Are Penny Auctions a Scam? Answer : YES, ALL OF THEM!

Penny auctions have been around for a while now, a few years actually. I have been working online for 15 years which has really hammered home : if it sounds to good to be true, it is.. Not probably.. It is.. I actually did some work for someone in Montreal that was starting a penny auction. I felt a bit slimy helping him and I eventually bowed out of the deal. Two days ago my 75 year old Mother messaged me and said she had been ripped off – by a penny auction.

We all know the above saying, but there is something about the human brain that really wants to believe. Unless you are skeptical about everything – which means you probably have missed out on a lot of great stuff – it’s a good bet you have been taken in by a too good to be true deal. Unscrupulous online marketers know how to push all the right buttons to suck money out of even the most intelligent people. Marketing is about playing to emotions, a good marketing piece will actually trigger a rush of serotonin and dopamine in your brain causing you to do something foolish. Auctions have been doing this for hundreds of years, I am not telling you anything you don’t know.

The Psychology of Advertising

SO.. Onto penny auctions. There is no such thing as a legitimate penny auction. To say that one site is legitimate is to say they are all legitimate. This makes my scam argument a bit shaky, technically it’s not really a scam. It’s a suckers bet. There is a difference. What is a scam is the advertising being used to promote these penny auction sites – that is a scam. I will get to that in a minute.

The penny auction sites are run on a very basic principle. They advertise an item for a fraction of the cost and place it up for auction. You come to the site and create an account and deposit funds to be used for your auctions. The terms of the auction say that the bid price will go up incrementally by a few cents as people bid, but every time a bid is placed the counter on the auction adds an additional few seconds or minutes. On many auctions you are expected to pay for the action of bidding, so to stay in the action it will cost you every time you increase your bid. This time will continue to reset as long as people are still bidding. You see whats happening here?

Example:

You see an XBOX 360 for $1.00 and the auction closes in an hour.You decide to bid $1.25, the cost of placing a bid is .75 if the bids are increasing by .10 increments you will have to spend about $3 just to be able to bid $1.25.So, imagine if you said the most you would pay for the xbox is $100!?!. If the bids are incremental at .10 and it costs you .75 to place a bid, that means that you would pay $749.25 just to stay in the auction. Add $100 more if you win. Congrats, you just paid $849 for a $299 Xbox.

The goal of the site owner is to get as many people bidding as possible on a pay per bid system. If there were 100 people bidding on that item and they all stayed in to $100 the site owner would make $74,925 on the auction for that Xbox 360. Please re-read the last sentence – the website owner would make $74,925.00 for selling an Xbox that he paid $299.o0 after the item was sold.This is an extreme example, but yes – its true – the profit margins are that much. It’s obscene.

I remember a few years back there was news about a site called Unique Auction.com they had an interesting model that was quite clever – to someone who admires a good ponzi scheme. The premise behind Unique Auctions was that you could buy a high dollar item for pennies if you were the only person to bid that exact amount. Essentially that was it – Im sure Im missing somethings but I only looked at it for a minute. So they would advertise things like a $60,000 Nissan with a starting bid of $300. So the goal was to bid a totally unique amount above the $300, and you should know that because its a car – each bid will cost you $10. Do you see whats happening here? Let’s say that the company was 100% legit , the auctions were real and real people won. The profit being made is still STAGGERING.

I am not anti-capitalist, not at all. I am anti-rip off and all these sites are obviously run by people who just don’t give a shit about ripping off people who are already hurting for money. They are no better than high interest check cashers, spammers,  fake pharmacies, hidden cross sell site, shady continuity programs, penis enlargement pills, diet scam, etc. Would you be surprised to know that all of those industries I just listed were the former industries of most of the penny auction owners? Its a natural progression. Profit off the hopeful with no remorse. Hacking a persons weaknesses should be no different than hacking a computer system. Its illegal to exploit a hole in a system and there is absolutely no difference. The FTC is the human anti-virus software.

There is NO doubt in my mind that the FTC is going to drop the hammer on a lot of these sites. I am sure the warnings are out there but many of them have been in the shadows. Recently I have seen them popping up in the sponsored links on MSNBC.com and other reputable sites. The majority of these sites are veiled corporations with offshore merchant accounts and address in the Nevis, Cyprus, Antigua and any other place with lax banking laws. Penny Auctions are basically the porn sites for the masses. Not that I am against porn sites, but the marketing is the same.

