Recently I discovered a site called Smokoo. At first it looks like a normal auction site (e.g. eBay), but with the difference that products get sold for next to nothing. This made me want to find out how they are able to do this. And what I found is more than slightly dodgy.
When you sign up for an account, you get to purchase credits. And then you use these credits to make bids on items you want. But your bid is not a specific amount. Every time you make a bid on a product, the current price of the item goes up by one cent. The other difference to a normal auction is that every time someone makes a bid, the remaining time for that particular auction is extended. So there’s no chance to make the winning bid in the dying split-second. Once you’ve made a bid, you have to hope that no one else makes a bid before time runs out. If that does happen, you get to buy the product for the current bid price. Of course you’ve already paid for each bid that you made, and every bid costs you R5. No problem, you think. I make a few bids, and with the super-cheap price of the product, I still save money. Well, not entirely. Let’s look at an example.
Let’s say you find a nice laptop on the website that you want. Bidding starts at one cent. You make a bid to raise it to two cents. You’ve already spent R5. But 50 other people also want this laptop, and they each, in turn, make a bid, bringing the bid price to just over 50 cents. Collectively more than R250 have already been spent. What makes things worse is that the website allows you to set up an “auto-bid” mechanism. You define what the maximum is you want to spend, and then the website will bid for you when you’re not the highest bidder. So you enable that feature, and so do the 50 others. And so a frenzy of automatic bidding starts.
Let’s skip ahead to when someone wins the auction. Let’s say the laptop gets sold for R100. Considering that each cent represents a bid, the R100 represents 10,000 bids. Multiply this by R5, and you end up with R50,000. Yup, Smokoo just made R50,000 by selling a laptop for R100. If you distribute this amount over the 50 bidders, each person will have spent an average of R1,000, but 49 of them will go home empty-handed. Nice, huh?
So, what we have here is, in some ways, a scam. You’re getting products dirt cheap, sure, but loads of other people are paying and not receiving anything. Granted, they are doing this willingly and knowingly, but it’s still not right. Added to that, this whole process resembles gambling quite closely. You’re continually spending money for something that you might not get. And if you get really fixated on a particular product, you will spend more and more money on bids, only for someone else to eventually end up with the item. Not nice. And if you do get the item, you know that a large part of the cost of it was subsidised by all the other bidders. So in essence it’s a bit like the Lotto, and like playing slot-machines. People invest more and more money, until they either win, or they give up before that point. Quite sad, really.
Do you agree that this whole concept is at least a little morally corrupt?