Three and a half years after Exciting Commerce’s first post on what investors are really looking for (GE/EN), peHUB has taken a look at the penny auction scene and describes the investment boom amongst Swoopo, BigDeal and others (in cache):
"Numerous startups have come up with innovations based around online transactions, including payment platforms like Offerpal Networks, exclusive luxury shopping sites like Gilt Groupe, and group-buying businesses such as Groupon and its many clones.
But the newest class of e-commerce startups to capture the attention of VCs are so-called penny auction sites, which combine online auctions with game mechanics. Users of these sites — hoping to land expensive items at a deep discount — make small bids on the wares during limited windows of time.”
peHUB also gives a good overview on the current investor activity:
"In addition to Swoopo, similar sites to garner VC include London-based MadBid.com, which raised $6 million from Atomico Ventures in July, and San Francisco-based BigDeal.com, which raised $4.5 million from Foundation Capital, First Round Capital and Mayfield Fund last year and sealed up another (previously undisclosed) $10 million from its investors in February.
Competitors that have sprung up in the past year include BidRival, BidRodeo, BidCactus, Dibbing.com and Beezid. None has disclosed any venture funding — yet."
Even if the details of the services vary, they all have one thing in common:
"And while their models vary -– Dibbing.com drops the price of an item with each bid, while BidRodeo has promotions, such as promising 50% more bids for users’ second purchase of bid packages — each is premised on enough people bidding on the same item to both cover the item’s cost and produce a healthy profit for the startups."
BigDeal, who captured $10 million of second round of financing in February is following an exciting approach:
"To distinguish itself from sites like Swoopo, BigDeal lets users who’ve lost auctions to use their unrefundable bid dollars in BigDeal’s virtual “loyalty” store, where they can apply them toward buying items like $200 necklaces. (Put another way, users can recover their bid dollars by spending even more money.)
Users who get outbid for an item on BigDeal can also apply their bid money toward a “buy item now” option, paying the same price for the product that they would at, say, Amazon."
This approach reduces the risk of using the site and losing money without having a positive experience. But more importantly, the model simply implies a reduction of risk, because in the general case, the lost money (and more) will indeed in the end go to BigDeal. A very clever strategy.
BigDeal has at least big ambitions:
"Still, it has big ambitions to become the “Zynga of e-commerce,” in part by broadening its offerings to include housewares and luxury items like fine jewelry, as well as by layering in a number of other new “games” into its paid-auction model."
In Germany, Spreadbooster has one of the most notable business models amongst other concepts using dynamic price models.
Related posts:
- Swoopo Continues to Downsize: Layoffs and Withdrawal from South Korea
- Top 500 Shops: Swoopo Nabs 10 Million in Financing
- SpreadBooster Plans Shopping Experience for the Masses
Originally posted in German by Marcel Weiss, adapted for excitingcommerce.com by Jason Soo.
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