Penny auction is a type of auction in which a product or service is put up for auction at a minimum cost, bidders place bids with a fixed small increment and you have to pay for each bid. The participant who made the last bid is considered the winner. This article will show you how to create your own penny auction website and make money from it.

Principle of penny auctions operation

How penny auctions work. To understand this, let’s consider an example.

A digital camera Sony Alpha A7 III Body (without lens) was put up for sale at a starting price of $ 1, with a market value of $ 1.8-2.3 thousand. The bid step is fixed - 1 cent, the cost of one bid is $ 1. Let's say that players made 6,000 bids, thus raising the lot price to $ 61. Then the owner of the camera, if it is sold for $ 61, will receive $ 6061: (cost of the bid $ 1 * 6000 bids) + the selling price of the lot $ 61 = $ 6061.

As you can see, with such an auction mechanism, the owner of the lot can receive significantly more money from the sale, even if the product or service was sold at an incredibly low price. Buyers, in turn, can buy an expensive lot at a very low price (as in the example above, where a camera that costs about $ 2 thousand was sold for $ 61). The organizer of the penny auction (website) also wins, as it removes the commission from each transaction.

Penny Auction Bidding Rules. The general principles are no different from the rules on eBay or another similar auction site: a product or service is put up for auction by a supplier, players place bids, increasing the value of the lot, the winner is the participant who made the largest and / or last bid.

Feature of penny auctions is in the following things:

• Starting price is always 0 or 1 dollar.
• You have to pay for each bid. This is a small amount, for example $ 1, which is not scary to risk, even making 10 bids. And the bid price is always higher than the fixed increment of the lot price increase by bidding.
• The bid move is fixed. This is usually a very small amount, such as 1 cent in the US or 1 penny in England (hence the name of the auction), allowing thousands of bids to be placed before the price reaches market value.
• Each bid made delays the end of the auction by a fixed time, for example by 10 seconds or 1 hour.

Penny Auction Site Business Model

When deciding how to launch a penny auction, you must consider how you will profit from it. This can be done in two ways: by becoming the sole supplier of the auction goods or by creating a multi-vendor marketplace. In the first case, you will earn on payment for bids, which is very profitable if you can find many interesting product offers.

The second way means that at your auction, anyone can put up a lot for sale, as on Etsy and eBay. You can monetize such a site in the following ways:

• Pay per bid. In this model, the penny auction receives a portion of the profit from all bids made by the bidders, for example 5% or 10%. If you take the Sony camera example above, where the seller received $ 6,000 from bids, then the penny auction site would receive $ 300 or $ 600 in bids revenue.
• Listing Fee. When a seller lists his product or service for sale, he must pay a small amount to the auction. The fee usually depends on the category of goods, for example, when selling real estate, it is $ 100 per lot, and when selling a smartphone or refrigerator, it is $ 10.
• Premium functions. At regular auctions, this is an increase in the number of simultaneous bids, promotions and bonuses, analytical and marketing tools, integration with social networks like Linkedin. In the case of penny auctions, you can add a bot to this that will bid for you 5 seconds before the end of the auction when you are offline (like the Bid-O-Matic bot on QuiBids).
• Advertising lots on the site. Paid promotion of individual lots or sellers within the platform. For example, placing the lot on the first screen, placing the lot at the top of the listing, brighter design of the lot, place in recommendations, place in the field "Similar products", etc.
• Partner integrations. Promotion of third-party brand services within the auction site. For example, an auction might recommend that users use a specific mail service in exchange for a portion of the revenue from each delivery. It can also be financial, insurance or various repair services.

Niche and target audience of the penny auction

Unlike traditional online auctions like Etsy and eBay, penny auctions are not that popular and there are no benchmark sites that everyone knows about. Therefore, when starting your penny auction, you can choose any niche for your project. Whether it's a marketplace where anyone can buy and sell any kind of product, or a niche site where they only sell gift cards. The main thing is that goods or services can be sold using a penny auction.

These lots include all goods and services where buyers know their estimated cost or they can easily establish it. For example, Apple iPhone 11, the approximate cost of which is known to everyone, or Samsung refrigerators, the price of which can be found on a site like Amazon. If the market value of the lot is unknown or it cannot be quickly established, then such a lot will most likely not arouse interest among buyers, since they will not be able to see the possible savings.

