Don’t Let Auction Sniping Kill Your Online Auctions

Bidding for online auctions is undeniably a game. A fun game, a game that can have many strategies. From the very basic incremental bidding to a troublesome sounding sniping to clear cheating in the form of shill bids. Most importantly, it is an interactive game, where your action depends on the other players' actions.

Each of the strategies, has its up sides and down. Let us talk about auction sniping – why one would do it, why one maybe shouldn't do it and why do sellers not like it so much.

What is Auction Sniping?

A snipe bid is one in which the bidder makes his “maximum possible” bid at the “last possible moment”.

The two elements of this strategy are the value of bid and its timing.

- Maximum possible bid would mean the most that the bidder is willing to pay for the item on auction. This is basically how the bidder values the said item.

- This bid is timed in such a way that it makes any other bidder impossible to overbid it. So, if the bid is the highest bid, it is more than likely to win.

Of course, this is true only for auctions that have fixed end times.

Auction Sniping: Buyer's point of view

Auction Sniping: Buyer's viewPitfalls: Now, there are many things to consider before calling this a winning strategy from the buyer's point of view. The strategy assumes that the bidder knows for sure what the true value for the item is. This is untrue in most real-life cases. We can never say how much exactly we are willing to pay for an item without having a baseline to compare with. Secondly it assumes, that the bid will definitely be higher than other bids. Or in case of proxy bids, nobody's proxy bid will go beyond the auction sniper's bid.

Why is the buyer sniping? Considering the practical issues, why would a buyer snipe at all then?

For one, it is a relatively low maintenance considering there is a hoard of inexpensive software out there which can do it for you.

Secondly, it makes all the right noises as far as winning at best price goes. Anyone who is selling sniping software makes very good arguments and claim near 100% winners.

Last and most importantly, there is a good chance the bidder will get to buy at a much lower price than if they were bidding incrementally. Consider how the two strategies work. The idea is that instead of bidding many times from when the auction opens, you bid just once at the fag end of the auction. The bidding psychology in the first strategy, is such that the bidder is gauging what others are bidding. When pitted against the second strategy, auction sniping the incremental bidder doesn't get that reference point. To top it off, the price doesn't increase and the auction sniper can just make a bid in the end that will have to be higher than the current highest bid – that's it. The main selling point is that the ultimate price paid is much lesser than what the price would have been (maybe after a bidding war) had the sniper been an incremental bidder instead. Basically, the auction sniper wants to pay the least possible by delaying their show of interest.

Hardly illegal, from bidder point of view they are playing smart, not dirty.

Auction Sniping: Seller's point of view

Auction Sniping: SellerThe last reason that works for the buyer is the seller's sore point - the price is the lowest. By not revealing what the auction sniper is actually willing to pay – through their bids – the auction doesn't reach its true potential. It can be argued that the loss might not be too high, but the seller's concerns are valid. There are few ways to avoid auction sniping.

How to avoid snipers on auctions?

Automatically extend the bid deadline by a few minutes if a bid is placed in the last moments of the auction, to give other buyers time to react.

Captchas: If the seller is required to enter a captcha right before committing to buy, the seller achieves two things. They delay the time required to bid by a few seconds. The captcha can have an expiry time to avoid auction snipers from entering the captcha in advance. Also, automated sniping tools are pretty much thrown out of the auctions.

“Buy It Now” button: A non-sniper can just buy the item long before the sniper contemplates sniping the auction. Sure, there is a chance that there could be “Buy It Now” sniping, but that requires manual bidding and precision.

Minimum number of bids: A less desirable strategy could be to have a required number of bids for an auction for the buyer to be an eligible bidder. The other prong of this mechanism is that this might dissuade bidders completely. Also, in a way it is against the spirit of auctions.

Incentivize early bidding: Seller could offer a discount to the earliest, highest bidder. Of course, deciding the discount amount/percentage will be a balancing act. But, it might be well worth it to dissuade auction sniping.

Having said that, auction sniping would do well for a seller to study their auctions well. This is to figure out how much they are really losing out to sniping. For all you know, the impact is not too bad. Alternately, the study might lead to some insights into the bidder's practices that could be used to the seller's advantage.

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