Are Sites Like Beezid a Scam? Not Entirely; But Yes, Kinda.

I was traveling this past weekend, down to Indianapolis for a family gathering, and given my proclivity to stay in hotels while traveling, a brother of mine & I took up residence in a local Baymont for Saturday evening. Since we had time to kill, naturally, the television came on (because duh), and I took special notice to the number of times that internet “auction” sites, such as Beezid, were being advertised. Maybe, because like most of you I have a DVR, I just hadn’t watched many commercials lately– but the number of times these advertisements ran in a span of just a few hours seemed a rather high frequency.

So, of course, I began to wonder– what really is the catch here? They can’t actually be selling a Macbook Pro for $15, can they? No, my rationale side told me, that’s just not right by any stretch of the imagination. The only seemingly obvious solution would be that, simply, site like Beezid are a scam. But, then, how do they get around the “truth in advertising” standards? There has to be something more to this.

Turns out, after hours of research, there certainly is. And the “Beezid scam” becomes quite obvious, once you do the math.

How these auction sites work

Beezid, like Quibids and others in the “not so-much like eBay” internet auction space, suck consumers in with a very simple premise– the opportunity for quality inventory at an insanely discounted price. Great concept; unfortunately, not all that shimmers is gold…

These auction sites require users to purchase their bids up-front– typically, they come in “bid packs”; so, you buy 10 bids for $10, etc. This money is paid to the site up-front, before you ever place a single bid on any item. There’s the first money-making opportunity for these auction sites, because, buying bids doesn’t necessarily mean you’ll ever win any merchandise. It just gives you the opportunity to maybe win at some point, but takes some money from you, regardless.

Once an item goes up for auction, each bidder raises the final purchase price by only one penny. Unlike on eBay, where a countdown clock counts down the amount of time until the item is sold (and does not ever increase), every time a bid is placed, the timer goes up by another 20 seconds– given another user the opportunity to place their bid on said item.

Do the math.

This is where the commercials for sites like Beezid are misleading consumers. Stay with me here, because we’re going to do some elementary school math.

Each user pays $1 for a bid, and lets say, they are bidding on an iPhone. Every bid raises the final purchase price by only $.01. In this example, let’s pretend this iPhone sold for $7.

Since the price started at zero, that means there were 700 $.01 bids, which cost each user $1 a piece. That means, in essence, Beezid received $700 of up-front revenue for this phone. Add in the $7 selling price, plus shipping, and it’s likely that this particular iPhone sold at the total price of $725– far above the actual retail price.

So, is Beezid a scam?

Well, no, not by the actual dictionary definition of the word. They did truthfully sell an iPhone for $7– they just charged people $1 each to bid on this item in the first place. Conceivably, someone could have placed a single bid, costing them $1, and won the iPhone for $7; if this were the case, that would be an incredible bargain, to say the least.

Likely, though, Beezid and sites like it have a built-in defense against this sort of “good luck”. Obviously, I cannot prove it, but I’d imagine there is something in their internal system that will either place “fake” bids, or somehow aggressively promote a product to other users if someone has the chance to “close the deal” without putting in a certain amount of bids.

In this case, bidding on items on sites like Beezid is more akin to internet gambling than auction-based buying– you buy your chips up-front, in the hopes of catching a winning hand before you run out.

Clearly, I cannot prove any of the behind-the-scenes hypotheses– and therefore, on the surface, sites like Beezid do have a legitimate claim to make to consumers. However, I would advise you to live by the age-old adage (“never judge a book by its cover”), and be wise to the potential downside to making purchases on a site such as this, before you invest too much time or money into something that may never come to pass.