A bargain at twice the price?

The latest trend in the “something for nothing on the Internet” game is the pay-to-bid auction site. The auction operator lets such items as cash and gift cards go at prices far below face value because all the bidders, even the losers, have paid to place their bids. Some of these sites claim to be helping people beat the recession. One, PsychoAuction.com, even has a complicated back story involving a founder, Nick Dickreuter, who was let go when Lehman Brothers failed. According to the PR version of the story, Dickreuter lost all respect for money and now gives things away online.

Except, of course, that Dickreuter clearly respects money. Hs site stands to make a lot of it from those who don’t understand how giveaway auctions work.  It’s not like Dickreuter took a vow of poverty and went out to serve the poor.

PsychoAuction isn’t the only site following a pay-to-bid model. DFWbid.com is another that has been mentioned on different bargain-hunting Web sites. The pitch is that you can get a $25 gift card for $8; the reality is that a lot of people spend money to bid without winning. (more…)