In session 4, Dealdash has been brought up by Dimitrios and he explained briefly what this site is about. In hindsight: Dealdash is an auction site that sells stuff that is very appealing to bargain hunters. For example; you can win a brand new Macbook Pro for just an unbelievable price of $ 18.52 (RSP: $ 1299.00). How can Dealdash make this happen? In contrast to Ebay, a bidder on Dealdash can only increase the price with $0.01 per bid. After each incremental bid, the end time extends with 30 seconds. Basically, the price increments with $ 0.01 until there are no new bids within the bidding time. The winner is obligated to buy the product for the final price. Sounds great, right?
Now follows the tricky part:
All products start at a price of $0.01 and the price increases with one cent per bid. After each bid, a timer starts ranging from 30 seconds to a few minutes. If the timer expires without a new bid, then the last bidder gets the product. Usually the bidder pays a price which is much less than the original retail price.
So how does the owner of the site make money? The revenue model reveals that the site uses ‘bidding rights’ to let participants pay for each single bid. Yes, ‘bidding rights’. This involves an amount of $ 0.99 or more. Furthermore it is not possible to apply any skills or knowledge.
Therefore, Dealdash’ Dutch alternatives (a.k.a. ‘centveilingen’) are considered illegal in the Netherlands. Two main factors are attributed to the reason why Dealdash is considered to be illegal: (i) you do not know who other participants are and (ii) it falls under gambling according to the Dutch law and penny auctions do not obtain such gambling license. Kansspelautoriteit monitors the gambling market in the Netherlands. They observe the market and penalize illegal activities.
PROS: The site owner makes a lot of money with the bidding rights. Furthermore, the winner gets a product for a bargain.
CONS: All other participants lose their investment. Because only the last participant gets the auctioned product and earns back his/her investment.
Instead of asking you to participate, I do NOT recommend to click on Dealdash or any other penny auctions at all.
- http://www.dealdash.com (Lecture session 4)
- http://www.kansspelautoriteit.nl/nieuws/alle-nieuwsberichten/2014/augustus/nieuw-verschenen/ (PDF-file: ‘factsheet_centveilingen_augustus.pdf)