Thoughts and Musings

Best / Smartest Online Business I’ve Ever Seen

Posted in - innovation & Sales and Marketing in 2010 & Uncategorized & What's in my head now? on April 16th 2010 1 Comments

Tooling around FB the other day, I came across an ad for “women that like expensive purses” (or something along those lines). While I usually don’t click the ads, for some odd reason, I decided to click this one and MAN am I glad I did. I was introduced to a brilliant business model that had been equally executed. The site is and the business model plays on human emotions. To simplify the process / numbers for you, I’ve attempted to outline below.

1. Consumer goes to
2. Consumer can see items that will be auctioned off (similar to Ebay, but much ‘cleaner’ site)
3. Consumer registers (free) and needs to ‘purchase’ bids to be able to bid on products. Each bid costs $1 and is sold in quantity packs. Example; to start, I purchased 100 bids (or spent $100).
4. I then have 100 ‘tries’ to bid out different items.
5. As the clock winds down on each product, bidding begins. When someone bids, 2 actions happen; 1) 6 seconds is added BACK to the clock 2) Price goes up by $.02.
6. Brilliance; can you figure out why yet? Here’s my simple numeric / financial breakdown…

Let’s look at ‘original product’ – PRADA bag. And let’s assume the ‘company’ purchased this bag resale for $600.00. Bidding begins and bag is sold for $28.00. You’re looking at the website and saying, “WHAT? NOT FAIR? How is it so inexpensive?” Well, what sounds like inexpensive is REALLY the sound of the owners of this site driving revenue.

If we take $28.00 and divide it by $.02, we get 1400 bids. This means the consumers have paid $1400 in bids. Do if we forget to add in the $28.00, and we only look at the variable cost, the margin here is ridiculous. You can see, the company nets about $800 for this bag. The model is scalable and will grow virally, so investment really only needs to be on the tech. side of the business as well as purchasing.

As this site becomes more popular, prices will go up (more people bidding = higher prices) as the larger pool of people you have bidding, the higher the chance is that someone who is willing to spend more money will be bidding. I’ve watched them climb a little bit each day, it’s uncanny.

As prices go up for the consumer, more bidding will happen for the site and more money will be made.

This business is not only brilliant, but it’s a “win, win, win” (provided bidders are not compulsive gamblers). If used correctly, this site is a “win” for the original company (PRADA, in example above) as the product can be bought at normal prices, a “win” for the consumer who ‘wins’ the product; and even for those who lose, if they lose ‘strategically’ they probably only bid a few dollars, and a ‘win’ for the owners of the website. Brilliant. Capitalizing on the old human weakness of greed and gambling. I love it.

As of now (1) people have had something to say...

  • shakdearnmoneyonline - Reply

    February 27, 2011 at 1:55 pm

    Very good article! Interesting to think about it that way!


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