New to penny auctions? No worries, go through the glossary of penny auctions and you'll be ready to make your first bid within minutes.

Q. What is Penny Auction?

A. Penny Auctions is an auction where bidders pay per bid (e.g. $1 per bid) and the price of the product/item in question goes up by a fixed amount (e.g. 1 cent per bid) on every bid and time counter is increased. What makes it more interesting is that there is a reverse countdown and the person who is last to bid when countdown reaches zero (typically 00:00:00) wins the auction. We suggest you to take a look at any penny auction site to get a feel of how it is like. Try Swoopo, Snaglo, BidCactus or any other popular penny auction.

IMPORTANT - The final cost of the item won is the cost of bids + the cost of product when auction ended. For example, you made 12 bids to win an iPod touch, each bid $1 and the final price of iPod when you won was $25 then you will have to pay a total of $37 ($1x12 + $25 + delivery & shipping if applicable). Hence do your homework before you go after a product. This is true for a typical penny auction, there are variations of penny auction where this may not be applicable.

Q. What are BidButler/BidMonkey?

A. Bid Butler or BidMonkey is a tool provided to users by penny auction sites using which you can automate the bidding process. If you are interested in a product but you don't have the time to monitor and bid on the auction then you can use this tool to automate the bidding in your absence. Typically this tool asks you to provide below mentioned details.

• Number of bids
• Start Price
• End Price

Once you provide the above details, this tool takes over the bidding process once the auction price reaches the "Start Price" and ensures that you are the last bidder when auction timer approaches zero (00:00:00). It waits for the timer to reach 00:00:00 and place the bid, ensuring it is ahead of other bidders.

ALERT - Using these tools may increase your chances of winning if you are ready to spend high number of bids but this tool is cleverly designed for the benefit of the auction site owner. By using these tools, people spend more bids (spend more money) on auction which fills the pocket of the site owner. In the last only one person can win so if there are more than one BidButler active on an auction then typically the one with highest number of bids will win and others will lost all their bids and money.

Q. What is Shill Bidding?

A. When the penny auction site owner is directly or indirectly (employees, family, friends or by any other means) involved in the bidding process as a bidder (acting as a normal user) to increase the competition which in turn increases number of bids. They have unlimited number of bids so they keep outbidding you until the auction price has reached to their desired level (in short, when they have ensured enough profit from that auction).

ALERT - STAY AWAY from sites if you suspect they use shill bidding.

Q. What are Bots or Auto-bidders?

A. Bots are similar to BidButler or automated bidders but the difference is that bots work for the site owner. Bots are automated programs which keep outbidding the genuine users in order to increase the auction price so site owner can make more profits. In some way, this is another form of shill bidding.

ALERT - STAY AWAY from sites if you suspect they use bots or auto bidders.

Q. What is a Bid Pack?

A. You need to buy a bid pack to start bidding on a penny auction site. Each bid pack consists of number of bids and may cost accordingly. For example, Swoopo offers a bid pack of 40 bids which costs $24 (i.e. $0.60 per bid).

Q. What is cost per bid?

A. As seen above, you can calculate the cost per bid by dividing the number of bids in your bid pack by the price of bid pack. Go for sites which offer lower cost per bid but ensure that the site is genuine.

Q. What are different types of penny auction?

A. To make penny auctions more interesting, new auction types have been created. Essentially they are all based on the penny auction concept where people make bids and the last bidder on 00:00:00 times wins but a twist is added to the auction which makes the deal look like more attractive. Below are some of the common penny auction types.

• Fixed Price Auction (FPA) : In Fixed Price Auction, a fixed price is set for the auction and irrespective of the final auction price, winner need to pay the initially set price (plus cost of bids spent).
• N-Cent Auction : Replace N with a positive number and you get a new auction type. For example, 1 cent auction where auction price increases by 1 cent on every bid. Some sites have 2 cent auctions and even 5 cent auctions.
• Buy Now : If you are desperately after a product on a penny auction site but lost all bids after spending them on the item then this one is for you. You have the option to buy the item at a discounted price where discount is the cost of bids you have spent on the item.
• N-Second Auction : Similar to N-cent auction, replace N with a positive number and you get a new auction type. Here auctions start as N-second auctions. The countdown increases by a maximum of N seconds each time that a bid is placed. Typical examples are 15 seconds auction, 20 seconds auctions etc.
• Lowest Unique Bid (LUB) : In this type of auction, the bidder who places the lowest unique bid wins the auction. Unique is the key here.

There are many more things which you'll learn with experience and of course, by keep visiting the resources on our site. We'll keep adding useful information on penny auctions on a regular basis.

A case study for better understanding of how penny auctions work

There is a penny auction site www.bid2loot.com and it's auctioning a electronic item ABC which has a retail price of $400 USD. Each bid on Bid2loot costs $0.50 USD (50 cents) and on every bid price of the auction item is increased by 1 cent. Assume that there is a shipping charge of $10 on the auction item. For simplicity, we are not considering VAT and taxes.

Auction stats from initial price $0 USD and finally auction is won by Mr. X at $60 USD after spending 250 bids. The final price is $60 which is almost $340 less than the retail price of item ABC. Wow!!!

So Mr. X got an extremely good deal, right?

Let's do some math now.

How much money penny auction site www.bid2loot.com made on this auction?

Item retail price = $400 USD

Number of bids spent on this auction = $60 x 100 = 6000 bids (Final price is $60 and each bid increase the price by 1 cent)

Money made by penny auction site www.bid2loot.com = 6000 x $0.50 USD = $3000 USD (Number of bids multiplied by cost of each bid)

Actual profit made by penny auction site www.bid2loot.com on this auction = $3000 - $400 = $2600 USD (Amazing, isn't it?)

Now, lets see how much Mr. X need to spend to get hands on this item.

Winning price = $60 USD

Bids spent by Mr. X = 250 x $0.50 = $125 USD

Shipping Charges = $10

Final cost of the item for Mr. X = $60 + $125 + $10 = $195 USD