MadBid

Last updated
MadBid
Type Private
Industry E-commerce, Internet, Online retailing
Founded2008
FounderJuha Koski & Daniel Rovira & Madhur Srivastava
Defunct2018
FateAdministration
Headquarters
London
,
United Kingdom
Area served
 United Kingdom, Ireland, France, Spain, Italy, Germany, Netherlands, India, Austria, Poland, Turkey, Canada, Australia & United States
Products Online auction with "Earned Discount" feature
Revenue£3 million (2017)
Website MadBid.com

MadBid was a Gamified eCommerce and online auction website registered under Marcandi Ltd. in the United Kingdom. It was founded in 2008 by Juha Koski, Madhur Srivastava and Daniel Rovira. The company operates in ten European countries including the UK, Ireland, Spain, France, and Australia. However, in August 2018, Madbid closed down and ended all sales.[ citation needed ]

Contents

Skype founders' venture capital firm Atomico in 2010 invested over £4 million ($6 million) in funding for MadBid. [1] [2] [3]

Business Model

MadBid’s core business model began as a penny auction and the company has since added additional eCommerce features including a "Buy Now" option to purchase products outright, as well as an "Earned Discount" feature that allows consumers to apply the cumulative value of bids placed which did not result in an auction win, towards a discount for products, the discount remains available for 365 days after the auction closed. Most "Buy Now" auctions on MadBid have a price comparison tab so that shoppers can compare against selected online retailers. [1] [4] [5] [6]

Bidding

The pay-to-bid auction process employed by MadBid is based on users buying "credits" which allow them to place bids in auctions. Users must purchase these credits before participating. Credits are sold in different bulk amounts and cost between 10p and 12.5p. However the effective credit value is significantly lower due to offers and to won credits and credits purchased in "Buy Now". The number of credits to place a bid on each auction varies; smaller auctions require two credits for every bid placed, while larger and more popular auctions can use up to fifteen credits. [1] [4] [5]

Every bid placed raises the auction price of an item by 1p and at the same time extends the closing time of the auction by up to 60 seconds. [7] The auction closes when time runs out, and the last bid wins the right to buy the item for the final auction price plus any processing and shipping costs. The final auction price is incremented by 1p for every bid placed during the auction.

The net result is those who did not win paid for a number of bids and receive nothing (though the amount paid does count towards the "earned discount"), the winning bidder has paid for their bids and will still need to pay the final auction price plus p&p. In one example for a television with an RRP of £450, which cost four credits per bid, the winner spent £217.60 on bids plus the winning price and P&P, all other bidders paid and did not win the item, the highest of those paying £211.60, the other bidders paid much smaller amounts. In total Madbid received £612 for the item. [4] In a more recent example, for a circa £600 laptop, MadBid could have received around £14,000 in bids assuming the cost of bids was equal for all participants. [8]

Buy Now

MadBid offered a "Buy Now" option, where users can purchase most items without needing to take part in an auction. Additionally credit accrued from bids placed on auctions which weren't won ("Earned Discount"), can be used to reduce the cost of "Buy Now". The true worth of this discount is debated as in instances the base MadBid price is claimed to be significantly more expensive than other online shops. [8] In one example a toaster listed with RRP of £79.99 was listed for "Buy Now" at £49.38 + delivery, whereas the same toaster was available elsewhere online for £25 with free delivery.

Awards

The Guardian included MadBid as part of their 2010 "Tech Media Invest 100 List". [9] The company was a finalist for the 2011 eCommerce Expo's "Site Innovation Award", [10] and in 2012 they were finalists for the Red Herring 100 Europe Award, in the Entertainment & Media section. [11] Later that year, the company was nominated for the "Small Online Business of the Year Award" at the Orange National Business Awards. [12] The Sunday Times also listed MadBid 41st in the 2012 Tech Track 100 league table. [13]

History

MadBid was founded as a bootstrapped startup by Juha Koski, Madhur Srivastava and Daniel Rovira during 2008. After growth fueled by a 2009 seed round, the partners in 2010 raised £4 million equity financing in a Series A venture round from Skype and Kazaa founders' venture capital fund Atomico; the funding was aimed towards a Europe-wide roll out of services. [14] [15]

Marcandi, the company that operates Madbid, is owned by Jersey-based Keyword Group Ltd. [8] The company has gone into administration as of 28 June 2018.

