What were penny auctions?

Basically, a person lists an item for sale for a fraction of what that item is worth. Let's say I want to sell my car. I list it for $1.00 but I charge everyone who wants to join the auction a dollar for every bid they make. If I can get 1,000 bidders and each bidder makes 10 bids...well you can see how I could get a good price for my old jalopy. Meanwhile a buyer can get my car for his 11 bids or $11.00 Sounds great to get a car for $11 but keep in mind the other 999 bidders have all lost their money.

On the auction site eBay penny auctions are used to cheat the feedback system. A seller lists a non-existant item for one penny and the buyer gets the item for one penny, meanwhile they both pad their feedback.

Sellers on eBay also use them to build a mailing list. They use the penny item as a loss leader in order to get a huge number of valuable email addresses.

There are legitimate uses for penny auctions. The website Pheebay promotes penny auctions to publicise online sellers. Valuable items are listed for one penny(or cent) with no reserve and after seven days the item goes to the highest bidder, even if the bidding only reaches two cents.

A seller may also use a penny starting bid to attract immediate attention and generate excitement about a popular item they are selling to get the bidding going knowing that the end price of the item they have to offer is generally in a certain range. For instance if you go to a large website like eBay you may find 15 copies of a recently released novel. The one started for one cent will attract bidders before the one started for $10 as long as the shipping and condition are the same. And it is not uncommon to see the one started for a lower bid go for more in the end than the one started for the higher bid due to the excitement generated attracting more bidders and driving traffic to the sellers listing. Of course sometimes a seller does not attract the customers he or she has hoped to attract with the low opening bid, but in the end, selling at the lower price may also add a loyal customer. This would be a customer who will add this seller to their "favorites" and continue to buy from them for years to come.

many sites now auction gift cards such as walmart gift cards, and visa gift cards.