There is a crafty online marketing technique thats been employed heavily in the supplement and weight loss industry, also in teeth whitening and basically every information marketing scam. The happy Bob penis pills made  billions with this method. Create a fake news site and push the product. Its not new. People have been doing advertorials in print for a long time. The beauty of the online advertorial sites is that they are doing one thing that the print world is not. They are flagrantly violating FTC laws. Posting fake online testimonials is illegal – plain and simple. I ran across a fake news site pushing a penny auction and I was impressed, even the domain is convincing.  I will post a link here, but please do not click on this link and think that I was mistaken and this site looks legit. Its 100% bullshit and you will lose your money.

http://cbcnews9.com/2a/?t202id=881&t202kw=160×600-bid-2

I have spent too long writing this , but I do get some good scam traffic to this site so I wanted to put something out there for people wanting to know if Penny Auctions are a scam – the answer is YES basically, but this isnt the question you should be asking. What you should be asking is : Will I get ripped off by a Penny Auction? The answer to this is unequivocaly YES you will either get completely ripped off or you will end up paying 500x the price of the item you wanted. There are NO reputable penny auctions. There is NO WAY to get an item for pennies on the dollar. You WILL NEVER find a hidden gem on the internet fun by charitable philanthropists who want to give away high dollar merchandise.

If you want to bid in an auction, USE EBAY. Even on Ebay you run the risk of getting ripped off, but at least you know the reviews are legit and you have some recourse. If you throw your credit card down on a Penny Auction – the money is gone. You should just send 50% of it to me and I will make you feel better about not getting ripped off.

Auto Blogging : Killing the internet on auto-pilot

If you are here for the 3 free hours of SEO consulting, please read this post. The information is near the bottom.

Disclaimer 1: If I mentioned you in this post – I am not necessarily bashing you. I have a lot of respect for many of the big name “gurus” , you guys either are, or employ master copywriters.

Disclaimer 2: I omitted a lot of links because I don’t care to give any link love to these programs. If I sent them traffic, I may as well become an affiliate. I have not changed any names of people or programs so BE WARNED: If you seek them out with the intention of seeing what I am talking about, you could very well be hypnotized into buying the exact product I am railing on. Their copywriting is that good. Don’t come crying to me when it doesn’t bring you money in a wheel barrow.

If you know me, you know there are some things that I hate: Long scrolling sales letters, excessive up-sells, and get rich quick schemes. I generally don’t like information marketing (even though I have worked it). I – like you – wake up to daily emails that sound something like this (real email excerpt):

WARNING! Ben

You need to watch this video right now.

http://www.anotherautoblogscam.com

It will be taken down in the next few hours
and it’s the most important video you’ll see
all year as it reveals a secret $100m loophole
and how you can use it to cash in big time.

Like $221,555 per month!

Watch it now…

Here is the one that is at the top of my hit list right now. The main reason is that I get a version of this email every other day and the subject line ALWAYS says “ONLY 4 COPIES LEFT!” – I have added COPIES LEFT to my spam triggers..:

Yes folks, the auto blog. With the popularity of wordpress growing daily – because it is truly sent from God, we are starting to see a lot of systems being pushed by the snake oil gurus that claim to be : the next big thing, that involves no money down, no traffic, no list, no experience – hell you can do it from a rented library computer! If you read between the lines, what they are selling is an automated WordPress blog that scrapes the web looking for content and posts it. The latest adds the feature of cloaking text links from within the article to affiliate links, making it look like its a link to another one of your pages. Lord help us. Auto blogs are in a word, garbage. Well not garbage, but recycled junk. The premise is that “its so easy, you can make 1000′s of them with one click”. GREAT! Thousands of websites popping up that contain rehashed crap often un-credited to the original author. These sites add to the giant trash heap that is the internet.

The auto blogging systems are nothing but packaged plugins (which are free) in a semi slick interface, that automates the setup process of WordPress and installs the plugins. They do not address traffic, they do not get attention from search engines, they do not contain quality original content – they are worthless. Well, they are worth a few cents – and therein lies the premise. Create 10,000′s of auto scraping blogs that generate a few cents a day in Adsense revenue or possible a couple bucks off of a zip submit (an affiliate link that pays you a few cents when someone fills out their email and zip code – most often for a free ipod or gas card). Yes I know, new people join the web every day, but does this mean that we have to take advantage of them?

