codenode

In my first post The truth about QuiBids I concluded by saying,

The bottom line: penny auction websites like QuiBids are a bad idea because countless people will waste countless hours of their lives only to lose thousands of dollars on a single item which costs, at retail, only a few hundred dollars, and all their lost money becomes the sole profit of the company which cleverly masques the dollars-and-cents reality of its game in a shroud of penny-bid lingo.

QuiBids can make an insane amount of money on an item whereas all players except the one who wins lose a lot of money often times without realizing how much they’ve lost because the penny-bid lingo obfuscates the financial details. However, Kevin (a commenter) pointed out, if you lose you can buy an item outright less the amount you’ve already bid. He is correct and that makes QuiBids less audacious.

There is another aspect to QuiBids and all online auction sites that rely on timing which make them an inescapably bad idea: the technology that makes them work works against you. I have been working in the computer industry for 15+ years, so I’m qualified to reveal to you how technology works against you for sites like QuiBids. I make a disclaimer though: this post won’t have cold hard numbers to support my claims, and I can’t show you the Internet at work, but those with a technical knowledge of code and networks will, I trust, agree with me completely.

First, sites like QuiBids hinge on a clock counting down and resetting when people place bids. How do you suppose this works for, let’s be simple and say just 10 bidders in 5 different timezones? I don’t know QuiBid technical details, but as a programmer myself and looking at the source code of a live auction page, it seems QuiBids uses a combination of Javascript and Flash which communicates with their servers to find out how much time remains for an auction, then displays that time on your screen. This is logical because there must be an authority which 1) determines how much time remains for an auction, 2) resets the time when bids are received, and 3) keeps track of the item’s price and current winner. Why would that authority be anyone other than QuiBids? It would be nearly technologically impossible to track those three bits of information in a distributed fashion, i.e. no central authority but rather synchronizing and communicating between bidders. This is where technology begins to work against you.

As you well know, web pages do not load with a constant response time. There are three very broad, general levels between you and your requested page which account for the different response times. The first level is your computer. If your computer is busy doing other stuff, it may take it a few extra microseconds to full seconds to request, receive, parse, and render the web page, not to mention load and run any Javascript or Flash programs. Or, maybe your compute is just really old so it takes a little longer to do tasks that new computers do more quickly. Or, maybe your Internet connection is slow so information is sent and received more slowly. There are many reasons why your computer can cause delay before you actually see the web page.

The second level is the Internet itself. From my present location, there are at least 10 computers between me and QuiBid’s servers. Each one of those computers is susceptible to the delays just mentioned. So when I try to load an auction, any computer between me and QuiBids may momentarily delay the response from QuiBids, or worse it will drop the response, which my computer will detect and automatically re-request. (Yes, I know it’s not all “computers” between me and QuiBids, there are a lot of routers and other devices, but even routers have loads, prioritization algorithms, throttling, etc.) More problematic at this second level, however, is the time it takes for data to travel between me to QuiBids. This time is called round-trip time (RTT). Round-trip time in the continental U.S., for example, is usually pretty good: tens of milliseconds to a few hundred milliseconds. In other words, it usually takes data about 1/4 second to go from my computer, to QuiBids, and back. If you’re not in America, however, your RTT to QuiBids will be longer. And if you’re on an island, the RTT will probably increase even more. Or, if you use satellite or long-range WiFi your RTT will probably be comparatively huge.

The third level is QuiBids, their servers and databases. Their administrators must be quite talented to keep a complex operation like QuiBids running well (I mean that sincerely; I’m not being facetious), but there’s a technological limitation that no one can bypass: serialization, or marshaling. Because of the aforementioned two levels, data from bidders does not arrive at QuiBids at the same time. Even if it did, for a single auction, there cannot be two winners, so how does QuiBids organize the data? Let’s presume I click to bid at time index 0, and you click to bid at time index 0+0.5, i.e. half a second later. But your computer is faster and the Internet routes your data to QuiBids faster, so although I clicked to bid first, QuiBids receives your bid first, then my bid, and if my bid was the last bid, then I win. It is possible, but highly unlikely that QuiBids is checking and correcting for this problem because there’s only two solutions, which I’ll digress into explaining for the sake of completeness…

