A penny auction makes or loses money on three numbers you set before the first bid: the bid fee, how much each bid raises the price, and how many seconds each bid adds to the clock. Get them wrong and you send out a $300 item for $102 of revenue. This article works through the arithmetic with the settings as they exist in BidKing, so you can run the numbers for your own lots before you list them.
All figures below are made-up illustrations, not forecasts. Penny auctions are not a guaranteed income. Most bidders in any lot pay fees and win nothing, which is why consumer regulators watch this model closely. Some jurisdictions also examine whether it amounts to gambling. Check with a local lawyer before you launch, and treat your bidders the way you'd want to be treated.
How a penny auction works in BidKing
Penny is one of six auction types in every BidKing edition. When you create a lot under Auctions › All Auctions → New auction and choose Penny, the form asks for:
- Bid fee: what each bid costs the bidder, taken from their wallet. Customers top up the wallet through your payment gateways; you set what one wallet unit is worth.
- Price rise per bid: every bid raises the lot's price by exactly this much. The price starts at zero.
- Seconds added per bid: every bid adds this many seconds to the lot's end time. A bid never moves the end earlier.
- Start and end time, and optionally a reserve.
Whoever placed the last bid when the clock runs out wins and pays the final price. For a physical item they claim it through the cart at that price; a digital prize is downloaded; a coin prize goes straight to their wallet. A scheduled job closes ended lots every minute, so cron must be running.
One thing to plan for: because every bid adds time, a busy lot runs past its scheduled end. A lot that adds 20 seconds per bid and draws 1,500 bids ends 1,500 × 20 seconds (about 8.3 hours) after its scheduled end. Set the end time knowing a popular lot will overrun it.
The maths: revenue per lot
Two things bring money in on a penny lot:
- Bid fees = number of bids × bid fee
- Final price = number of bids × price rise per bid, paid by the winner
So revenue = bids × (bid fee + price rise). Your costs are the item, delivery, and the payment processing on the top-ups that funded those bids. The lot pays when:
bids × (fee + rise) ≥ item cost + delivery + processing
Rearranged, that gives the number you should write down for every lot before you list it, the break-even bid count:
break-even bids = total cost ÷ (fee + rise)
Worked example (illustrative numbers)
Say you're listing a pair of headphones that cost you $300 including delivery. You set one wallet coin to $0.01, a bid fee of 50 coins ($0.50) and a price rise of $0.01 per bid. Each bid brings in $0.51.
Break-even is $300 ÷ $0.51 ≈ 589 bids.
| Bids placed | Bid fees | Final price | Revenue | Result vs $300 cost |
|---|---|---|---|---|
| 200 | $100.00 | $2.00 | $102.00 | −$198.00 |
| 589 | $294.50 | $5.89 | $300.39 | about break-even |
| 1,500 | $750.00 | $15.00 | $765.00 | +$465.00 |
Two things stand out. The final price is almost irrelevant: at a $0.01 rise it never gets near the item's value, so the lot lives or dies on bid volume. And the gap between a loss and a profit is entirely about how many people show up. A new site with a small audience will sit on the top row for a while.
Now the same lot from the winner's side. Suppose the winner placed 120 of those 1,500 bids. They paid $60 in fees plus the $15 final price, so $75 for headphones that retail higher. That's the pitch. The other bidders shared $690 in fees and got nothing. Both halves of that sentence are true, and your terms page should say so in plain words.
Tuning the three settings
Bid fee
The fee sets your break-even directly. Double it and you need half the bids, but each bid also feels twice as costly to the bidder, so fewer people stay in. There's no universal right number. Test a few lots at different fees and track bids per lot in the admin (Auctions › Bids shows bid-fee income for the last seven days).
Price rise per bid
A bigger rise moves more of your revenue into the final price, which is paid by one person who actually gets the item. That's a fairer split, and it means you depend a little less on volume. The trade-off is that the "won it for almost nothing" headline gets weaker.
Seconds added per bid
A few seconds per bid keeps a busy lot from running for days; more seconds per bid gives bidders on slow connections or mobile data a fair chance to respond. The auction page checks for new bids every few seconds rather than instantly, so don't set it so short that a bidder can't react before the end.
Where operators lose money
- Too few bidders. The table's top row. Start with lower-cost items whose break-even you can actually reach, and add bigger lots as the audience grows.
- Giving coins away and counting them as revenue. Coins from sign-up or referral bonuses that customers spend on bids aren't cash. If a third of the bids on a lot were paid with bonus coins, a third of your "fee income" is money you never received. Run the break-even sum on cash bids only.
- Reserves on penny lots. BidKing lets you set a reserve on a penny auction. If the final price ends below it, nobody wins, and bidders have already paid their fees. With a $0.01 rise, a reserve is almost never met. We'd recommend against reserves on penny lots. If you do use one, show it clearly on the lot.
- Payment processing. Card fees on many small top-ups add up. Encourage larger top-ups, but never in a way that pressures people to spend more than they meant to.
- Cancelling. Cancelling a lot refunds every bid fee to the bidders' wallets. That's the right behaviour, but it means a cancelled lot earns nothing.
Auto-bidders, anti-sniping and Buy Now
Auto-Bidder (included in BidKing Pro and PrizeX) lets a customer set a limit, such as a number of bids, and the system bids for them whenever they're outbid. On penny lots it keeps people in without them watching the clock. Make sure customers understand that each automatic bid costs the same fee as a manual one.
Anti-sniping (also in Pro) extends English-style auctions when a bid lands near the end. Penny lots don't need it: every penny bid already adds time, and BidKing doesn't apply anti-sniping to penny auctions.
Buy Now (every edition) sells a lot outright at a fixed price you set. On a penny lot it disappears once the price reaches the Buy Now price, so set it above the current price. When someone buys outright, bidding closes, every bid fee paid on that lot goes back to the bidder’s wallet, and each bidder is told. Some operators use it to give bidders a way out at a known price. Our guide to Buy It Now on auctions covers the rules for each auction type.
Run it fairly
The US Federal Trade Commission's consumer warning on penny auctions lists what goes wrong on bad sites: bids that cost money whether you win or lose, "bonus bids" that sound free but aren't, and bots or shill bidders that push prices up. Your site should be the opposite:
- State the bid fee, price rise and seconds added per bid on every lot.
- Say plainly that every bid costs money whether or not the bidder wins.
- Never bid on your own lots or let staff accounts bid. Real bidders only.
- Publish winners and final prices.
- Keep the 18+ sign-up age that BidKing sets for auctions (you can raise it, not lower it), and don't market to minors.
Common questions
How do penny auctions make money?
Mostly from bid fees. Every bid costs the bidder a fee whether or not they win, and the winner also pays the final price. A lot is profitable when bids × (fee + price rise) is more than the item's cost plus delivery and processing.
What's a good bid fee for a penny auction?
There's no universal figure. Work out the break-even bid count for the item at a few candidate fees, compare it with how many bids your lots actually get, and test. A fee that needs more bids than your audience produces will lose money on every lot.
Does every bid in BidKing extend the timer?
Yes. On a penny auction every bid adds the number of seconds you chose to the lot's current end time. It never shortens a lot, so a lot with days left keeps them.
Are penny auctions legal?
It depends on where you and your bidders are. Consumer protection rules apply almost everywhere, and some regulators have looked at whether paying per bid is a form of gambling. Check with a local lawyer before launching.