When are are on a lot of mailing lists like I am, you can tell when a new JV(joint venture) has been given out to the big boys because the sales letters start piling up. COME WATCH THIS VIDEO OF A FORMER CRACK HEAD WITH A 5th GRADE EDUCATION MAKE MILLIONS ON CLICKBANK WORKING ONLY 7 MINUTES A DAY FROM THE WEB BROWSER OF HIS 10 YEAR OLD CELL PHONE!”

.. I expect them. Look for the word “auto pilot”.

I just did search of my Gmail account for the word Auto Pilot and I returned 39 emails sent within the past week. Lets see who the names are on the list of senders:

• Rob Benwell – he has been the biggest offender lately with a program called blogging to the bank. I actually bought his info product because I was curious to see what his system was. It was actually a PDF followed by 10 up-sells to more expensive products that would make the information in his PDF easier. Now I am not going to knock Rob Benwell too much, for one reason. I enjoyed reading his PDF. He wrote a 60 page document with very clear directions on how to turn WordPress 3.0′s multi-site feature into a sea of auto blogs. What I appreciated is that he never said it was original, he didn’t offer a product, he merely offered instructions on how to do it, and where to get the free plugins. His report wasn’t too full of bad humor and fluff, I read it on my cell phone over my lunch break. I even went one step further and bought one of his up-sells that had to do with his people actually creating the blogs, that charged me an additional $35 and I saw that was going to be recurring. I was never contacted by his people, support emails went un-answered, I was billed and got nothing for it. So, that pissed me off. I canceled with Paypal and I have been giving away his system to whoever wants it. Rob also has a really annoying email frequency (every 5 minutes).
• Jonathan Leger – He has been around for a long time. He offers some decent stuff. I think he is the one behind the worlds best spinner which actually isn’t bad. Not knocking him, smart guy and gives a lot of good information for free.  Honestly, I should probably take him off this list. (but he came up for auto blogging in my Gmail)
• SENuke – Hell, I paid for SENuke for 2 years. I finally canceled my subscription because the methods it uses are completely dead and produce little to no effect in my line of work which is real SEO. Still, I think those guys worked their asses off on that product and I have no regrets spending $150 a month for 2 years. I liked it for auto creating accounts and the feature of giving a simple rating to how hard it would be to get ranked for a keyword, but all that does is check to see if a Web 2.0 site is in the Google listings. If it is they believe you can grab that spot. Helpful, but not $150 a month helpful. Again, not knocking them. They put a lot of work into that product and I am sure they will come out with other cool stuff.
• Brad Fallon – OK. So this is the reason I decided to write this post. I am used to getting the same tired sales letters from the info guys like Ryan Deiss, Amish Shaw, Kern (he’s a charismatic genius), Alex Goad (His black hat book introduced me to the Blackhat community – I don’t use black hat methods but I am an Exec VIP at one of the big Blackhat boards because there are some really smart white hat guys there too), Blinkweb, HalfAgain, and all the other guys. I usually just delete them because I don’t need that for what I do. Brad Fallon – the Stompernet Guru is a well respected guy. Stompernet , while not SEOMoz by a long shot, is still a cool company with lots of smart people. I was SHOCKED when I opened an email from Brad Fallon last week and the firs thing that jumps out at me is the words BLOG and CLONE. The email from Stompernet on October 19th has the subject line: “How to clone your blogs for SEO and profit (free webinar) … Oh No!.. It’s come to this.

Stompernet has created some cool tools, they have great training discs (I have all of them – I found them in a crate outside my church ), but this clearly looks like another system to cash in on WordPress multi-site functionality. The email reads: “

Hey, Brad Fallon here.

I wanted to let you know that our very
own Faculty Member Wilson Mattos
has developed a rocking app called
“*****” that he is going to be
promoting to the world soon.

The cool thing is you’re hearing about
it before most anyone else.

(It’s good to be an insider!)