The first solution is that our bids are tagged with times. Time index 0 is 00:00:00 GMT-6 (midnight my timezone), but that assumes that the time is actually and accurately 00:00:00 on my computer and on your computer (and every bidder’s computers) accounting for each of our timezones. That’s a very poor assumption because there’s zero guarantee that our computers have accurate and/or synchronized times. Therefore, bids cannot be time-tagged. So the second solution is that QuiBids tries to coordinate or synchronize our bids, but this is impossible because QuiBids cannot have access to anything beyond their servers (and a little bit of access to our computers). QuiBids cannot account for round-trip times or all the computers between them and us.

Back to the third level problems. Let me draw another analogy. Time-based auctions are like hourglasses, and bids are the grains of sand. The last grain of sand to fall through to the other side wins. The narrow part of the hour glass serializes (or marshals) the grains of sand as they pass through because they can’t all pass through at once. By chance, a grain of sand that’s sitting right near the narrow part may pass through early or late. Similarly, our bids arrive at nearly random times (from QuiBid’s point of view), and on top of that, their computers must serialize the information. In an hourglass, physics, friction, etc. dictates the serialization; in a computer, it’s a matter of process schedulers which coordinate thousands of requests to the limited number of CPUs and hard drives.

If you’ve read this far, congratulations! I know the aforementioned information is very dry. Now let’s put it all together to see the technological argument against QuiBids, and all time-based “auction” sites. In an ideal world, when there is 1 second left on the auction clock and I click bid at T-1.0s and you click bid at T-0.5s, you should win because your bid was the last one, half a second after mine. But given the three levels of problems plus the fact that there’s many people bidding at once, how likely do you think it is that the bidding process is fair and accurate? It’s unlikely and completely unreliable. Therefore, playing QuiBids or other time-based “auction” sites is analogous to throwing darts while blindfolded.

I suspect you’ve had an experience similar to mine where I was diligently watching an auction, waiting for those last few seconds, I see 1 seconds remaining, I click to bid but then the site tells me that someone else has won. The three levels (my computer, the Internet, and QuiBids) explain why this happens. My click to bid simply did not arrive or was not processed at QuiBids in that final second. Or, there was never even a full second left because it passed in between my computer asking and receiving from QuiBids the remaining time. Or, who knows… there’s a dark universe of technological processes between that simple bid button on my screen and that bid actually taking affect at QuiBids.

Before concluding, I want to say that QuiBid’s “bid-o-matic” introduces new considerations that I haven’t addressed here but do not negate the technological argument. Secondly, someone asked me what I thought about eBay. In my opinion, eBay is a true, good, and respectable auction site.

If the dollars-and-cents argument against QuiBids doesn’t convince you that you should not waste your time with QuiBids or other time-based “auction” sites, then the technological argument in this post should because there’s nothing wrong with a fair and transparent bidding process, but the technology that makes QuiBids work also makes its auctions unfair and opaque.

QuiBids is a penny auction website with an irresistible hook: win awesome stuff at bind-blowing prices, like a brand-new Apple iPad 16 GB Wi-Fi for $4! It seems unbelievable but it’s true. It’s also very deceptive.

I spent a little over $300 today and won only some Pyrex containers (I did need them, at least). Before I expose the penny auction machinery let me make clear: I’m not blogging this in a fit of rage over my $300 Pyrex containers. Believe it or not but I don’t care about the money. Also, I intended to spend that much because I was sure no one would out bid me at that price level (I was bidding for an iPad and historically they’re won at far less than $300). My motivation for this blog is simply to lay bare the plain details and facts about how (this) penny auction website works financially, to show and prove to you that, unless you enjoy seeing your money disappear at a fantastic rate whilst participating in the grotesque enrichment of the company to which it went, you should not participate in penny auctions.

I speak of QuiBids because it’s all I know. I can only guess that other penny auction websites operate similarly. If QuiBids objects to this blog post then that’s too bad because I’m protected by free speech and nothing I’m about to say is false to the best of my knowledge. (I will correct any factual inaccuracies pointed out to me.)

