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Penny Auction sites are everywhere on the web now, but for almost every one there are two or three sites or threads talking about how the site is using some kind of scam. In addition, if you search around for a list of defunct Penny Auction sites, the list is probably longer than the list of active sites. It is valid to wonder whether these active sites do indeed need to bend the rules to stay alive and be successful. There are some new penny auction sites, like BunPig.com, who are heading into market pledging 100% transparency and honesty, and they are a living test of whether the white hat approach can work. If they fail, it is worth wondering whether any surviving site is trustworthy.

Would it be possible for a new Penny Auction to achieve longevity while actually adhering to a strong code of ethics? There are several factors that enter into the discussion, and the jury is still out on the verdict. Considering these factors before you log on and buy bids is a sound idea to avoid walking right into a scam trap.

One major reason that successfully launching an honest penny auction is difficult is that penny auctions rely on traffic, and traffic takes time. Everyone knows that the auction winner is going to walk away with a really good deal on some item, and that the penny auction house is going to lose money on the sale. In order for them to recoup the loss and make a profit, many other users have to place purchased bids and not win. If a site is young, it can’t have hundreds of customers yet, so losses will not be offset by gains in bid sales. So a new site has to be prepared to lose a lot before they gain enough traction to make some money. The pressure to use phantom bidders to drive up prices and offset this loss has got to be huge, and it is worth wondering how many sites succumb.

Really good marketing could be one answer to the traffic problem, and has the potential to drive customers to the site in such numbers that shill bidding would not be needed. But marketing is expensive, and directing traffic to your site does not guarantee sales once people get there. When site owners are comparing costs, hedging with shill bids could save a ton of ad money while allowing the traffic at the site to grow organically. And many successful sites may have chosen that route.

Customer service is one more major investment that underhanded sites overlook. An honest site needs to hold on to its customers, so free bids and even free product need to be awarded to make unhappy bidders happy again. An underhanded site can skip shipments to customers, or defraud them of bids because their higher margins make individual customers less important. The added cost of good customer service could potentially put an honest company out of business.

Starting a penny auction comes down to investment. If a site is willing to put some money on the line, they can retain their integrity and still have a chance of success. But how much it takes is a real question, and many honest sites might have trouble sticking around long enough to get it answered. Do you best to find these sites while they are still around!

Searching for an honest penny auction site? Check out BunPig.com. That site is shaping up to be the best new penny auction on the web, and their integrity is second to none.