Here’s what it does: it actually clones
WordPress sites with a few pushes of
a button:  content, plugins, everything

• Brad Fallon (cont.). I don’t have time to go to webinar sales pitches. I barely have time to go to educational webinars that I really need, but I think the subject of this email is pretty clear about what we would find. A Pitch-fest for a tool that adds a simple line of code to the WP-config file, maybe installs some plugins. I don’t want to speculate too much because if I am wrong, I don’t want to be THAT wrong, but I think I am pretty close. I usually just delete these kinds of emails, but so many people hold Stompernet in such high regard – hell, I have even put it on a resume – that I was really surprised. I responded with a simple one line email: “Oh Brad.. You too?
• Chris Freville recently sent out a sales letter that was pushing another auto-pilot scheme for traffic that would flood you with free traffic etc. etc. His sales letter was REALLY good, this was for an application by Russian Programmers (of course) – who would think that a couple programmers from Youngstown Ohio had cracked the Google code?!?! He had all kinds of clickbank screen shots (I still cant believe people fall for that), but what he did have was a nice HD video of himself (I think it was him) pushing his product. He had all the hot button words and his copy-writing was first rate. He touched on all the problems, related to every issue that a new marketer has faced, and really portrayed some major enthusiasm. I like to keep up with what people are up to and I am willing to shell out the occasional $37-$97 to find out. So I bought in. Here is the email that I received:
  Hey Benjamin,Congratulations on securing one of my beta tester copies of
  Stealth Profit Machines software.Here is the access link again:

  http://www.stealthprofitmachines.com/tha555hddn80prdx2010release/custprodmain.htm <– Yes folks that is the real link and I am guessing you can find everything I purchased there, but that would be immoral to download something I paid for and there are only 500 copies being sold

  You’ll notice there’s a number of extra goodies added to the
  download area!

  Why?

  Simple. I like to over-deliver! Keep a look out for even more
  bonuses to be added in the coming days.

  Cheers,

Chris

• Chris Freville (Cont.) – I downloaded the software, opened it up. The purpose of the software is to create auto blogs in seconds. What it does is login to your Cpanel account, install WordPress, install 2 common WordPress plugins, and install its own plugin. You then give the blog keywords and it goes out and scrapes article directories for articles that match your keyword. You associate a keyword with an affiliate link and it automatically inserts it into the article text but masks it so when someone mouses over it, it appears that they are going to another page on your site. That’s it. Is this a time saver? Sure, does this generate traffic? NO! His sales letter was ALL ABOUT TRAFFIC. This software does NOTHING to generate traffic.  I should also mention that when I tried it, I was inundated with error boxes which spawned so many times I had to ctrl-alt-del to kill the process. It only actually worked once, kind of, but I had to use it on a previously installed blog, and the best part : the articles were already loaded with the authors links! I’m not even going to touch on the fact that you are giving your hosting panel login information to a piece of software that calls home (contacts its owner). I should point out that 2 minutes after I bought it, a day before I even downloaded it,  I sent them an email:
  Hi Chris,
  No offense, but this product is not worth $37 to me. You have automated WordPress installation and a couple plugins – Your sales pitch is good, good enough to get me to fork over the $37 but I am pretty disappointed. WPpost robot or any number of other auto-poster plugins + a cloaker+ and SEO links = same thing.
  If you had included a multi user function to mass produce blogs and manage them from one spot, that might be a bit better.
  I know there is no easy button and the best way to make money is by designing a product like this and getting a good list, but I would be very appreciative if you refunded my money. I am not going to use this software for anything. Your letter is a bit misleading because you talk about traffic and nothing here does anything to generate traffic. Just a lot of junk blogs sitting online doing nothing.
  I would appreciate a refund. Thanks a lot!

  Ben

No response. Surprised? No.

I could continue on for days about auto-blogging and what an incredible waste of time it is, but I have to get back to my real job. I am a search marketing and traffic specialist for one of the fastest growing tech companies in the country. We produce valuable content, generate valuable links, and create sites that will not only make millions of dollars, but they will be here in 50 years. Auto-blogging is nothing more than spam – don’t fool yourself. The logic behind spam is that the conversion rate is less than a 10th of 1%, but when you are sending out hundred of millions of emails, that’s good money. Auto-blogging is really no different. You are flooding the web with useless content that had been rehashed over and over.

