Way back when I started this blog I mentioned that I might occasionally delve into completely unrelated, random nonsense. Well, this particular post is about as far outside of my comfort zone as I'm ever going to go, and I'm probably never going to do another post like this ever, ever again. The topic?
Yeah, yeah, I know. It's overdone. There's tons of shit out there about the literally millions of scams on the Internet. I've looked. It's actually a bit of a hobby of mine: when I see a scam, I don't just dismiss it--I research it. I try to figure out how, exactly it works. Typically that research only takes a few minutes and I'm able to move on with more important things, like spending hours with Google SketchUp crafting a rather poorly-designed 3D model of a Free Planets Alliance Battleship.
But the other day I heard about a rather new online scam called Flutteroo, and to my surprise, there wasn't really ANYTHING on the Internet I could find to learn how, exactly, the scam operated.
Oh, if you Google "Flutteroo scam" you'll get several hits. Many, actually. The problem is they all lead to articles of the same nature--"Flutteroo's not a scam: I know people who saved/made a lot of money / and I know people who haven't made a dime." Basically, posts flung out into the aether of the intertubes to encourage the marks, rubes and fools of the world to give Flutteroo a shot. This is the old testimonial approach to marketing--these blog posts and articles are basically there not only to encourage new people to give Flutteroo money, but to convince people who have already been scammed to keep coming back--because, hey, they're bound to get lucky eventually, right? Just look at how cheap some of the stuff is!
At a glance, it seems simple enough--it's like ebay, only everything is super cheap! It sounds almost too good to be true, doesn't it.
Everyone knows that expression: "if it sounds too good to be true, it probably is." That expression, at face value, it has a cautionary message. But the implicit message is precisely the one that sites like Flutteroo, and other Penny Auction scams, prey upon: "if it sounds too good to be true, it probably is--but it might not be!" That doubt is the same doubt that propels so many fools to sit for so many hours in front of slot machines, pulling that lever over and over again. "I probably won't when--but I might!"
Anyway, I'm getting a bit verbose here and most of the people who find this article are going to be looking for the same knowledge whose absence led me to write this in the first place, so let's get on with things.
Here's how the "penny auction" scam Flutterwoo (based in the U.K., by the way) and similar sites work.
The basic site is set up with auctions similar to eBay, with items always selling for fractions of their retail price. You'll see $600 items sell for literally pennies on the dollar. The "crucial" difference between a Penny Auction and an eBay auction is how the bidding happens: with a Penny Auction, you can purchase a finite number of bids from the auctioneer, each one is worth a single penny.
Bids can only be purchased in bundles, with the real-world price of each bid being exactly $0.30 USD.
Because Penny Auctions are so similar to other auction sites, the tactic seems simple, right? Just wait until the auction is nearly over, then start bidding. If you get in your bid last, you win. It's that easy, right?
These auctions don't end. Ever. Those timers you see for each auction? Complete bullshit. I watched an auction for a while, only too see the numbers increase and decrease. I've seen auctions go from having only a few seconds left, to being 30 minutes away from ending. Funny, that?
And each new bid resets the time. Manage to sneak in a bid the moment before the auction closes? Congratulations, you've... given everyone else bidding on the auction 15 more seconds to bid again. Or 25. Or 4.
And there area lot of people bidding. As many as there are marks in the world, it seems.
So, really, who wins an auction is really determined by two things. 1) Patience: you'll win if you keep bidding after everyone else has given up; and 2) Money: the more money you've invested in bids, the longer you'll be able to keep bidding, meaning the more likely you'll be able to outlast other bidders.
Let's take a look at a recent auction for an Apple iPad 2.
The iPad sold for $82.18 USD. That sounds pretty good for whoever won, right?
And it's even better for Flutteroo. Remember, each penny represents a single bid, and each single bid cost the bidder $0.30 paid to Flutteroo. That means that, for this iPad worth $500, Flutteroo made $2465.40 from bids alone.
Plus the actual $82.18 that "face2face" paid for the actual auction--so a total of $2547.58.
For those of you who are bad at math, that's more than a 400% profit. Assuming, of course, that the iPad was actually shipped.
Those shill websites I mentioned finding earlier are filled with reports of it "really working" and people "really getting" what they sold. Thing is, though, the whole bidding process in incredibly easy for the auctioneer to rig--simply by having a "fake" bidder in the auction, constantly keeping the thing moving until everyone else drops out. That way the auctioneer gets all of the money from the bids, and doesn't have to do, well, anything.
And the people that lost the bidding?
They see that theirs was the second or third or fourth-to-last bid, and they don't think, "Gee, I've just wasted my money." No--they think, "Gee, I almost won that one!"
And so they buy more bids and give Flutteroo more and more money.
Basically, this scam isn't too different from most gambling scams--it preys on the hope of the marks foolish enough to think they can get something for nothing. By manipulating auctions to ensure profits, and by making it so that the only real way to win an auction is to purchase an obscene number of bids (which, by the way, helps to hide the "real cost" behind each sale to the mark) Flutteroo is able to rake in exhorbitant profits with minimal risk--nothing here is, after all, technically illegal.
As far as scams go, these penny auctions are absolutely brilliant, in a terrifying kind of way. If you're at all curious about these kinds of things, as I was, I'd recommend checking out Flutteroo auctions for a while. Naturally, you'll have to create an account (you can't view bids without signing up) and I'd suggest using a disposable email (because once you give them your email, you can't remove it from your account information) and, of course, NEVER actually trying an auction yourself, no matter how good a deal you think you'll get. Watch some of the auctions play out. Watch the same people bid over and over, giving more and more of their money to Flutteroo for absolutely nothing in return.
It's a frightening testament to both the greed and creativity of these British grifters, as well as the inexhaustible foolishness of their many victims.