September 25, 2005

Why auction sniping is bad for business

Auction sniping is the act of using automated software to bid the minimum extra amount, often $1, in the closing seconds of an auction in order to win an item. This practice is damaging to sellers, buyers and the companies that make a profit from online auctions.



Why is it bad for sellers? Firstly lets see why its bad for buyers.



As a buyer, you lose out because some one has out bid you with out giving you a chance to respond. You could be in the position to be willing to bid another extra $10 but there is nothing you can do - the auction has ended, some one else has walked away with your sought after item for an extra $1. If this has ever happened to you, you know how frustrating this is. Its the lack of ability to respond to challenging bids that makes auction sniping unethical - every one is suppose to have an equal opportunity to bid, not just the people who have a high bandwidth or employing auction sniping software.



Its easy then to see why auction sniping is bad for sellers - you have a customer willing to pay more than the closing amount but they can't because they have been snipped. You end up selling an item for less than its market value, and that's bad for business.



It follows then the companies who make a profit from hosting online auctions by taking a small commission from the sale also loses out - a lower closing amount equates a lower commission. Its obvious that its in every one's interest but the sniper's to put a system in place to prevent auction sniping - and such a system exists.

Auto-extension
is implemented by trademe.co.nz, a New Zealand online auction site. This extends the auction by 2 minutes when any bid is placed in the last 2 minutes - the auction will only end when no bids has been placed in the last 2 minutes, giving every one equal opportunity to bid, giving sellers maximum sale value, giving trademe.co.nz maximum commission. Every one wins.



Auction sniping not only deprives buyers of equal footing, it also robs the seller and hosting company of profit - it should be banned and people who use it be dealt with as frauds.





Cheers,

Steve

2 comments:

  1. I can see your point, however let's think about Ebay - it has proxy bidding built in - you enter the maximum you're willing to pay, but the amount that you bid is just that $1 or so higher than the current bid that is necessary to make you the current highest bidder. If someone bids higher, you're bid is automatically incremented until either the time runs out or the price goes past your maximum bid.
    This way, if everyone just bids the maximum that they're willing to pay, everything works out just how you'd like it.

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  2. repeating here for the readers What you say is true, except that "maximum" amount is determined by market demand. Sniping effectively hides market demand until the final seconds of an auction. When this new demand exposed, market price for the item goes up as evident by the sniper biding $1 more than the previous highest bid. However sniping ensures that the rest of the bidders do not get a chance to react to this. Thats my problem with sniping. If the market was given a chance to react to the change in demand, then all is fair and square. Even just a minute of bid-extension would ensure fair bidding by giving every one a chance to react.

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