Revenue

MadBid's sales grew 71% a year, from £1.5 million in 2009 to £7.5 million in 2012, before falling in recent years. [14] [15] [16]

The site had over three million registered users and a million weekly unique user page views in 2012, up from 1.6 million users in 2011. [3] MadBid also saw a 219% click volume increase from its 2010 volume of 60,000–70,000. [17]

The final closing price is usually lower than the product's recommended retail price, but not always cheaper than conventional retail channels. [8] MadBid earns a profit if the revenue from bids placed and the final price are greater than cost price plus operating costs. As MadBid can earn up to around £2.00 for every penny in price increase, an auction that reaches £10 could earn the company close to £100. In 2010 MadBid reported that they profit on only 30% of sales, but that those profits exceed any losses on the remaining 70%, current figures are unreported. [1]

Criticism

Mark D. Griffiths, professor of gambling studies at Nottingham Trent University, has repeatedly called for more regulation of sites like MadBid, but the UK's Gambling Commission has stated that it does not believe that such sites involve gambling, and while the Office of Fair Trading has worked against other sites which utilise automatic bidding against customers, it says it has nothing to add to the work already done. [3] [4] [18]

Due to the possibility of participants losing an auction, some analysts have criticized the model or compared it to gambling, even when operating without fraud. [19] [20] [21] [22] [23] The Better Business Bureau has stated that, "not all penny auction sites are scams" and to "know exactly how the bidding works, set a limit for yourself, and be prepared to walk away before you go over that limit." [24] The Washington state attorney general's office studied the bidding-fee scheme and concluded that it does not constitute gambling under its state laws. It is now studying whether or not such "penny auctions" constitute a lottery. [25]

In May 2015, The Guardian exposed irregularities across three Madbid markets (USA, UK and Europe) where the prices successful bidders were shown to have paid were inaccurate. A Fiat car was shown as having sold for £193, $193 and €193 in its respective markets, an iPad for £34.40, $34.40 or €34.40, and a camera for £23.94 or €23.94. Due to the concept of exchange rates, at least 2 out of the 3 claims were definitely incorrect. Madbid's explanation was that 'Bid winners (from each of the MadBid sites) are automatically displayed across the three sites. However, the software that drives this is not sophisticated enough to deal with the currency conversion and interest rate variables between the pound, dollar and euro. To simplify matters, the price is paid is [sic] consistent across the sites.' [8]

The Guardian also claim that winners of auctions may pay considerably more for their goods than had they purchased them through conventional retail channels, using the example of a toaster with RRP of £79.99 that sold for £36.27 plus £8.99 delivery, but was available for £24.99 delivered from another website. The price paid by the winner excluded the cost of bids. [8]

See also

Related Research Articles

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<span class="mw-page-title-main">Auction</span> Process of offering goods or services up for bids

An auction is usually a process of buying and selling goods or services by offering them up for bids, taking bids, and then selling the item to the highest bidder or buying the item from the lowest bidder. Some exceptions to this definition exist and are described in the section about different types. The branch of economic theory dealing with auction types and participants' behavior in auctions is called auction theory.

<span class="mw-page-title-main">Price fixing</span> Agreement over prices between participants on the same side in a market

Price fixing is an anticompetitive agreement between participants on the same side in a market to buy or sell a product, service, or commodity only at a fixed price, or maintain the market conditions such that the price is maintained at a given level by controlling supply and demand.

eBay American multinational e-commerce corporation

eBay Inc. is an American multinational e-commerce company based in San Jose, California, that brokers customer to customer and retail sales through online marketplaces in 190 markets worldwide. Sales occur either via online auctions or "buy it now" instant sales, and the company charges commissions to sellers upon sales. eBay was founded by Pierre Omidyar in September 1995. It has 134 million yearly active buyers worldwide and handled $74 billion in transactions in 2022, 49% of which was in the United States. In 2022, the company had a take rate of 13.25%.

