An Adsense ad that was displayed on one of my sites caught my attention last night. I’ve seen this ad around on many sites over the past few months but last night I needed to take a break so I checked out the site. What I found was an amazing business model that I would guess may be pulling in six figures in profit a day, but I’m questioning the legality of it.

The site I’m talking about is QuiBids.com (horrible domain name if you ask me… though they probably fell into that gray area where they’ve spent money branding the domain and now that it is successful do they want to jump to a better domain name) and the concept is very simple. They auction off items, from gift cards to TVs to homegoods to “bids” on their site. How’s it work? All auctions start off at a penny and the bid increments go up one cent at a time. But before you bid, you must purchase “bids”. A bid will cost you $0.60. The starter pack is 100 bids for $60. The reason why people buy bids is because there are items worth thousands of dollars selling for a purchase price of less than $200. Here’s an example from last night where a lucky person got a $1,500 MacBook Air for $135.63.

 

But if you did the quick math in your head you’d see why I’m questioning the legality of this site.? To reach $135.63 bid, there were 13,563 bids that were placed.? At $0.60 per bid that means $8,138 worth of purchased bids were placed by people.? Now it shows in the screnshot that the lucky winner only spent $30 worth of purchased bids (so the $30 of bids plus the final ending price of $135 means that person walked away with a $1,500 laptop for less than $200 out of his pocket), but there were over $8,000 worth of purchased bids that wound up doing nothing but going in QuiBids’s pocket.? So QuiBids essentially sold a $1,500 laptop for $8,100.? Great business model, huh?? But is it legal?

To determine legality you ask yourself is this a game of skill or a game of chance, and if it is a game of chance than you might be crossing the line between legal and illegal.? Consider this an online raffle.? It would be a great business model if I could buy a 2012 Mustang for $30,000 and than sell 400 raffle tickets online for $100 each.? Someone will get a $30,000 car having only spent $100 and I’d get $10,000 in profit.? Why can’t I do that?? Because it is not legal.? I’d view QuiBids to be doing the same type of action in a different format.? It will be interesting to see if business model stays alive and healthy or if one of the attorney generals catches on and questions the method.

15 comments on “Amazing Business Model Selling a $1,500 Laptop for $8,100, But Is It Legal?

  • I think it would be interesting if someone brought this model to the domain space. It would allow newbies to bid on and acquire high-dollar domains, and get good prices for the seller. Imagine if instead of a MacBook Air it was maybe a single-premium LLL.com. Seller would get maybe $6k (above market value), auction house would get a little over $2k, and buyer would get a nice asset that they normally wouldn’t have been able to afford.

  • I’ve seen this many times before, it was quite popular for a while here in Sweden at least with sites like mr123.com (which claims to be “The world’s first penny bid auction site”) .
    There where also another kind of site with the same concept that would let you buy “bid packages” and then the auction would go to the bidder with the lowest unique bid. Actually bought a brand new Xbox360 this way for about $20 a couple of years ago 🙂
    I don’t know much about US law, but it was/is legal here in Sweden at least.

  • This site doesn’t have a good review. There’s complaints about quibids charging $60 for signing up (They say sign up process is free). And there’s more complaints on BBB. 375 complaints in the last 12 months alone. There’s probably so many that didn’t bother filing a claim.

    This method won’t work with domains. Think about Namejet auctions. In a good premium expired domain auction, there will be 100-200 bidders. Out of those only 5-10 are active bidders.

  • It may be legal. Getting the product is not determined by how many chances you buy like a lottery. It is determined by how much you are willing to pay. And you can pay .60 and place a bid of $1000 as easily as a lower amount. You can keep bidding until others stop. Unless it’s shilled by the site operator I don’t see this as a game at all.

    You could also modify this by saying “bids under $1000 incur a .60 processing charge bids over $1000 are free”.

    Or you could charge a flat fee to bid on X items per Y time period of N dollar amount.

  • Yes it is legal its an auction.

    There is no $60 to sign up, you pay $60 for the first bunch of bids.

    @Michael I started pitching this idea for domains a few months back. You could have someone get an LLL.com for cheap and the seller make more.

    Penny auctions work on that the price can only go up by .01 at a time. But each bid costs you .60. Its a great model.

    And Quibids does let you buy the product for the retail price and includeds bids spent against the price.

    So you can try to get $100 Target gift card, for cheaper but if you spent $40 in bids you could spend the other $60 and get the $100.

    I did not know penny auctions were not understood in mid 2011.

  • Oh wow this is definitely a great way to earn some on the part of the company. Thanks for explaining how it works. I’ve actually encountered this kind of platform for my respective area but visiting it now makes me understand more how it runs.

  • These sites in the fine print always indicate they are “entertainment” sites. That’s really the only possible way they can justify sucking people into something like that. I wouldn’t want to run a site where 99% of my customers will pay something and get nothing.

    If I’m not mistaken, none of these sites are legal in every US state.

  • QuiBids.com isn’t the worst name in the world (I remembered it from your post above, but had to go back and lookup the words “online raffle” 2 times). This site does seem to be as described “an online raffle”. Thanks for checking this out and describing it in detail TLD Admin person! Good info, I would have never taken the time to figure this out.

  • Nothing really illegal about it at all really.

    I mean, how about the people that do euro millions lottery and win 150 million euros and only bought a 1 euro lucky dip ticket.

    Probably it would be considered a “lottery” of sorts so you would need certain licenses for it to be legal I guess but it does not sound dodgy at all really…but of course in this world who the f*ck can you trust?

    “If its too good to be true…it usually is”. That saying has served me well over the years.

    I am wanting to buy a mac book pro myself but they are very expensive but I would not have minded putting down $50 to win it.

  • If you pay $60 for the bids and say you bid for a certain item only $40 and someone else wins the bid does it mean you loose the balance of $20 or you can use the remaing
    $20 in your account to bid on another item.
    So if the company organizing the bid takes your balance
    it would be illigal but if the balance stays in your account and you can use it to bid on another auction
    it would be legal.

  • Been around for years… Developed one myself. Good money in it, Swoopo.com was the biggest for awhile. Penny Auction scripts can be purchased now for under $3k (the whole site and admin)
    You have to be willing to loose to begin winning at first. This and Dutch Auctions are successful. I thought about bringing it to the domain industry but never got around to doing it. Maybe we should.

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