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This premium article is the work of Ken Knelly. Ken spent a dozen years as a print journalist, earning regional and national recognition. He owns Clearberries, a strategic communications firm specializing in writing, editing, and crafting messages. He is also the co-author of Penny Wise: The Complete Guide to Saving Money with Online Penny Auctions.

QuiBids remains by far the top draw among penny auction sites. Its new site has gained a great deal of attention for it improved look, better searching options, and a greater view of statistics.

None of that is news to any penny auction observer. Just how QuiBids has thrived, the lessons it may have learned from the sector once ruled by now-bankrupt Swoopo, and whether it can keep the gravy train on track is newsier.

Looking under the hood — and giving bidders a load of stats along the way — is Eric Stix, a 2012 graduate of Brown University and principal at game development company Stixel LLC.

In an interesting piece of research, Stix examined a host of auctions in November 2011. He also built on the well-regarded academic work of Ned Augenblick and others.

Stix keys in on QuiBids’ success in maintaining healthy bidder-to-auction ratios. The number of daily auctions, for example, more than doubled in the Black Friday period over two weeks earlier. The boost tracked just slightly ahead of the increase in bidders.

QuiBids, he concludes, did what Swoopo didn’t when it introduced the buy-it-now feature: Offset the reduced profitability with far more bidders in an auction.

Most interesting, though, is his unpacking of voucher bids as a key to profitability — because the value of such bids cannot be used toward buy-it-now fallback purchases and because bidders are particularly irrrational in such auctions.

Stix goes so far as to conclude QuiBids’ success rests on keeping voucher auctions hopping:

… if bidders only derive benefits from monetary gain, bidders should avoid bidding in voucher bid auctions. Moreover … if bidders rationally ceased participating in these bid vouchers auctions, QuiBids would be taking a loss. This means that the only reason QuiBids is profitable is because people behave irrationally.

QuiBids Voucher Strategy

So what’s the lesson for bidders?

Be selective in jumping in on voucher auctions. Irrational behavior is at a premium, and the lack of benefits on the back end give the bids far less value.

Also: Be mindful, as Stix concludes, that QuiBids “keeps many unprofitable, inexpensive auctions around to increase consumer retention in the hope that those customers will then go on to give QuiBids extremely large profits in higher priced auctions.”

It remains to be seen whether Stix conclusion portends a dead-end road ahead for QuiBids. His piece, while well-researched, would have made more ground along those lines with interviews and examination of bidders who fall into the “irrational” and “addicted” category.

In an interesting Appendix B, Stix takes a look at the $25 gift card as a staple of those “inexpensive auctions.” For some tactics on making hay out of those possibilities, take a look at a recent post for some success tips.

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