<span class="mw-page-title-main">Dutch auction</span> Type of auction which begins with a high asking price, and lowers it.

A Dutch auction is one of several similar types of auctions for buying or selling goods. Most commonly, it means an auction in which the auctioneer begins with a high asking price in the case of selling, and lowers it until some participant accepts the price, or it reaches a predetermined reserve price. This type of price auction is most commonly used for goods that are required to be sold quickly such as flowers, fresh produce, or tobacco. A Dutch auction has also been called a clock auction or open-outcry descending-price auction. This type of auction shows the advantage of speed since a sale never requires more than one bid. It is strategically similar to a first-price sealed-bid auction.

<span class="mw-page-title-main">Online auction</span> Auction held over the internet

An online auction is an auction held over the internet and accessed by internet connected devices. Similar to in-person auctions, online auctions come in a variety of types, with different bidding and selling rules.

Pay-per-click (PPC) is an internet advertising model used to drive traffic to websites, in which an advertiser pays a publisher when the ad is clicked.

A bidding fee auction, also called a penny auction, is a type of all-pay auction in which all participants must pay a non-refundable fee to place each small incremental bid. The auction is extended each time a new bid is placed, typically by 10 to 20 seconds. Once time expires without a new bid being placed, the last bidder wins the auction and pays the amount of that bid. The auctioneer profits from both the fees charged to place bids and the payment for the winning bid; these combined revenues frequently total more than the value of the item being sold. Empirical evidence suggests that revenues from these auctions exceeds theoretical predictions for rational agents. This has been credited to the sunk cost fallacy. Such auctions are typically held over the Internet, rather than in person.

<span class="mw-page-title-main">Auction rate security</span> Debt instrument with a long-term nominal maturity with a regularly reset interest rate

An auction rate security (ARS) typically refers to a debt instrument with a long-term nominal maturity for which the interest rate is regularly reset through a Dutch auction. Since February 2008, most such auctions have failed, and the auction market has been largely frozen. In late 2008, investment banks that had marketed and distributed auction rate securities agreed to repurchase most of them at par.

<span class="mw-page-title-main">Bidding</span> Method of competitive price determination used in auctions, stock exchanges, etc.

Bidding is an offer to set a price tag by an individual or business for a product or service or a demand that something be done. Bidding is used to determine the cost or value of something.

<span class="mw-page-title-main">Bob Shop</span> South African online auction website

Bob Shop, formerly Bidorbuy or bidorbuy.co.za, is a South African e-commerce website based on an internet auction and online marketplace model allowing individuals and businesses to trade with each other. Transactions on bidorbuy are in South African rands.

<span class="mw-page-title-main">Online travel auction</span>

The term online travel auction is a system of buying and selling travel products and services online by offering them up for auction and then awarding the item to the highest bidder. The need for travel auctions emanated principally due to the high cost of travel. This high cost is also what led to the growth in popularity of low-cost carriers, a concept initially pioneered by Southwest Airlines, and later mimicked by Ryanair.

<span class="mw-page-title-main">Swoopo</span> Auction website

Swoopo was a bidding fee auction site where purchased credits were used to make bids. Prior to changing its name to Swoopo in 2008, the website was called Telebid. In March 2011, Swoopo's website became inaccessible, and a notice page claimed that Swoopo was experiencing "technical issues." In February 2012, DealDash obtained the domain name for Swoopo.com. The penny auction was invented by Lloyd Liske and William Buckell when the site was first created and known as telebid.com. At that time the site received bids by phone and charged to transfer their bids to the internet site. This is where the format of paying to place a bid started.

A demand-side platform (DSP) is a concept that combines various software solutions for advertisers to automate the process of buying and selling ad impressions in real time.

vWorker Employment website for freelancers

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<span class="mw-page-title-main">Reverse auction</span> Auction with one buyer and many potential sellers

A reverse auction is a type of auction in which the traditional roles of buyer and seller are reversed. Thus, there is one buyer and many potential sellers. In an ordinary auction also known as a forward auction, buyers compete to obtain goods or services by offering increasingly higher prices. In contrast, in a reverse auction, the sellers compete to obtain business from the buyer and prices will typically decrease as the sellers underbid each other.

