Today I came across a website called BidRivals (www.bidrivals.com). I consider their's to be one of the most cunning business plans ever.
Let me explain their business model first. So the home-page displays some 16 products. Some products right now are a PS3 slim 120 GB, Nokia N97 unlocked, Canon T1I. This is an auction site. So each product starts with a minimum price of 1 cent and with every bid that you make, the price goes up by another cent. There is a timer which starts counting down from 15 seconds once a bid is made. If at 0, no one outbids you, the product is yours. Simple, right? No potential for evil here, right? Wrong!
Let me give you outcomes of some recent bids - an Iomega 2 TB HD sold for $1.26, and iPod nano 16 GB sold for $1.63, a blu-ray disk player for $1.12. Surely this is a hoax, you tell me. No one sells an iPod for less that 2 dollars. What if I tell you it isn't? And that this is a perfectly legitimate website and if you were the person who bid for 1.63, then you will definitely get the iPod. In fact, I think the company would at that point be willing to give you the iPod for free.
To explain why, let me present the Canon T1I worth $900 on sale right now. I have been observing the bidding for the last 60 minutes. When I started observing the bid was for 17.46 dollars. I said what? No way! A T1I for 18 dollars? Where is the bidding button. I want to register. And then I googled a bit, analyzed the data a bit. And started writing this blog post. And I have not even bid for the camera, yet.
So what makes the whole process evil is that you have to buy bids. Yup. Each bid costs you 60 cents. That's all. If Alice made the winning bid for the T1I at 17.46, that would have cost her 17.46+0.60 for the bid. But this is where the fun part begins. Because Alice is not the only person bidding. So every time Alice bids, someone else has 15 seconds to outbid you. So after Alice bids, Bob comes into the picture. Sees the price as 17.46 and outbids Alice. Price become 17.47. The price went up by 1 cent, but Evil Co. pocketed 60 cents. This goes on and on, Cal joins in, followed by David, Ethan, Alice decides to bid again and you get the picture.
The T1I is at 22.37 right now. Which means 2236 bids have been made on the product. Evil Co. has made $1341.6. In the past 60 minutes, there have been 490 bids = $294. There are 16 products on the home page and the same pattern is being repeated everywhere. So $4704 per hour. Say I am wrong by 50% in my calculations, that makes it $2352 per hour. Or close to 20 MILLION dollars in 1 year. There is more. This is just the US website. They have 18 websites for different countries, each with different products. Say each country earns them 10% less than the previous, that is still 170 MILLION(!) dollars. Even if this company lasts for a year, the founders will have made enough to last many generations.
So the question to ask is - should such a company be allowed to run? It is not much different from gambling. Or from insurance companies. Yet we consider the first to be evil, the second to be good.
While you think that, I will go back to bidrivals.com and wait for that perfect moment to spend the 1 free bid I got for joining on my DSLR. Who knows? I may get it for $50 (a 94% discount for me, a 233% profit for the company). Now isn't that a win-win situation!