I know that some people go into auto-blogging with the idea of automating the tedious tasks and creating original content and syndicating it, but let’s call a spade a spade. It’s another bullshit “easy button” and like most things in internet marketing, it is not a way for someone with no online experience to make money. I love the fact that all internet sales letters mention that “aren’t you tired of throwing away your money on useless gimmicks and systems that don’t work?”.

These marketers are laughing at you. Seriously laughing at you. Money making schemes always boom when the economy tanks and it really hurts my heart to think about how many families are out there right now, out of work, struggling to pay bills and looking for ANY way to bring in some money. $37 is a lot to them – $37 can buy you a weeks worth of groceries if you are frugal. $37 can be a cell phone payment or a payment to the electric company.

There is nothing wrong with being an entrepreneur, its admirable. There is something wrong with making bold bullshit statements that a piece of poorly written software is going to change your life. If you do this, you should be ashamed of yourself. If you do this and are reading this, you are probably laughing at me too. I don’t care. I make a lot of money, the old fashioned way.

Unfortunately, the people who are searching the web for ways to make money are not going to find this blog post, my warning will not reach them. If anyone reads this blog post it will be other SEO pros or the narcissistic info marketers who are Googling themselves. There are a couple things I can do that might be able to help.

1. I will give 3 hours of completely free SEO coaching to any small business owner that would like some help. No strings, no up-sells, no catch. If you need some help with the fundamentals of getting your website found, I will give you 3 hours of my time. I can teach you more in 3 hours than you will learn from any $2000 seminar or b.s. marketing product.

2. I am going to contact my college friend at the FTC to look into the claims and statements being made by these guys selling these products. I know there was a bit of a scare a couple years ago with compliance issues and the use of fake testimonials, but I have noticed that people have gotten lazy recently. I have spotted a few clear violations.

3. I will speak to a very close friend of mine who is one of the countries top attorneys to see if there is a possibility of a class action suit against a couple of the major offenders.

I will close this with a true story from my past. I worked in the adult business from 1996-2002. A random occurrence landed me a job at Xpics publishing in Lake Tahoe, the dominant company at the time. Xpics was re-billing credit cards for $60 million dollars a month and had created an empire that was truly amazing. Back then you could put a banner for them on your site and get paid .27 a click for a raw banner click.

I had NO idea the amount of money being made by these companies – had I known I would be a multi-millionaire several times over right now, but the owner was REALLY good at keeping us in the dark. We were just having fun.

Anyway, this job taught me many amazing things and I witnessed – and occasionally was part of – the birth of some life changing technologies – the pop up console is a good example (read about Brian and his attempt to patent the popup). As soon as I figured out how much money was being made – and how underpaid I was -  I bolted, and went to a new company in Santa Fe where I was paid a much better wage ( i still have regrets every day that I didn’t know what I had at the time).

Part of my job was going to trade shows and conventions. The trade shows were identical to every other trade show except it was full of naked women, tanorexic GQ guys, and the old-school super shady pioneers of the business. The first trade show that I actually had a booth was IA2000 in Miami. I remember that trade show for several reasons, one being approached by this guy who said he had the next best thing for payment processing – gold, turned out to be e-gold which is a story all its own.

The other thing I remember was that there was an old couple walking through the crowds, they were much older than the other attendees – probably 70s. They looked really out of place, not nervous, but definitely overwhelmed. They came up to my booth to see what I was pushing, which at the time was a non-adult program called sports clicks that fell flat a few months later. I asked what they were doing there and they told me that they had just recently retired, didnt have a lot of money and had heard on the news that the adult business was making new millionaires every day. They said that they were thinking about cashing out their entire retirement account and trying to make money in the adult business, but they didn’t know how and were looking for advice. I could have done several things at that moment.

1. I could have pushed my program on them, would have been easy – get paid for clicks to my sports website, we even buy raw exit console clicks and garbage traffic.

2. Offered to help them come up with a viable plan on how to make their money, make money.

3. Told them I had a company of my own and would happily let them invest in it, then stolen their money.

4. Told them that this business was not for them, its much harder than it looks. Everything is easy except one thing: getting traffic and thats where the money is

5. Ushered them to the door and told them to get out and never come back.

I wish I chose #5, but I didn’t, I chose #4.  I told them all the various facets of running an adult site (back then bandwidth was REALLY expensive), and that I can pretty much guarantee that they will lose all their money- either slowly- or all at once. I talked to them for about 45 minutes and they seemed to listen. Unfortunately, that was a huge convention and the adult world is full of the best pitchmen on the planet – the online porn biz created  methods that are just now coming into play on infomercials and webmarketing. I would bet that before they got to the door, someone got to them and told them they had the “easy button”, just click it, sit back, and watch the money roll in.

