How Do Unique Bid Auctions Really Work, aka Zeek Rewards, DubLi Network, or BidiFy Part 2

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A few days ago we started looking at the Unique Bid Auction industry to better understand why network marketers from around the world are flocking to companies like DubLi Network, Zeek Rewards and BidiFy. Today I want to look at what the critics have to say about the Unique Bid Auction, and a little about gamification, one of the psychologies which could be attracting millions of folks to bid in the auctions.(Click here to read part one)

What is Gamification?

Gamification is known to be used interchangeably when talking about the three following terms: game design techniques, game thinking and game mechanics to enhance non-game contexts. In most situations gamification will apply to non-game applications (such as unique bid auctions) and processes (Facebook applications), in order to encourage people to adopt them, or to influence how they are used. (On a positive note, Evolv Health used gamification in their new Facebook application attracting 32,000 stories in the first 30 days, with 2.5 million impressions being shared worldwide, leading to their surge in new customers and distributors.)

Gamification can be described as, making technology more engaging (easier to understand and use). Guiding or encouraging users to engage in desired manner. Helping the user or programmer to solve situations while not being a distraction, And lastly and maybe the most interesting where it pertains to unique bid auctions, taking advantage of human psychological predisposition to engage in competitive (maybe addictive) online activities. Second Life, may be one of the first online communities to have utilized gamification, even though I do not think the term was around back at the launch.)

Here are some great research on gamification:

All the World’s a Game, and Brands Want to Play Along – Source – Ad Age Digital

“Basically game mechanics are a way to get consumers addicted to things,” said Tim Chang, principal at Norwest Venture Partners, which has backed many social mobile game companies. “They keep people engaged to keep doing things, as opposed to what goes viral quick: You click, you watch and then never see it again.”

One of the best examples is, of course, mobile social game Foursquare, which awards badges as users “check in” via their phones at physical places. Accumulating badges — and achieving statuses such as the “mayor” — are motivations to get people to check in.

7-Eleven and Zynga connect for a campaign with FarmVille and Mafia Wars.

Mr. Chang plots this trend on what he calls the “game-ification of life,” where competition and points are increasingly a part of offline activities, such as shopping with services like Gilt Groupe and Groupon and health and wellness with NikePlus.

Recently H&M ran the first-ever brand integration on MyTown, a mobile game like Monopoly set in the real world, created by developer Booyah. During the campaign, H&M was the most searched location within the game, 700,000 users checked in to its retail stores, and 8 million saw its virtual goods. The game, which has 2.3 million users since launch in December, has since worked with brands such as Travel Channel, Olay and Microsoft Windows. (Read the full article click here)

Beyond Facebook: How social games terrify traditional game makers but will lead us to gaming everywhere – Source – Game Beat

Jesse Schell, a game design professor at Carnegie Mellon University, generated a lot of chuckles this morning with his observations about that in his talk “Beyond Facebook” at the Dice Summit in Las Vegas.

Facebook games and others that use the “free to play” business model, where you can play a game for free and make money by selling virtual goods, hook their users via clever psychological tricks that convince you to buy things, either with real cash or by fulfilling some kind of special offer. These little incentives add up, creating a silly compulsion loop, forcing people to search for achievement points in everything they do. They keep playing because they get little rewards all of the time. Schell said that this trick will tie into other trends. (Read the full article click here)

Gamification Facts & Figures – Source – Enterprise Gamification

Phunny Phacts

Average age of gamers in years: 37 (has also been playing for average of 12 years)
77% of American households own videogames
The average age of the most frequent game purchaser : 41 years
55% of gamers play games on their phones or mobile devices
% of youth playing computer & video games: 97
% of female gamers: 42 (In fact, women over the age of 18 represent a significantly greater portion of the game-playing population (37 percent) than boys age 17 or younger (13 percent).)
% of gamers older than Fifty (2011): 29 (an increase from 9% in 1999; This figure is sure to rise in coming years with nursing homes and senior centers across the nation now incorporating video games into their activities.)
Percent of gamers who play games with other gamers in person: 65
91% of the time parents are present at the time games are purchased or rented.
68% of parents believe that game play provides mental stimulation or education, 57% believe games encourage their family to spend to time together, and 54% believe that game play helps their children connect with their friends.
Avg. of hours/week played in WoW: 20
Gamers have collectively spent 5.93 million years playing World of Warcraft
# of articles in WoWWiki: ˜250,000
Rank of WoWWiki compared to all Wikis: 2nd
Rank of Wikipedia: 1st
Most popular games played by US soldiers in Iraq when off-duty: Halo, Call of Duty
46.6% of surveyed German employees playing games during working hours: daily, 10.0%; several times a week, 15.5%; once a week, 7.0%; once per month, 3.6%; less than once per month, 10.6%
61% of surveyed CEOs and CFOs are playing games during their working hours
Highest proportion of active gamers by country in percentage of the population (National Gamers Survey 2011):
Germany: 66%
Mexico: 57%
Russia: 53%
UK: 52%
Brazil: 47%
USA: 42%
Largest number of gamers are in China
Average number of game platforms that a gamer plays on: 3.8
Time spent gaming per day in the US: 215,000,000 hours

Examples of companies and industries using gamification:

Communicate Hope, which aided the development of Microsoft’s Office Communicator (now known as Lync). For this game, the goal was to get users to provide feedback on the product design and usability and to submit bugs. The game leaderboard was linked to five charities and Microsoft’s contributions to those charities was tied to the game results. Smith’s group got 16x more feedback from people playing the game than those not playing the game, and tens of thousands of dollars went to the charities.

