture of the author stephenwaldo
    I thought about getting into the penny auction business about 6 months ago, but never ended up following through with it because it seemed like a terrible idea, even then. I would HIGHLY recommend staying away from penny auctions. It might've been a profitable idea 2 years ago, but these days it is investment suicide unless you're willing to really sink yourself into it, and even then...You'll have EVERYONE working against you.

    Your competitors will be trying to outrank you, out bid you, and if worse comes to worse they'll actively work AGAINST you. Very cut throat.

    And THEN you get to the actual customers, who are even worse...There are multiple forums online dedicated to sole purpose of keeping hardcore bidders/programmers constantly updated on new penny auction sites to take advantage of. These people can and will snake as many auctions as possible for as little as possible, and they'll do it by ANY means necessary. I've read stories of people who have lost all of their seed money on Day 1 to these sort of bidders.

    Owning a penny auction site allows people to make money off of your loss - Does that really sound like a business you want to get into?

    Normally I try not to be the Debbie Downer. And again, I don't have any personal experience actually running one of these sites, so if someone else does then by all means ignore my advice. However, from my knowledge gained by researching it and learning about it, it's profitable when it works, but it is TOUGH to make it happen and requires an ENORMOUS budget to get started.
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  • Profile picture of the author Ed Micah
    From what you guys have said, if I were to aim to have a success start, how much of my budget do you think I will need? which this includes - all the SEO works, scripts cost, outsource, etc?

    Having a penny auction site is just so profitable, but not that easy though!
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  • Profile picture of the author stephenwaldo
    Oy, like I said I gave up on it and never actually followed up enough to be able to give an accurate estimate beyond...A lot.

    I know it depends on what level of items you want to auction off...The normal macbooks, ipads, xboxs, etc. means that you probably need a few thousand in cushion money in addition to the other costs of getting started. If you do toys, plane tickets, or something else that's more unique you'll have to adjust that accordingly.

    I strongly encourage you to program your own script for the reasons I outlined in my previous post, but I know that will be expensive too.

    The SEO work, to me, seems like it'll actually be the easiest part, but it depends on whether you want to get into social networking, press releases, blogging, etc. for focus more on straight back links.

    But again, take everything here with a grain of salt because I have no actual experience launching one of the sites… As soon as I realized it was going to be too expensive for me I diverted my focus elsewhere. Sorry I'm not very helpful =/
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  • Profile picture of the author aaronblevins
    It is definitely an incredible business model for the people running it. You stand to make so much money from the majority of the population who have no idea they are being scammed into actually paying out a lot more than what the product would have originally cost
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    • Profile picture of the author Ed Micah
      Originally Posted by stephenwaldo View Post

      Oy, like I said I gave up on it and never actually followed up enough to be able to give an accurate estimate beyond...A lot.

      I know it depends on what level of items you want to auction off...The normal macbooks, ipads, xboxs, etc. means that you probably need a few thousand in cushion money in addition to the other costs of getting started. If you do toys, plane tickets, or something else that's more unique you'll have to adjust that accordingly.

      I strongly encourage you to program your own script for the reasons I outlined in my previous post, but I know that will be expensive too.

      The SEO work, to me, seems like it'll actually be the easiest part, but it depends on whether you want to get into social networking, press releases, blogging, etc. for focus more on straight back links.

      But again, take everything here with a grain of salt because I have no actual experience launching one of the sites... As soon as I realized it was going to be too expensive for me I diverted my focus elsewhere. Sorry I'm not very helpful =/
      Hmm, okay!
      Even though it's doable, but it's just too hard and too many competitors out there. Maybe I think I'll reconsider this.

      Thanks for your advises anyway.

      Originally Posted by aaronblevins View Post

      It is definitely an incredible business model for the people running it. You stand to make so much money from the majority of the population who have no idea they are being scammed into actually paying out a lot more than what the product would have originally cost
      It's true :/
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  • Profile picture of the author iamjwal
    I'm new to the Warrior Forum, but somewhat of an expert when it comes to penny auctions, so I wanted to weigh in on this discussion without spamming.