The idea of the free SEO consulting occurred to me as I rambled off this post, I will put up a page with the details in the next day or so.

Have a great day.

Sidenote: It’s funny. I am scanning my email for a sample sales letter text to fill in at the top of this post and I see two emails, one from Jason Katzenback and one from Comment Kahuna – both have the same theme – GOOGLE HATES BLOGS! pay us some money.  Imagine getting this email 2 days after spending $500 to have some chucklehead tell you why Google LOVEs blogs?!?

Free Money Making Information. How to make money online. Free Marketing Ebooks!

Gotcha…

I am so tired of the information marketing crap-flood that lands in my email box every day. You know the emails I am talking about, you landed here because you are the ideal target. Actually, I bet I could get you to fork over $27 in 200 words or less. You think you are savvy, but I could. I wont, but I could.

Hey Ben,

its Joe LaDouche here. I just got off the phone with  a guy who also floods you

with obnoxious emails!

I have lost the use of my left arm from excitement.  and he showed me a new

system that he has been quietly using to make 100 million dollars an hour for

the past 6 months. I talked to him for 3 hours and he literally blew my mind!

The information he shared with me is so revolutionary, I literally wet myself

and saw jesus in the pee stains on my jeans! He let me look over his shoulder

while he showed me how he could manipulate Google with his mind while

simultaneously funneling PPC money from his competitors to make his ad

show up on the inside of peoples eye lids when they sleep!

He has a FREE video up but its only going to be there for 10 more seconds

so you better get over there quick before this information is gone forever.

Just between you and me, the last time this guy put out an e-book, he

caused the earth to spin off it’s axis and toilets flushed in the opposite

direction.! Get over there before your head explodes and you get evicted.

Seriously, I know that you have spent your kids college fund $97 at a time

but this is the real deal, I know I said that last time, and the time before, and

the time after, but I swear to God… This time I’m serious.

Oh No! My margins are getting

smaller and smaller I might

have to start sending emails

one character

per

li

n

e

In my brief jaunt into the information marketing world, I did learn some interesting things, for sure. However, what I also learned was that even people – with an otherwise altruistic outlook, found nothing wrong with selling people common sense and advertising 101 in an e-book or membership site. I used to work in porn back when it was fun, I make no secret of that. Porn was the original business of reselling intangibles, and yes, the marketing is manipulative, but there is a big difference between convincing someone that they might be able to score with a chick who is out of their league is a far cry from convincing someone that if they fork over $997, you will tell them something that will change their life.

I manage to get almost any of these systems for free. If you know where to look you can find website communities that will share the cost of these workshops, ebooks, etc. Everyone kicks in $10 an buys it. Honestly, I have felt ripped off paying $10 for a $1000 product. Not everything I have checked out is garbage, there are definitely some smart people out there. Ryan Deiss is a clever guy to be sure. I enjoy reading his stuff.

I’m not going to bash anyone by name. I will tell you something that you should know if you are a customer of that group of gurus. One of them, and this is the Gods honest truth, is currently working with a big community of black hatters to create a completely fictional internet marketing genius, make this character a guru, and pimp his product for him. You know who the guy is who is doing this, he is one of the biggest names in the business, but I’m not going to name him because I don’t need the headache and I don’t like informants. However, just know, that the next time you get an email from your favorite online marketing guru and they mention that some guy they know is coming out of the shadows to reveal some amazing new product – there is a distinct possibility that its a scam. This isn’t speculation on my part, this is something I know as FACT. I have the chatlogs to prove it.

There really isn’t a purpose to this post other than for me to vent a little bit. I was checking my email from my phone and deleting all the information marketing emails and its been a long day, so I was a bit more annoyed than usual.

Think about it before you pull out your credit card. If the price ends with a 7 – take a breath and think back to all the other information products and systems you have bought in the past, now think about how many of them made you a million dollars.

I hope this information helped you. Actually, come to think of it, I might just out this Guru for the scam they are about to pull off. I will tell you who it is… For just $27