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Penny Auctions Vs. Traditional Auctions: Differences And Similarities

While online penny auctions and traditional auction websites, like eBay, both occasionally offer a Buy-it-Now feature, they differ in terms of the time limit system, payment process, and entertainment value. In short, penny auctions are more intense versions of sites like eBay.

Traditional auctions, like those available on eBay, often drag the auction experience out to a week or more.  When the time runs out, whoever bids highest wins. For instance, they may auction off an iPod for 1 week with a minimum bid rule of $20.  However, there will be stiff competition to get such a low price on the item.  After a whole week of everyone trying to outbid each other, the item may sell fairly high, close to the retail price, or even higher.

Time Limit Rules: Penny Auctions

The time limit system on penny auctions is much shorter and more intense, by comparison.  When the clock dips below a certain time (some sites make it 15 seconds), the auction will end if no one bids again.  However, if someone else bids the clock will reset (to 15 seconds again) and keep resetting until no one else bids and the clocks runs down to zero.  This makes penny auctions so thrilling that they are now commonly referred to as, “Entertainment Auctions,” whereas traditional auction sites like eBay do not offer that fast-paced level of experience.

Payment Process: Traditional Auctions

In traditional auctions, if you bid the highest amount by the time the clock runs out, you pay that amount plus taxes and the shipping and handling fees.  So if you won an auction where you bid $5 on a book and taxes and shipping and handling fees added up to $3.50, in order to claim your item and receive the book you must pay $8.50.

Payment Process: Penny Auctions

The main difference between penny auctions and traditional auctions is that in penny auctions, you pay for the auction end price in addition to bids you have placed plus shipping and handling.  For example:

There is an iPhone auction with bids fixed at 75 cents each, and price increments of 1 penny per bid.  One person bids once and you win by also bidding once, just before the timer runs out.  When you win an auction, you pay for your bids (1 bid of 75 cents in this example) and the total number of bids in the auction times 1 penny (2 bids x 1 penny = 2 cents).  So in this example, you won a brand new iPhone at a penny auction for only 77 cents.  Even if you won the auction but bid 10 times (10 x $0.75= $7.50) and there were 100 total bids (100 x $0.01), you still won a brand new iPhone for $8.50!  That is the same price for a book in the traditional auction example!

The Buy-it-Now Option

Some traditional auctions and some penny auction sites have a Buy-it-Now option.  On eBay, you can forgo the usual bidding process and immediately buy the product for retail value.  Penny auctions also have this feature, which is convenient if you don’t win.  The money you already bid in the auction counts towards part of it, and you simply pay whatever’s left.

Penny Auctions vs. Traditional Auctions

The best penny auction sites couple the risk-free, Buy-it-Now option with an intense bidding experience with an unmatchable entertainment value.  As opposed to traditional auctions which often use hidden fees to even out the seemingly low price, auction winners can save up to 90% with penny auctions.

Savvy shoppers seek penny auctions with bid prices under a dollar and price increments at a penny.  The largest discounts are most feasible on the newest sites, because less people know about them they have much less competition, and therefore, are easier to win—and most importantly, win without too many bidders jacking up the price like in traditional auctions.