Gamble your money away...

Where does one draw the line between gambling and competitive e-commerce transactions?

I am a big fan of auction sites like e-bay and variants like Amazon Marketplace. e-commerce channels provides a transparent option for the customers to drive down the prices of goods and services. It also allows small businesses and individuals to reach out to larger markets with minimal shoe leather cost.

I am also all for online gambling sites and casinos that does not make any attempt to mask what they are selling - you smoke cigarettes knowing the risk.

But what about sites that egg your gambling addiction on surreptitiously?

The business model of penny auction sites like www.quibids.com and www.swoopo.com relies on this aspect.

Users are encouraged to bid on items that usually get sold at 30 - 40% of their market value. However, you pay for each bid you make and the bid amounts go up at an increment of 1 or 2 cents.

Let us take the case of an iPad that gets sold for 100 USD. If each bid costs 60 cents for a user, quibids will end up making 6000$ from the sale. And the temptation of the lower price will invariably lure bidders in as they would not want to lose the "deal" for holding back on 1 cent!!

Now let us look at the process from a different narrative view...there is a single winner who got a very good deal. There are multiple bidders who bet on winning but lost out much smaller amounts of money proportional to the bid made. Does this sound familiar to what you did during that last trip to Atlantic City or Vegas?

Now let us push this thought stream a bit more - in a roulette or blackjack game, I know the bidders in the game...here I don't. In fact, I am not even sure if there are robots out there bidding the price up and waiting for me to jump into the pool for the "win". I know my odds in any game in the casino - my odds here are hopelessly skewed as neither the final amount nor the number of players are fixed.

A beautiful business model - and on top of that I doubt if any of these "quasi-gambling" sites pay entertainment or gambling tax that the casinos pay out to the Treasury.

I wish I had thought of it first!