Is MadBid a Scam?

‘Is MadBid a scam?’ is a question often asked by people when they hear about the site for the first time. It’s a natural one to ask. The prices on MadBid do seem too good to be true. 2p for a new Canon Rebel digital camera worth £999? Give me a break…but they are true. Fred11 really did pay 2p (the proof is in the link) for that camera. When is a site that looks like a scam not a scam? When it has an unusual business model, a model which most people don’t understand. Let me explain.

How MadBid loses money most of the time, but still makes money

Although MadBid loses money on most (70%) of its auctions, like that camera I mentioned, it doesn’t lose money on every auction. For a start, if it lost money on every auction it would have have gone out of business long ago (it has been running since 2008). If it loses money on 70% of its auctions it follows that it makes money on 30%. How does this all add up? As MB’s Director has explained in an interesting interview (no longer available), ‘The 30% of products we don’t make a loss on compensate for the 70%’.

Here’s an example of a profitable auction for MadBid: an iPad 3 closing for £187.96. Let’s calculate exactly how much dosh it raked in on this one, shall we? To do that, we need to do some simple calculations (skip the next few lines if you’re allergic to maths). In total, 18,796 bids were placed. 8 credits were used up each time someone bid. Credits bought with a valid promotion code cost 5p each.

18,796 * 8 = 150,368

150,368 * 5 = 751,840

751840/100 = £7,518.40

Subtract the retail cost of the iPad (£649) from the amount spent on bids (£7,518.40) and you have a rough idea of MB’s profit, ie £6,869.40. Not bad for a few hours’ work!

Because MadBid never spreads the word about the auctions on which it makes tonnes of money (why would it?), it’s easy to imagine they don’t exist, but it’s important to remember that they do!

Also worth noting is that when MadBid loses money, which, as we have seen, is often, there is a limit to how much it can lose, ie how much it paid for the item being auctioned, but there is virtually no limit to how much it can make. When it auctioned that iPad, for example, the most it could have lost, ie if the first bid won the auction, was £649, but as it turned out it made £6,869.40, more than 10 times the RRP of the item and could have made more!

My experience

I know that MadBid isn’t a scam because I have won and received hundreds of items from it in the years I have been a player. If you want to hear the experience of others, take a trip to the MadBid forum. The forum members like to moan a lot, but they are in no doubt about the site’s legitimacy. Heck, they’re some of its best customers!

Key points

  • Some auctions do close for ridiculously low prices and these are the ones that get advertised, but not all auctions close low.
  • When prices do end high, MadBid makes a lot of money.
  • Although there is a limit to how much MadBid can lose per auction (ie how much it cost it to buy the item up for grabs), there is virtually no limit to how much money it can make.
  • In the time I’ve been a member MadBid has sent me over two hundred products, so for me there’s no question of it being a fraud.

Had an experience with MadBid you’d like to share with others? Convinced it’s a sham operation? Just feel like venting your feelings on the Internet? Head to the reviews page.

UPDATE: YouTube video now available

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