Microsoft & Rochester Institute of Technology – Students who dropout early were less likely to have been woven into the social fabric of their school. Phelps proposed to create a productivity-style game around the “non-academic” aspects of college life and turn it into a “Hero’s Journey.”

(Read the full article click here)

Here is a great slideshow presentation on exactly how gamification works

Now think of how unique bid auctions work… Winner’s circle, competitively against others. Using free bids just to say you are the winner, these are all techniques we can find in other online businesses.

Now let’s look at what critiques have to say about the unique bid auctions:

Most online penny auctions just don’t make any sense – Source – MSNBC

But before you rush to sign up, you’d better understand how penny auctions work. The bidding starts at zero and goes up by only a penny each time. But you have to pay anywhere from 50 cents to a dollar to place a bid. And most penny auction sites make you buy a package of bids to get started.
“They’re very different from other auctions because you have to pay to play,” says Bob Schroeder with the Federal Trade Commission. “You could end up spending more than the value of the product you’re bidding on.” (Read the full article click here)

Profitable Until Deemed Illegal – Source – Coding Horror

I was fascinated to discover the auction hybrid site swoopo.com (previously known as telebid.com). It’s a strange combination of eBay, woot, and slot machine. Here’s how it works:

You purchase bids in pre-packaged blocks of at least 30. Each bid costs you 75 cents, with no volume discount.
Each bid raises the purchase price by 15 cents and increases the auction time by 15 seconds.
Once the auction ends, you pay the final price.
I just watched an 8GB Apple iPod Touch sell on swoopo for $187.65. The final price means a total of 1,251 bids were placed for this item, costing bidders a grand total of $938.25.

So that $229 item ultimately sold for $1,125.90.

But that one final bidder got a great deal, right? Maybe. Even when you win, you can lose. Remember that each bid costs you 75 cents, while only increasing the price of the item 15 cents. If you bid too many times on an item — or if you use the site’s “helpful” automated BidButler service, which bids on your behalf — you’ll end up paying the purchase price in bids alone. For this item, if you bid more than 305 times, you’ve paid the purchase price — and only raised the cost of the item by $45.75 total. (Read the full article click here)

The Big Money: The Pennies Add Up at Swoopo.com – Source – Washington Post

At first glance, Swoopo.com — which began in Germany as a phone and TV-based auction site called Telebid, migrated to the web as “Swoopo,” and launched its U.S. site last year — looks like an auction site patterned on eBay, with prices for most items starting at a penny and rising as members “bid” up the price. Like eBay, Swoopo has a full panoply of auction tools, such as comprehensive records of all completed auctions and an electronic bidding system (“Bid Butler”) that will put in last-second bids to keep you in the auction. Unlike eBay, however, on Swoopo you pay 60 cents each time you make a bid.

Sixty cents? Sure doesn’t sound like much when a $1,000-plus camera or computer is at stake. But consider the MacBook Pro that Swoopo sold recently for $35.86. Swoopo lists its suggested retail price at $1,799. But then look at what the bidding fee does. For each “bid,” the price of the computer goes up by a penny, and Swoopo collects 60 cents. To get up to $35.86, it takes a stunning 3,585 bids — and Swoopo gets its fee for each. That means that before selling this computer, Swoopo took in $2,151 in bidding fees. Yikes.

In essence, what your 60-cent bidding fee gets you at Swoopo is a ticket to a lottery, with a chance to get a high-end item at a ridiculously low price. With each bid, the auction is extended for a few seconds to keep it going as long as someone in the world is willing to take just one more shot. This can go on for a very, very long time. The winner of the MacBook Pro auction bid more than 750 times, accumulating $469.80 in fees.

Some of the ideas behind Swoopo have been explored in a theoretical way by game theorists. The reluctance of bidders to say goodbye to their “sunk cost” has been explored by economists such as Daniel Kahneman and Amos Tversky — and has been found to draw bidders deeper into the game. Swoopo plays off those insights to efficiently get people to make bad choices. It’s the evil stepchild of game theory and behavioral economics. (Read the full article click here)

An iPad for $2.82, or illegal gambling? Source – Red Tape Chronicles – MSNBC

Here’s a puzzler: How can a website sell a $10 Walmart gift card for 26 cents and still make money? Or sell an Apple iPod worth $100 for $3.30 and make an enormous profit?
Welcome to the wild world of penny auctions, where nothing is quite what it seems and everything costs money — even the bids themselves.
Penny auctions have taken the Internet by storm. Ads for electronics products promising seemingly impossible 95 percent discounts appear on hundreds of popular websites. There are dozens of penny auction sites, with more popping up daily. One site, SkoreIt.com, recently engaged in an aggressive national radio campaign, bringing even more attention to this “new kind of auction.”

Penny auctions are run by for-profit companies that believe they’ve hit on a new formula that is entertaining and offers a real chance at deeply discounted merchandise. Of course, paying a little money for a chance at a big prize sounds like gambling, but supporters of the concept say that additional elements they’ve added differentiate the format from what might otherwise be called an illegal lottery. Some observers aren’t so sure.

“We call this entertainment retail,” said Jeff Geurts, chief financial officer of Quibids. He says the site runs 15,000 auctions per day, and will soon ship its 2 millionth product to a winner. “We look at shipping products as a measure of our success.” (Read the full article click here)

Well there you have it a little more on the whole unique bid auction industry.