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MadBid is a pay-to-bid auction site registered under Marcandi Ltd. in the UK. Founded in 2008 the company operates in 5 European countries including UK, Ireland, Spain, Italy, and Germany.

The company received £4million in funding from the Skype founder’s Venture Capitalist firm Atomico in July 2010.

Mechanics

MadBid’s core business model is that of a penny auction, however MadBid.com has also added additional e-commerce features. Such as a limited "Buy Now" on most products, allowing users to directly purchase the products sold in the penny auction. If participating in an auction and the bidder does not win, then if MadBid hold additional stock of the item, they can buy the product using paid credits placed in the auction as a discount against Madbid's selling price. The price charged need not be market competitive, however most "Buy Now" auctions on MadBid.com have a price comparison tab so shoppers can compare against selected online retailers.

The pay-to-bid auction process of MadBid.com is based on users buying "credits", which allows them to place bids in an auction. Users must purchase these credits before participating. Credit packages range in price from £14.99 to £374.99. Every auction has a timer, which counts down; it can be from 2 minutes down. Each auction also varies in the amount of credits needed to participate, for the smaller auctions users need 2 credits every time they want to place a bid. For the bigger and more popular auctions the number of credits required to place a bid can be up to 8 credits every time you want to place a bid.

Every time a person places a bid the timer restarts and continues to count down. When the time runs out, with no further bids resetting it, the user who placed the last bid wins the right to buy the item for the final auction price plus any postage and packing costs. The final auction price is incremented by 1p for every bid placed during the auction. In some auctions the winner may choose not to buy the item, but instead opt to convert the auction value into MadBid credits.

Therefore, those who don't win the auction pay for the bids they placed with no return, the winner pays the cost of their bids and the final price. In one example assuming a cost of 10p per bid, one failed bidder spent £211.60 for a £450 item they did not win, whilst MadBid.com took in £612. Conversely on a £139 item only collected 23 bids, worth £9.20 to the site. MadBid.com claims to make money on 30% of the auctions, offseting the losses from the other 70%.

Company

In 2010, the company was chosen by the Guardian Newspaper as part of their Tech Media Invest 100 List. In 2011 they were nominated for an eCommerce Site Innovation Award, along with PrismaStar. In 2012 were finalists for the Red Herring 100 Europe Award, in the Entertainment & Media Section. Later that year, the company was nominated for the Small Online Business of the Year Award at the Orange National Business Awards (UK).

Controversy

Sites such as MadBid.com often come under scrutiny and are likened to gambling. In December 2008 the BBC questioned if Madbid.com and similar sites were like an online lottery following comments made by Dr Mark Griffiths, professor of gambling studies at Nottingham Trent University. MadBid.com has attempted to decrease the risk to bidders for some auctions, by allowing purchase of the products with the bids placed in the auction as a discount for some auctions, however the price offered by MadBid including any discount need not be better than is available elsewhere. MadBid.com have also created Rookie auctions for new users to familiarise themselves with the website. Rookie auctions only allow users who have never won an auction before to participate. If a new user purchases credits and does not win in any of the MadBid.com auctions in their first day, the credits from their first purchase (up to 500 credits) are automatically recredited within 24 hours.

Profitability

MadBid.com reports turnover of £4.5million in 2011. The cost of participating in an auction ranges from 0.20p to 0.80p per bid. Every bid placed increases the price of the product in the auction by 1p, usually resulting in the final closing price lower than the RRP of the product. If the collective bidding cost plus final price for the product exceeds the cost price plus operating costs, then MadBid make a profit, or if less then MadBid makes a loss. Madbid claim to only profit on 30% of sales, however the profit on those outweighs the loss on the other 70%.

MadBid.com’s most famous auction was a Mini One that closed for £6.83. These auctions have also been covered in the media from the Mini auction being featured in the Sunday Times to £500 Tesco voucher’s going for 1p covered in Woman’s Own Magazine and MoneyWeek.

References

1. Butcher, Mike (July 26, 2010). "Madbid secures 4m Funding". Techcrunch.com. Retrieved August 20, 2012. {{cite web}}: Italic or bold markup not allowed in: |publisher= (help)
2. ^ King, Mark (January 28, 2012). "Penny Auction sites can leave a hole in your pocket". Guardian Newspaper. Retrieved August 20, 2012. {{cite web}}: Italic or bold markup not allowed in: |publisher= (help)
3. ^ Melanie (July 12, 2011). "Madbid to treble Turnover with help from Scandinavia". Directorsof. Retrieved August 20, 2012. {{cite web}}: Italic or bold markup not allowed in: |publisher= (help)
4. The Guardian (September 13, 2012). "Tech Media Invest 100". The Guardian. Retrieved August 23, 2012. {{cite web}}: Italic or bold markup not allowed in: |publisher= (help)
5. Unknown (2011). "eCommerce Expo Awards". eCommerce Expo Awards. Retrieved August 23, 2012. {{cite web}}: Italic or bold markup not allowed in: |publisher= (help)
6. Unknown (2011). "Red Herring Europe Finalists". Red Herring. Retrieved August 23, 2012. {{cite web}}: Italic or bold markup not allowed in: |publisher= (help)
7. Unknown (Unknown). "National Business Awards". National Business Awards. Retrieved August 20, 2012. {{cite web}}: Check date values in: |date= (help); Italic or bold markup not allowed in: |publisher= (help)
8. Pennells, Sarah (December 20, 2008). "Penny Auctions Under Scrutiny". BBC. Retrieved August 20, 2012. {{cite web}}: Italic or bold markup not allowed in: |publisher= (help)
9. Unknown (2012). "Good Deals Section". Women's Own. p. 43. {{cite magazine}}: Unknown parameter |month= ignored (help)

See also

• Bidding fee auction
• All-pay auction
• Dollar auction

External links

• MadBid's website

• Online auction websites