Imagine X is the highest value any bidder attaches to ownership of the site. Even if the price drops below X, the bidder has an incentive not to bid (since they can potentially wait and scoop it up at a discount). You're throwing out money.
I wanted to combine getting a good value with the ability to showcase the bid/price - and the process - publicly.
If I did a normal open auction, there is a chance everyone would wait until the last minute to bid. I'm managing bids manually, so it could get hectic. Plus, it wouldn't be as fun to watch for people reading.
Also, if there were NO bids early on it would really hurt the potential sales price with a lack of interest.
A full-on closed auction wouldn't be nearly as exciting for people to watch, and I wanted to generate buzz and interest, plus show the whole process.
With the reverse auction, the bid management is simplified - I only have to manage one winning bidder. It also allows the process to be showed publicly. Finally, it creates a sense of scarcity. If someone really wants it, they'll be more likely to bid early to prevent others from getting it.
So is it perfect? Definitely not! :-) Probably leaving some money on the table but I thought that this was the best structure to maximize value AND interest.
This would maximize intrest, but not maximize value (money).
To give bidders the incentive to bid their true value, you need a Vickrey auction where the winner only has to pay the next highest bid. But, this is suboptimal if there isn't a lot of liquidity. Also, you won't have the credibility to do this if you are auctioning off your own business (you have an incentive to lie about the next highest bid).
Downside of that might be that the reverse auction probably generates more buzz though... here we are, on the front page of HN.