Sixjax is an ecommerce company based in New York City, US. It is a pay-per-bid online shopping website, with gaming features offering discounts on products as prizes.

<span class="mw-page-title-main">DealDash</span> Auction website

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QuiBids.com is an American online retailer headquartered in Oklahoma City, Oklahoma, United States. It is a retail website that operates as a bidding fee auction, also known as a penny auction. The company has been sued under allegations that it is a form of illegal gambling and that its advertising is misleading. It advertises the price products are auctioned at in QuiBids cash and compares them to US dollars without disclosing the different currencies being used.

Beezid was a Canadian online retailer and penny auction website located in Montreal, Quebec.

References

  1. 1 2 3 4 Colmenares, Alan (July 26, 2010). "Skype founders place $6 million bet on MadBid.com". VentureBeat . Retrieved August 20, 2012.
  2. ↑ Butcher, Mike (July 26, 2010). "Madbid secures 4m Funding". techcrunch.com. Retrieved August 20, 2012.
  3. 1 2 3 "Feature". Management Today. October 31, 2012.
  4. 1 2 3 4 King, Mark (January 28, 2012). "Penny Auction sites can leave a hole in your pocket". The Guardian . Retrieved 9 March 2015.
  5. 1 2 Natalie Vincent (February 3, 2014). "Madbid Review" (PDF). Watch My Wallet. Retrieved 9 March 2015.
  6. ↑ "New Feature Alert: Earned Discount". MadBid.com. October 11, 2013. Retrieved 9 March 2015.
  7. ↑ King, Mark (January 28, 2012). "How penny auction websites can leave you with a hole in your pocket" – via www.theguardian.com.
  8. 1 2 3 4 5 6 "Revealed: How MadBid buyers can end up paying twice the price". the Guardian. May 15, 2015.
  9. ↑ The Guardian (September 13, 2012). "Tech Media Invest 100". The Guardian . Retrieved August 23, 2012.
  10. ↑ "eCommerce Expo Awards". eCommerce Expo Awards. 2011. Retrieved August 23, 2012.
  11. ↑ "Red Herring Europe Finalists". Red Herring. 2011. Retrieved August 23, 2012.
  12. ↑ "National Business Awards". Orange National Business Awards . Retrieved August 20, 2012.
  13. ↑ "Tech Track League Top 100 2012". The Sunday Times . Archived from the original on March 3, 2014. Retrieved November 23, 2012.
  14. 1 2 Ben Lobel (8 December 2011). "Lots of potential". GrowthBusiness.co.uk. Retrieved November 23, 2012.
  15. 1 2 "Bidding for success". Small Business UK. 15 November 2011. Retrieved November 23, 2012.
  16. ↑ "Rank: 41 MadBid.com". The Sunday Times . Archived from the original on April 5, 2013. Retrieved November 23, 2012.
  17. ↑ "Digital Marketing Case Study MadBid: MadBid". Lucid Edge. Retrieved November 23, 2012.
  18. ↑ Pennells, Sarah (December 20, 2008). "Penny Auctions Under Scrutiny". BBC News . Retrieved August 20, 2012.
  19. ↑ "Profitable Until Deemed Illegal". Coding Horror. Retrieved 25 November 2014.
  20. ↑ Gimein, Mark (2009-07-12). "The Big Money: The Pennies Add Up at Swoopo.com". The Washington Post. Retrieved 2010-04-26.
  21. ↑ "Coding Horror". Coding Horror.
  22. ↑ "Is Swoopo Nothing More Than a Well-Designed Gimmick?". September 17, 2008.
  23. ↑ An iPad for $2.82, or illegal gambling?
  24. ↑ "BBB Names Top Ten Scams of 2011". Archived from the original on January 8, 2012.
  25. ↑ Zimmerman, Ann (August 17, 2011). "Penny Auctions Draw Bidders With Bargains, Suspense". The Wall Street Journal. Retrieved 2019-11-03.
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