    First, it is very difficult to be successful in this industry, but that doesn't mean it's impossible. The big US sites right now are Quibids, SkoreIt, and Beezid. The reasons for their success are intelligent, strategic marketing campaigns and plenty of traffic.

    You can find Quibids through affiliate networks, TV, Google campaigns, and radio. SkoreIt focuses mostly on TV and radio.

    You'll need as much funding as possible up front, and you should anticipate starting in the red. Once you build up your user base, the traffic will be essential to keep the auctions competitive and get you in the black. To set yourself apart from the competition, you should develop a site that offers unique features and functionality that other sites don't offer. Stagnancy and relying on a strict penny auction model will be a guaranteed road to failure.

    I have more on this in my book Penny Wise: The Complete Guide to Saving Money with Online Penny Auctions and on the industry-leading blog that I manage called the Penny Auction List. Feel free to contact me through either of those venues.

    Thanks.

    Josh
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  • Profile picture of the author jharr53301
    I'm in the process of building a PA site myself. But I have a unique product base that I am going to auction as well as a huge client base already from an already popular site that I plan to market too.

    The only guaranteed way of failing at something is to never try it!
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    • Profile picture of the author davidstar
      You can check out Penny Pro Auctions in Google. One stop centre from SEO even helping you to get member.
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  • My gf runs a successful PA site within a unique niche and the only red she started in was buying the script, domain and hosting space. The rest was word of mouth and talking to prospects.

    She uses the lowest/highest unique bid model and either has a set amount of bids that the auction has to reach before it closes (which means a small profit margin), or the timer does not begin until enough bids have been made (aka, the auction has now paid for itself).

    There is no need to go into the red or spend your money if you're willing to use other auction methods that do not include the countdown timer.

    I admit though that they seem to be more popular and are targeted by powerbidders. It's better to work on targeting casual auction players who are interested in your niche products (and products that powerbidders are rarely interested in bidding on). The process is slower and you'll have less interest but at least you wont be losing any money (GF only make between 100-200$ a month, but it's a nice hobby and it's extra cash).
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    • Profile picture of the author davidstar
      Code:
      How to start a successful penny auction business? I mean, what are the correct steps of starting one in terms of stocking up your products first? or SEO/adwords your site first? or building your customer list first?
       
      What are your opinions about starting a successful penny auction  business. Although there are already way too many competitors and  failures out there, but as internet marketers, we should have some  advantages to do this.
       
      So, what would you do?
      I will try to answer all your questions here.
      1) It's easy, first you need have a proven, fast and stable penny auction software. I know a reputable company that can set up the penny store, customize to your logo and colour of your liking and even host the software.

      2) You do not need to stock up any product. In US there are dropshippers that can handle the stock for you. If you stay outside the US and dropship is not readyly available than you can purchase the products daily.

      3) You need to get the buzz around before launching the site. You need minimum member to run a successful penny auction website. Definately SEO/adwords is a effective traffic method and there are other method that you can get member like CPA, facebook and other network.

      4) If really depend. IM is even more competitive but it depend how you position and how you run your auction site. Set a lower margin and let more people win than you will have a winner in the long run.

      I started one before each month I pocketed average 10-30k a month.

