Penny Auctions: A Profitable Business Model

The penny auction business has grown in popularity during the last four years and the reason is due to the fact that the websites are an attractive and profitable business model.

As web users spend more time online, e-commerce spending continues to grow. This is reflected in the two following trends:

1. More people spending more time online results in increased experience and trust with the web

2. The economy has forced consumers to get smarter online when spending their income and salary

Data gathered using Compete has found that the monthly visitors to auction websites continue to grow, reaching more 13 million unique visits per month, with the average visits in the third quarter of 2012 reaching 11 million unique visitors.

Traffic data collected is based on the leading penny auction companies. Furthermore, online revenue is expected to surpass more than $630 million in 2012, with 62% CAGR for the period 2009 - 2012.

This data correlates well with studies performed by Softmedia (http://www.softmedia.biz/) in 2010 based on web traffic volume. Based on the research, a site with 100 unique visitors can deliver 1-4 paying bidders, with an average order value of $100 within the customer life time (counted as interval between first purchase and last visit). The data also found that a 20-30% sign up rate for unique web visitors to registered players and a returning visitor to registered player sign up rate of 50%.

These conclusions are based on real data and without advertising expenses. We estimate that permanent advertising support can improve the average customer life time expectancy and income by as much as 100%.

Providing operational costs do not grow as fast as income, the revenue percentage will be much higher. The expected revenue is 30-50% from the total income due to advertising costs, prizes and operational expenses.

However, being able to handle high volume traffic with simultaneous bidders is not an easy task and to be successful requires a powerful penny auction software system. The more powerful the software, the faster your site will run when handling high volume traffic. Getting this right is THE most important step when it comes to launching a penny auction website. If this decision is taken post-launch and your website suffers from slow load times, web visitors will leave and bid on your competitors.

Resources (http://www.pennyauctionsoftware.biz/):

Penny Auction Profitabilityr
Profitability Continuedr
Penny Auction Traffic and Performancer
How Much Profit Do Auction Websites Generate?

To learn more about Penny Auction Software, please visit http://www.softmedia.biz/penny-auction-software.