How Wavee Makes Money: The Math Behind The Startup | Hacker News Reader

How Wavee Makes Money: The Math Behind The Startup

ajaimk.com

14 pointsajaimk10 comments

The difficulty with this (and any other sites it resembles - quibids, for example) is that there is absolutely no good reason to believe that there aren't bots behind the scenes driving up the bids.

As an exercise in curiosity one day I watched a few auctions on quibids for about 45 minutes - with a number of them, immediately after a bid was placed by what may have been a "real" user, nearly instantly another user - always the same one - placed another bid.

After a time watching this, I began counting the number of bids placed (at 60 cents per bid, which is quibids rate), the questionable bidder placed over 300 bids in the span of 45 minutes - each time in immediate response to someone else's bid.

The item in question was a $100 gift card from Target. At 300 bids (60 cents each), that was $180.00 - grossly in excess of the value of the card itself.

Yes, it could be claimed that this was just a very dumb bidder, but the speed and rate at which they were entering bids was nearly unbelievable.

The auction ended at $15.40. At one cent increments, that was 1540 bids - at 60 cents each. Quibids made 924 + 15.40 - $100 for that card. Sick.

There is no reason to think that the bots are from the site itself (though, no reason to think they are not, either). It seems to me that it would be almost trivial to bot this up...but then you have a bot war trying to get the last possible profitable bid -- or at least one that the bot programmer is comfortable with.

Yes there is good reason to think that. An outsider would have to pay .75c/bid to run the bot, which is lunacy.

A bot run by wavee would pay nothing

This type of auction model is really just a brilliant scam. It's 100 people subsidizing the cost of the item for one person. So, one person gets a great deal, 100 people throw their money away, and Wavee brings in profits that may be even greater than selling the item at MSRP.

may be even greater than selling the item at MSRP

Orders of magnitude greater, look at one of the finished games and do the math.

It's quite an old scam, first described in 1971 according to Wikipedia; http://en.wikipedia.org/wiki/Dollar_auction

The first mainstream'ish implementation I know is swoopoo.com (2008). Since then a large number of clones have popped up, likely motivated by the fact that, for some reason, gambling laws in many countries don't seem to cover this scheme.

Do gambling laws in the US really not cover dollar auctions? For some reason I always thought such laws would be why every promotional sweepstakes in the States, e.g. McDonald's Monopoly or Coke bottle codes, etc. have a rule in fine print about "No purchase necessary to enter. To enter, send a self addressed envelope to... " etc. so it could be argued the sweepstakes is not pay-to-enter. Even then, such promotionals usually have further notes about not being able to enter in three or four out of the fifty states.

It would seem regulation would be desirable for such auction sites, since the consumer has to place a significant about of trust in the auctioneer not to bid up his own products to make more money, or throw non-profitable auctions to a self-owned account... the end-user currently has no practical recourse if this happens.

Hopefully grellas or another IAAL can throw in some knowledge.

bigdeal.com does this too. TechCrunch sponsored their jump into America and ultimately pulled out. It's super confusing for people and 99% of bidders get screwed.

The reason why bids happen so fast is that they over bid a high amount and not the next increment. And those super bidders usually have 'won' bids in a previous auction thus receiving a discount on the bid value.

In essence a sniper auction where only one person who paid to bid actually gets the item. Is this still legal?

I'm not entirely sure it's a lot different to ebay bid sniping with multiple contestants, except for the fact that it's all automated and the profit margin is centralised with the auction house itself.

Of course, that doesn't mean that said centralisation is legal.

But I think my only real disagreement with their existence is that they aren't covered by gambling regulations. As a slightly weird form of gambling, presented clearly to the public as such (and regulated as such), I don't believe I'd have any objection to them.

Sadly, borderline misrepresentation of the truth is not illegal and probably couldn't effectively be made so.

shrug one way or another a fool and his money will be separated - the important thing is to make sure he enjoys the process. Value for money can come in excitement/fun as well as goods.

(why, yes, I'm feeling cynical today, why did you ask?)

Just to confuse you further, they auction off "bid bundles" (e.g., 300 credits, worth $225, just sold for $7.23). So they're even making tons of money from their own virtual things.

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