      I hope that help.
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  • Profile picture of the author bidstall
    Just like any other business Some Penny auctions have been successful, while some are not. The Penny auction business depends on the model you are operating. Say for example, you decide to close auction every 20 secs if a bid is not received, that would be too risky unless you have critical mass bidding 24/7.
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    • Profile picture of the author aaaa33030
      Originally Posted by bidstall View Post

      Just like any other business Some Penny auctions have been successful, while some are not. The Penny auction business depends on the model you are operating. Say for example, you decide to close auction every 20 secs if a bid is not received, that would be too risky unless you have critical mass bidding 24/7.
      In that case, you can have the script programmed where if the reserve price is not met then the timer restarts over by 20 seconds
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  • Profile picture of the author Merden
    Why you not try word's most recommended and highly rating Penny auction script provider? Php Penny Auction is the only which help you in making of your own website from thinking to complete setup. Try our demo before taking any decision.
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    • Profile picture of the author aaaa33030
      Originally Posted by Merden View Post

      Why you not try word's most recommended and highly rating Penny auction script provider? Php Penny Auction is the only which help you in making of your own website from thinking to complete setup. Try our demo before taking any decision.
      I was interested in their script but their demo at phppennyauctiondemo . com is never online.

      I emailed them for weeks now about that but never got a reply

      Are you the owner of the script?

      If so can you please give me the link to a working demo?
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    • Profile picture of the author goodsport
      Originally Posted by Merden View Post

      Why you not try word's most recommended and highly rating Penny auction script provider? Php Penny Auction is the only which help you in making of your own website from thinking to complete setup. Try our demo before taking any decision.
      Php penny auction the script over loads servers because of a poorly written script that causes database bottlenecks, and sequal connections that do not close. I would recommend to any one starting a penny auction to use a script like pennyauctionguru.com orpennyauctionprofessor.com both of the programmers are the guys who invented the penny auction and made most of the big name penny auction sites. The code they sell is the very same code being used by all the big name sites. And there is a very good reason why the big name sites use this code and not phppennyauction or the other script vendors that sell scripts that don't work properly. Pennyauctionguru.com has built in CDN and Cloud support so when you out grow the dedicated server ( when you get more then 100,000 users ) you can install the script on multiple servers and they will all communicate with each other allowing any user who comes to your site to be sent to the closest server and balances the user load through out multiple servers. Most people who buy php penny auction discover the database issues when they try to run over 20 auctions at once or when they have over 200 users on the site at once then the problems rear their ugly head, thats how php penny auction has been able to get away with it because for of their customers never get to the 200 customer mark and when they do they find out they bought a script that costs too much to fix because it is fundamentally flawed. Picking a good script to run your site is essential and unless you do some research before you buy, One of the things I do is I always serach the penny auction vendors name and the word scam in google to see the companys dirty laundry and complaints. Alot of times the complaints will expose the scripts flaws because people will be complaining about them in the complaints. Another good thing about pennyauctionguru.com is they offer a 4.6 million mass email marketing campagin that gets new site owners 10 - 20 thousand new sign ups. The people they have in the 4.6 million email database are all verified penny auction users who bought bid packs at one time or another. Getting a payment processor is important depending on which country your in there are alot now that are willing to deal with penny auctions. Penny auction sites make on average between 60 - 100k a month once you get it up and running. But like any business you need to purchase products and ship them to winners, pay for advertising ( this is big with penny auctions you need to keep new customers coming in ) If you run a honest penny auction and ship your winners the items quickly, You will always have repeat customers and word of mouth goes a long way.
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  • Profile picture of the author Ricky Fowler
    Trust, Reliable and quality are the three main secrets to success in any business. It is also necessary to do some research to understand the working of the penny auction websites and adopt a suitable winning strategy to set up a penny auction business.
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  • Profile picture of the author empowered34
    First Thing You need is to beleive that you can run a successful site, Then You Need to set the intention that You are going to do this period, Then You need a Product line, Set up a webpage or webpages that will allow you to deliver your products online, Then you will need to set up a payment processor so that you can accept payments online, Then You will need to present your site to the marketplace and tell everyone why your site is different than the other of thousands of other penny auction sites and why they should use your site instead of all the others. It is something that I would never want to do. But More Power to Ya! I hope you get it up and running and you make alot of money with it.
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  • Profile picture of the author NewParadigm
    a couple of those sites advertise like crazy on Tv (directv). Not sure how they are doing. It's a tough slog to teach old dog consumers new tricks. (very expensive). Might be a good idea for some niche tho, with gambling appeal/entertainment. I think most buyers these days want a competitive no hassle buy it now price instead of waiting around for hours or days.
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    • Profile picture of the author Nuno
      This is an old topic, last year penny auctions were doing great. Now most of them are not... some giants even closed.
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  • There was one that went bust I have friends who asked me to invest 10K which I did not but they did and all have lost it as far as I know, the doors of the office where closed in Carolina or somewhere up there. I know one guy was mailing 10K checks via fed ex to the office they just took the money. I forgot the name of it but I got the pick like you will double your money in 3 months when I know it was probably something wrong so I didn't go for it. Maybe they are out of the jam now.
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  • Profile picture of the author operationoffers
    You would have the same business model as an online casino basically. Like another poster noted, this industry is a pure scam to those who use it and most are just plain too stupid to realize it. It seems so inviting when you think you can get a laptop for 12 bucks! but when you peel the layers behind you will quickly see how much of a scam it is where the majority of people will loose and be paying for the item plus most of the profits.

