Back in its heyday, PennyBurners.com regularly published the most up-to-date news about the online/penny auction industry, hosted a regular radio show, and boasted an active message board where customers gathered to speculate, swap rumors, and read up on auction strategy. With the number of auction sites significantly dwindling over the last year or so, PennyBurners hasn’t been nearly as active, but its proprietor, Nicholas Boccio, is still as savvy as ever. He was there right around the time QuiBids got its start, maintaining contact with hundreds of site owners and passing along information directly to consumers.
We caught up with Nick for a little conversation about QuiBids’ role in the late-2000s’ influx of auction sites, and what it’s looking like now that the dust has settled. Here’s what he had to say.
QuiBids: Let’s start with Swoopo, the original penny auction. [Note: A German company, Swoopo changed its name from Telebid in 2008.] Tell me what you know about them, and how they set the blueprint for the penny auction industry.
Nicholas Boccio: Swoopo started out before I got into penny auctions, so around October 2009 they were the biggest at the time, but they weren’t the most exciting. There were a lot of other penny auctions trying new things and that had better things to offer their bidders. Me and most other people just kind of forgot about Swoopo, even though they were the biggest.
I don’t know a lot about them because —like I said— they were boring, until they bought OohILove. On their way out they purchased OohILove and I think that they just used that as a way to get some last-minute money before they went into the German form of bankruptcy that they call “insolvency.”
QB: Tell me your penny auction story. How did you first hear about penny auctions and what was the interest there for you?
NB: OK, so I get a phone call from one of my salesmen here in Houston and he says “Hey Nick, we’ve got to go out to lunch, I’m going to show you this thing and we’re going to make millions of dollars before Christmas.” This was in October, so he was aiming pretty high. We’re literally at a Mexican restaurant and on this Mexican restaurant napkin with a ballpoint pen, he explains to me how BidCactus is selling this camera that went for 50 bucks, that’s five thousand bids at sixty cents a bid, look at how much money they’re making, but I wasn’t convinced at all. That website worked like something I’d never seen before, and that’s what grabbed my interest. I’d never seen a website operate live in that way. That’s what got me interested. I didn’t care about bidding. I’m not a gambler at all. And I looked up information on penny auctions, found a few sites that were helpful, but there was really no standard that everyone was going by. And what that caused was —the reason I got interested and stayed with the community— was that there were a lot of people starting off in this industry with the penny auction site as their first business experience, which is not a good idea. They didn’t know anything about computers, let alone a business. So I essentially just offered them my time. I can help them with running a business and I can help them with computers and websites so they can at least have, you know, a fighting chance to try to earn some money.
Anyway, after a few months of developing a good reputation for people, whether they’re bidders or penny auction owners, I started PennyBurners to continue that. We never wanted to do anything but be an advocate for the community, because 2009-2010, there was nothing but negativity in the media about penny auctions and we wanted to see if we could even out the scales, so to speak, with some of the positive things that penny auctions were doing. And I think we did that, we had lots of people on our radio show, we had lots of people on our message boards. One woman —I won’t say her name because most people don’t even know that she’s a woman— was living pretty meagerly on disability checks from the government. She was at least in her 50s, and she developed a reputation and a bidding style and skill with penny auctions that secured a much more comfortable lifestyle for her. Now obviously, I’m not advocating for everyone on disability to throw their whole disability check into a penny auction site but I think that that’s good. She built skill and turned it into money, that’s what America is about. That’s pretty much how I got into it.
QB: So you decided to go full-steam with your blog as a resource for the industry and for customers.
NB: Yeah. We’re advocates for the industry, so I’m happy —my phone number’s all over the place— if somebody calls and says “Hey Nick, what’s this penny auction thing all about?” and if I have an hour, I will tell them everything they need to know about penny auctions, where to go to get help, if it’s a site owner that’s struggling with chargebacks or somebody who’s cheating I’ll help them. I just want to be an advocate for the industry. That’s the phrase we like to use because sometimes people say we’re watchdogs and we have to correct that. A watchdog implies that we’re only on the consumer side and against the business, and it’s not that way at all.
QB: But you guys have done that in the past, acted as a watchdog before, haven’t you?
NB: I don’t think so. Like I said, a watchdog, in my opinion, only looks at it from the consumer’s point of view. And I knew from my introduction to penny auctions that the majority of sites really required help on the business side of things. If we acted like a watchdog, I would say we did it as much as a police officer might act as a father to a little kid who’s been in a car accident.
QB: Between the height of penny auction sites starting up and now, do you think you can estimate how many of them have closed up shop?