Let’s use this auction as an example. At the time of writing, the bid price for that iPad is $157.26. Let’s simplify and call it $150. Now here are some important facts:

• Users (i.e. you and me) must buy bids; users do not bid with real money.
• Each bids cost $0.60 (sixty cents). E.g. 75 bids = $45.
• The price of items, like our example iPad at roughly $150, are bid up in $0.01 (one cent) increments (this varies; sometimes the increment is more).
• The user who wins can buy the item at its final bid price.

Let me first emphasize the last point. If an item is bid up to $150 and you win it, then you buy it for $150 plus all the money you spent on your own bids, that is, $0.60 times the number of bids you made. So if you made 100 bids then you spent $60 on bids (100 * $0.60). Therefore the real final price for your item is $210: $150 for the bid price + $60 spent on bids.

Obviously you want to place as few bids as possible, but that seems nearly impossible to do if you have any chance of winning a “sexy” item like an iPad because, as our example auction shows, the bidding may drag on for hours. Our example auction began sometime this morning around 11am–I know because I place 278 bids ($166.80). This presents a very high barrier: bid competition. Some auctions end after less than 100 bids, and other auctions require thousands of bids. It’s easy to calculate how many bids an auction has received: for auctions with $0.01 cent increments the number of bids is simply PRICE * 100. So our example is 150 * 100 = 15,000 bids. The math is simple: 1 bid = 1 cent increment in price and there are 100 cents in a dollar so there are 100 bids in each dollar of the price.

Now wrap your mind around this: each bid cost someone $0.60, so if an item, like our example iPad, has received 15,000 bids then that’s 15,000 * $0.60 = $9,000 that QuiBids receives for one iPad.

Someone is going to win that auction, and let’s say it’s someone who comes into the auction late and bids only 100 times, thus costing their self $60 plus whatever the final price of the time is. Right now, since I’ve been typing, the price has increase from $157.26 to $160.78. Let’s be generous and hypothesize that someone won it at $160. So their final price is $160 + $60 = $220. And $160 at 1 cent increments requires 16,000 bids minus the 100 the winner placed meaning that the losers spent $9,540 (15,900 bids) for nothing. I am one such loser.

In their defense, QuiBids let’s you apply the money you spent on bids towards buying the item at what they consider retail price. For me that means I can buy the iPad for their retail price of $699 – the $166.80 I spent on bids, which equals $532.20. With shipping the iPad is $548.19 from QuiBids and $528.94 from Apple, a difference of only $19.25. That’s seems fair, right? No, we’ve been tricked again! When I describe it like that it looks like I’m only paying $19.25 more for my iPad but in reality I’m paying $548.19 to “buy it now” plus the $166.80 I already lost which totals $714.99, or $186.05 more than had I just bough the iPad directly from Apple. I’m still better off just paying direct from Apple and cutting my losses with QuiBids because if I buy from Apple for $528.94 that totals $695.74 with my $166.80 QuiBids loss, or $19.25 less than the “buy it now” option. Sure that’s only $19 but why give QuiBids another $19 when they’ve already raked in over $9,000 for that one iPad?

Even worse, my $300 loss was over two auctions so the amounts cannot be combined to buy an iPad through QuiBids less $300. If that was possible then I probably would not have written this blog. (I intended to play only one auction but technology failed me–that’s a completely different complaint, though.) I think the inability to combine losses verges on unethical because, all told, I gave QuiBids $300 in exchange for $26 worth of Pyrex contains–that’s terribly imbalanced. I’m willing to pay them more than Apple’s retail for an iPad because the extra money would be for giving me and others a chance to win that iPad for a very cheap price. Of course, any way it goes, I’m out money but that’s the price I pay for playing such games.

The bottom line: penny auction websites like QuiBids are a bad idea because countless people will waste countless hours of their lives only to lose thousands of dollars on a single item which costs, at retail, only a few hundred dollars, and all their lost money becomes the sole profit of the company which cleverly masques the dollars-and-cents reality of its game in a shroud of penny-bid lingo.