    Now it is this ethical. sure. People can read the terms and decide if they want to gamble just as they can in Vegas. however, I believe you have a better chance going to Vegas then winning anything of value on a penny auction site.

    I wouldn't personally want to get involved with them just because the competition is too fierce and I don't have the budget to start a project like that, not to mention the platform to start off with.
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  • Profile picture of the author greenowl123
    Very interesting thread. I never knew it was so competitive, but just by reading the first 2 responses, I really got my eyes opened...

    I think I will leave penny auctions to the big boys !

    I am very comfortable with what I am earning now, but another $1,000 or 2 a month is always welcome, so I will just keep doing what I am already doing.
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  • Profile picture of the author 10kaday
    I would say its so competitve but easy to make money with paid traffic still
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  • Profile picture of the author tic99998
    I was about 24 hours away from buying Penny Auction software ($2,000) and giving it a good try. But then, I found this AMAZING article done by Brown University. This article is a study of the Penny Auction business and is VERY detailed in its research.

    The article looks at both the good and bad side of the business, and in great detail explains the pitfalls that some of the larger sites fell into, and went bankrupt.

    I don't feel this article is either FOR or AGAINST Penny Auction sites, but their detailed data convinced me to try my money somewhere else.

    I hope this helps you!

    http://cs.brown.edu/research/pubs/th...2012/estix.pdf
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  • Profile picture of the author DTerk
    I am trying to come up with a 'lifetime customer value' and 'cost per acquisition' for our pay-to-bid site. To start I would like to find out what this number is for sites such as Quibids and Beezids. Any idea where I can find this information? Thank in advance for the help!
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    • Profile picture of the author Sojourn
      I was going to say try allpennyauctions dot com - they had data by username and by penny auction site (including Quibids) that I think could have been used to figure that out but it looks like they're down. You might try looking up the whois domain information and contacting the site owner to see if they still have that data. I'm sure they could give a pretty good estimate from what they were storing. I think they were still up around March or April of this year.
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  • Profile picture of the author James1212
    I belong to two penny auctions, and I stand to make some good bank. But the owners go through pure hell. Its tough and nasty, Personally I can not wait to be done with it.
    Stay away from it, there are plenty of other ways to make money online.
    Best
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    • Profile picture of the author ChrisPerez
      I seen this post n thought it would be helpful to point out who my partner used to get bidoink.com up n running... Believe it or not, they went through over 5 shelf software platforms n finally came across the guys over at Penny Auction Planet | Leaders in Auction Softwarepennyauctionplanet.com.
      To this day they are running the Auction Planet software.. lots of custom coding was done by those guys and Brad's happy to say they haven't experienced a single glitch with this software platform.... Highly Recommend Penny auction planet!!

      He says ask for Andrew or Chris n tell them Brad from Oinkers sent you there... Great guys

      Cheers
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