NB: Yeah, 99%. And it’s probably more than that. Within 90 days, there’s almost the guarantee to failure. I’ve spoken with 200+ penny auction site owners on the phone over the last three years. Every single one of them, with several exceptions, have failed. The exceptions would obviously be QuiBids, Beezid, and SkoreIt. [Editor’s note: Beezid merged with SkoreIt in October 2012, not long after this interview was conducted.]
[The vast majority of penny auctions] failed because of a lack of business knowledge. That was paramount. An inability to practice proper accounting was another. One of the biggest things that happened with penny auctions was the influx of Bid Pack purchases up front. Most sites looked at those as a windfall but in reality, they’re more like store gift cards. You buy a $100 gift card at Best Buy, but Best Buy doesn’t put that $100 in their pocket. They set it aside until you exchange that card for goods. Penny auction bids are a service, and until the user uses those bids, they’re still outstanding; they can still win items with those. In this case, bids are a liability. Most people didn’t realize that going in when they started their site.
The last thing, the biggest overall problem, was a lack of startup funding. If you’re trying to do this without a lot of money, you’re going to wind up on the bottom of the Atlantic with the Titanic. It’s just not going to work out.
QB: Of all those businesses that did fail, can you estimate how many resorted to doing business unethically or illegally?
NB: That is subjective. What I’m going to say is, I can’t know. If I know somebody is breaking the law, I contact the authorities and I’ve done it in the past. I’ve personally either wrote a letter or contacted consumer protection or the secretary of state for the state the business is in on five or six different occasions. I’ve directed other people who’ve felt that laws were being broken at least a dozen times.
I don’t think that happens very often and the laws that are normally broken concern shilling but some people will try to get the consumer protection agencies involved when [won] items aren’t being shipped. But to answer your direct question of how many resorted, I’d say that’s a minority, an extreme minority of people who resorted to something illegal or unethical.
QB: When did the public’s understanding of the term “penny auction” bottom out?
NB: What do you mean by “bottom out”?
QB: When was the public opinion of the word “penny auction” at its lowest? Its most negative?
NB: That’s going to be mid-2010 to about March of 2011. That’s when popular opinion was definitely the lowest, and that was due to several misinformed news articles and stories on penny auctions that were syndicated throughout the country.
QB: Why were these articles so misinformed? I’m sure you read a bunch of them.
NB: I read them all.
QB: What were the reporters missing in their reportage?
NB: Well, the reason the reporters —and subsequently, the people [who read their stories]— think something wrong is happening … because they’re comparing penny auctions to eBay. That was their first mistake. They looked at eBay —which doesn’t add time after every bid was placed— and compare that to what penny auctions do and conclude that penny auctions are wrong. But anybody who’s been to any sort of real auction knows that that’s just how auctions work.
The next big thing was the distrust with these anonymous websites. eBay’s really big. You feel secure with big things. So it’s easy to make a bad guy out of somebody you don’t know.
Another big reason is their lack of understanding. The price goes up by a penny, but each of those one-penny bids costs sixty cents. Now the true test for something being logical is to flip it around. If an argument’s logical, then you should have an equal-to-inverse situation.
So if the bids were one penny each and every time you place the bid it went up by sixty cents, does that make it any more right? Of course not. The dynamics of the game have changed, but all these are just the rules of the game, and the people who read about how it works and ask questions know this. The reporters clearly never did.
QB: How much of a gamechanger for the industry was it when QuiBids came along offering the Buy Now feature across all its auctions?
NB: QuiBids completely changed everything. I really believe that. QuiBids quickly became the standard for what a penny auction ought to be, in that the value returned to the customer was much higher than all the other penny auction sites, and the risk was lower, because everything had a Buy Now.
I would expand on that by also saying that —from a business standpoint— QuiBids really wrote the book on how to make a successful penny auction site with their online and national media advertising campaigns.
When QuiBids opened and everything had a Buy Now, you saw a lot of other sites copying that. Swoopo was doing Buy Nows on some of their auctions, and some sites have popped up and already died off, that were also trying to adopt the same model, with the 100% Buy Now. So yeah that was literally a gamechanger in the industry.
QB: Do you think that QuiBids is justified in choosing the name “entertainment retail auction” to differentiate from the less desirable term “penny auction”?
NB: Of course. Penny auctions didn’t have a fair first shot. If QuiBids didn’t separate themselves in terminology, then every time somebody looks up information about penny auctions to learn about QuiBids, they’d get negative search results. It’s not productive because QuiBids isn’t all the other penny auctions and QuiBids is really the model of what everybody else should be doing. So it was a smart move to differentiate the terminology.
This interview with Nicholas Boccio was conducted in October 2012 and has been edited to fit the format of this blog.