I kept seeing ads for the auction sites like BeeZid, QuiBids and so on, and curiosity got the best of me, so I decided to see what the penny auction sites are really about. And the answer is: Money, that’s what, and lots of it. Forget casinos, these things are like crack and can drain money faster than anything I’ve ever seen, short of a thug with a gun. Here’s how they work.

First you sign up with a credit card or PayPal. Most want $60 - $100 to get started. “But, wait Frank, I thought it was an auction. Don’t you pay when you win?” Aaah, yes, Grasshopper, you do … and you pay to get access to the auction, too. You have to buy bids at generally around $0.60 each. Yes, each bid costs you $0.60, but each one only raises the auction price of the item by one cent (hence the name penny bids even if each bid is sixty-one cents). If you win, you pay that purchase price plus a handling charge. In effect, you’ve already paid with your bids, so they don’t have to get much for the final purchase price because they’re making money every time you click the red “Bid” button on your screen.

Here’s a scenario: At auction is a 55″ LCD TV with a retail price of $1,999. It’s a nice one that anyone would like to have. It “sold” for $75.55 at the auction’s end. Sounds cheap, doesn’t it? Again, each bid is only a penny toward the final purchase price, meaning that there were 7,555 bids. Now, take .6 (the price of each bid) times 7,555 and you get $4,533. That’s right, they made a handsome profit of $2,500, and that’s if you only consider retail because they probably got a volume discount on the TV. They have at least fourty auctions going at any one time, and sometimes as many as 100.

There’s a timer, too, that counts the seconds. The auctions on most sites are twenty, fifteen or ten seconds for each round of bidding. If you click (meaning you bid), then the clock starts over. they often start at twenty seconds and, as the price goes higher, the time gets shorter which raises the intensity. If it’s something you really want, watching that timer go to one second and trying to bid at the very last half-second can raise the stakes without your knowing it.

Think, too, what you had to do to get the item. Let’s say you clicked the bid button fifty times for that deluxe TV. That means if you won, you got it for $75.55 plus the $30 you spent in bids (50 x $0.60 = $30). So, you did get a very cool TV for $105.55 plus $20 for handling (or so). You might just as easily have lost, too, because only one person wins the prize.

It’s insidious, really. You get your sights set on something and you think, “Man, I can get this for $25,” and you start bidding. Soon, someone starts a bidding war and, before you know it, you’ve sunk $20, just in bids. You can get so involved in the bidding, that you wind up “buying” it sixty cents at a time. You can click many times before you realize how quickly it goes.

The thing is, nobody really feels any pain. You don’t have to hand over any cash when you click, so there’s no feeling of parting with money, which is a very painful thing for people. Okay, your losing bids totaled thirty bucks, so you’re disappointed and a little upset, maybe even feel a bit foolish, but it’s no big deal. On one item, though, there might be thirty, fifty or one hundred people and more who bid on that item, too. Like any auction, it can be exciting and you can walk away with some sweet deals. The truth is, though, most people don’t. Just like a casino, someone across the room lets out a big “Whooop!” when they hit the slot machine or the roulette table. That’s one person in a room that might see 500 or 1,000 people in a day, or more, and all are parting with cash looking for the “big score.”

Those are the rare cases because, if you talk to a professional gambler, they’ll tell you that you can’t get emotional or attached to any one idea. Grudge matches on the table never end well, and so it goes with the auction sites. Luckily, my losses were minimal, but it still smarts to get outbid or take your eyes off for one second and see that you just lost after watching it for a long time.

What it really take is LOTS of patience and the ability to watch one auction continuously, sometimes for hours. I watched one auction for three hours and it still wasn’t over. You try to time your entry into the auction when it’s getting near the end and you don’t have to bid as much. Get in too early and you’ll bid and bid and bid and … .

There is a bit of skill to it, but more of it is luck. You’ll see a card for fifty bids end for $1.25. You think, “Hey, that’s good. I’ll try that,” and then watch the price go to $10 in your auction. So, are you feeling lucky? At least now you have some idea of what you’re in for should you try one. Good luck. You’ll need it.