Even before the sites that are today considered standard e-commerce establishments had mad a name for themselves (places like Amazon.com and Craigslist) online auctions were becoming popular. eBay, though today well known as an online marketplace, originally made a name for itself as an online auction house.
Many online auction sites today have an infamous reputation as being impossible to win, and attracting bidders with deceivingly low prices only to rope them into bidding repeatedly without any real chance of winning the product in question. Ironically, though, the stigma associated with online auction sites has spread much farther than their actual popularity. Although many people are aware of a vague general consensus that online auctions are dangerous or downright criminal, relatively few have actually tried their hand at an online auction, even just to see what one is like. And so the question remains; are online auctions actually just scams, or can they be a legitimately useful way to purchase products?
In understanding the answer to this question, it’s important to first understand the differences between different types of online auctions, and how each functions. There are a plethora of different types across the entirety of the web, but there are two major ones you’re likely to run into. The first and simplest are the standard auctions, which are the types usually found on Ebay and other larger auction sites. These have a starting bid, and the highest bidder at the end of the auction (usually after a certain period of time) pays the amount of the bid and receives the item. Many sites allow the current holder of the highest bid to use a system that automatically bids for them as other users issue higher bids.
Another type of online auction is popular: penny auctions. These auctions require you to pay the amount of the bid when you bid, after which the price increases by one cent. These auctions end after the time since the last bid on a specific product exceeds a certain amount (when a product has not received a bid in over a predetermined number of seconds).
Both types of auctions have their advantages and disadvantages, and is important to size them up before participating. Neither is a scam in the sense that neither takes money from you that you do not explicitly agree to pay. I tend to find penny auctions to be more misleading, because many different bidders put money towards an item before its recipient has been decided, making bidding in one more of a gamble.