The "uninteresting" lots include handicrafts and objects of art by little-known creators. In addition, relatively cheap goods, such as a regular pen or a medical mask, can also be attributed to "uninteresting" lots: why spend one dollar on a bid in an auction where the winning is a two-dollar pencil? Similar products on penny online auction sites need to be sold only in bulk so that the potential winnings are not $ 1, but $ 50.

The "interesting" goods for penny auctions can be:

• Household appliances, electronics, gadgets, computers.
• Vehicles: cars, bicycles, motorcycles.
• Air tickets, hotel room rental, excursion.
• Land plots, real estate.
• Clothes, footwear, accessories.
• Gift cards.

Key functions and technology stack

<style="text-align: center;">Main functions. Most of the features of a penny auction site are no different from those of traditional online auctions, so there is no need to reinvent the wheel when designing and developing them. It is enough just to copy the necessary UX / UI design elements from eBay, Amazon or other sites with excellent user experience.

You only need to pay attention to the following things:

• The lot card must have a large field where the approximate market value of the goods or services put up for auction is indicated. It is a marketing element that lures buyers with potential benefits.
• On the first screen of the site there should be a transition to the section with the listing of completed trades. Users must be able to see the final lot prices in order to experience the potential benefits.
• The listing should indicate how long until the end of the lot. And in the card of the lot itself there should be a large icon with a timer.
• The website must clearly indicate that this is a penny auction.
• The site must describe the rules of bidding.

Technology stack. The shortlist for the auction site platform includes Adobe (Photoshop, Illustrator, Dreamweaver, Flash), Apache (Solr, Cassandra), Akka, Apigee, Atlassian JIRA, DbVisualizer, Delphix, Bootstrap, CloudAMQP, Cloudinary, Elasticsearch, CreateJS, DataStax, InfluxData, Fabric, GitHub, Git Tower, Devart, Elastic Kibana, Google (cloud messaging, maps), Couchbase, CollabNet TeamForge GupShup and many other software products and technologies.

In addition, other integrations will also be needed:

• Finance and Accounting: Authorize.net, PayPal, Deem, SAP ERP.
• Sales & Support: BuiltWith, SurveyMonkey, Companybook, Google Forms.
• Marketing: Adometry, Effective Measure, Convertro, eMarketer, Criteo.
• Product and Design: Fonts.com, Google Fonts, Redbooth, Invision.
• Analytics: Google Analytics, adjust, CrazyEgg, Cloudera.
• HR: Glassdoor Jobs, HireVue, Connectifier, Humanity.

A full list of technologies that are used in the development of online auctions such as eBay can be found at Technology Stack.

Cost of launching an auction site

Penny Auction Marketing

Previously, the toolkit for promoting auctions consisted of newspaper ads, brochures, and word of mouth among the people involved. In the digital world, this set has been supplemented with tools for promotion in social networks, search engines, on specialized Internet sites, and email distribution. That being said, the digital marketing rules for online auctions are:

• When launching, you need to attract as many sellers and buyers to the site as possible. This requires referral programs, bonuses, promotions, work with influencers and other things that can attract people.
• In advertising, you need to rely not so much on the capabilities and features of the site, but on specific lots that can attract people. For example, you need to show people a banner selling the iPhone 11 Pro Max for $ 100 and at the same time charmingly indicate that this is an auction.
• Show interesting completed bids in your ad. For example, you can write: “Yesterday we sold a new Toyota Corolla for $ 1,000, today we sell Toyota RAV4 for (an interactive field with the current price)».

An important point

Penny auctions are similar to the lottery in that both there and there you have to pay a small amount (fee per bet) to be able to win something (a lot at a lower value), which is why in some countries such auctions are considered gambling. If you are targeting one of these countries, remember that to launch such a site you will need appropriate permissions and licenses, as well as compliance with certain requirements that apply to gambling sites.

How to Build a Penny Auction Website? key takeaways:

#1. Principle of penny auctions operation
#2. Penny Auction Site Business Model
#3. Niche and target audience of the penny auction
#4. Key functions and technology stack
#5. Cost of launching an auction site
#6. Penny Auction Marketing
#7. An important point