Is This Considered #Gambling as Well?

Penny Auctions… some new concept found getting very popular on the Internet since some 1 or 2 years ago.

Concept: you need to buy credits with certain amount, then only eligible to bid. It is so called ‘Penny Auction’ because the item that on auction, starting with very low price, for example 1 cent. Every bid will increase the bid price by 1 cent as well.

Some typical operators, sell to you 1 bid for 1 buck, more or less. Sometimes they give you promotion price when you buy big chunk.

So let’s start bidding. For example a electronic gadget, worth 500 dollar. Starting with 1 cent.

Here comes the bidder. One after another bid for the product. The final bid price are always looking so attractive because with 1 cent increment, how much can it be? Even after the bid price increased 100 times, the final price is just 1 dollar.

That’s the main attraction why people are joining the bidding. Of course, some may just look at it a fun game and to try their luck.

However, let say the final bid price for the product is 20 dollar. That means, all the bidders that join the bidding process already exhausted 1999 credits in total. That can be translated to 1999 dollar all together.

Ok, the person who win the bid can get the gadget with 20 dollar paid to the company. Of course, maybe he has just used 100 credits to win the auction, with some luck and intelligent. His cost of owning the gadget is 120 dollar.

The rest of participant that lose the game, gets nothing. Their total lost is 1899 dollar.

Where the money goes? You see in the whole game, the company take 2119 dollar, and pay out 500 dollar for the gadget to give to the winner. They get net profit of 1619 dollar. Wow… what a good profit.

Is this considered gambling? Exchange small money with big gain without any guarantee of return?