Absolute Beginners Guide to eBay (4th Edition)

It's important that you know all about the item you want to buy before you place your bid. It's also important that you know how eBay's bidding process worksor you could end up paying too much, or (even worse) not enough to win the auction!

Deciding How Much to Bid

Determining how much to bid on an item on eBay is no more complex than determining how much you'd pay for an item at a flea market or garage sale. You should bid an amount no higher and no lower than what the item is worth to youand what you can afford. It doesn't matter what the current bid level is; you should make your bid in the amount of what you're willing to pay.

Note

However, that doesn't mean you'll actually have to pay the full amount that you're willing to pay. Thanks to eBay's automated bidding software (discussed in the next section, "Understanding Proxy Bidding"), the price you pay will only be as high as necessary to beat out the next-highest bidder. If you bid $40 but the next highest bidder bid only $20, you'll win the auction with a $20.50 bidjust high enough to beat the $20 bidder.

And you should make that $40 bid even if, at the time, the current bid is only $1. Now, you might think that if the bidding is at the $1 level, you should bid no more than $2 or so. This isn't the case, again thanks to eBay's automated bidding software. If the item is worth $40 to you, bid the $40and let eBay's proxy software handle the mechanics of the bidding process.

How, then, do you determine that an item is worth $40or $4 or $400? The key thing is to never bid blind; always make sure you know the true value of an item before you offer a bid.

This means that you need to do a little research before you make a bid. If you're bidding on a piece of new merchandise, check the price in a catalog, at your local retailer, or with an online retailer. And you can use eBay's search function to search for other similar items, and see what they sold for. (Remember to search completed auctions, so you can see the final selling price.) You don't want to pay more than the going price, as determined by similar eBay auctions.

"Mike Sez"

Understanding Proxy Bidding

The automated bidding software used by eBay is called proxy software. Actually, it works like an automated robot, making all your bids for you, based on the maximum amount you're willing to pay. When you're bidding, eBay's proxy software can save you time and help ensure that you get the items you want without overspending your budget.

On eBay, proxy software operates automatically as an agent that is authorized to act in your placebut with some predefined bidding parameters. You define the maximum amount you are willing to bid, and then the proxy software takes over and does your bidding for you.

The proxy software bids as little as possible to outbid new competition, up to the maximum bid you specified. If it needs to up your bid $1, it does. If it needs to up your bid $5, it doesuntil it hits your bid ceiling, when it stops and bows out of the bidding.

The proxy software bids in the official bid increments used by eBay. For example, if the next bid is $0.50 higher than the current bid, the proxy software ups your bid $0.50. In no instance does the software place a bid higher than the next bid increment. (It's pretty smart software!)

Of course, because all bidders are using eBay's proxy software, what happens when you have two users bidding against each other? Simpleyou get a proxy bidding war! In this instance, each proxy automatically ups its bid in response to the last bid by the other proxy, which rapidly (seemingly instantaneously) increases the bid price until one of the proxies reaches its maximum bid level.

Let's say one proxy has been programmed with a maximum bid of $25, and another with a maximum bid of $26. Even though the current bid level might be $10, the bids rapidly increase from $10 to $11 to $12 and on to $26, at which point the first proxy drops out and the second proxy holds the high bid.

Bid Increments

To better understand proxy bidding, it helps to know eBay's bid increments. The bid increment is automatically calculated by eBay based on the current price of the itemthe higher the price, the higher the bid increment, as shown in Table 8.1.

For example, if the current bid on an item is $2.00, the bid increment is $0.25which makes the next bid $2.25. If the current bid on an item is $30.00, the bid increment is $1.00which makes the next bid $31.00. You see how it works.

Proxy Bidding, by Example

Let's walk through a detailed example of proxy bidding. The process is totally automated, and goes something like this:

1. You see an item that has a current bid of $100, and you tell eBay that you're willing to pay $115 for it. The $115 becomes your maximum bid.

2. The bid increment on this item is $2.50, so eBay's bidding softwareyour proxybids $102.50 in your name. This becomes the current high bid.

3. Another bidder sees this item, and bids the next bid increment (as specified on the item listing page), $105.

4. Your proxy sees the new bid, and ups its bid automatically to $107.50.

5. A third bidder sees the item, and enters a maximum bid of $150. In accordance with the current bid increment, his proxy enters a bid of $110.

6. Your proxy responds with a bid of $112.50.

7. The third bidder's proxy responds with a bid of $117.50, which is higher than your maximum bid of $115.

8. Your proxy drops out of the bidding, and eBay notifies you (by email) that your bid has been surpassed. (If the auction were to end right then, the third bidder would win the auction with a bid of $115. Even though he specified a $150 maximum bid, the bidding never got that high.)

9. At this point, you can place a new maximum bid for the item, or you can throw in the towel and let the new bidder have the item.

Proxy Bidding Advice

The nice thing about proxy bidding is that you can engage in a fierce bidding warand never get your hands dirty! The proxy software does all the dirty work for you, and just notifies you of the results.

Note

When you're placing your bid, realize that just because you set a maximum bid price doesn't mean you'll have to actually pay that price. The proxy software works in your favor to keep your final price as low as possible; don't assume that just because you specified a price, the bidding will always rise to that level.

Also feel comfortable that the proxy software will never exceed your maximum bid price. It just won't happen; the software is smart enough to know your limits. And by bidding your maximum right away, you guarantee that you won't get carried away and pay too much at the end of a heated competition. Remember, if you lose an auction because the bidding goes higher than your maximum, you didn't want to pay that much for the merchandise anyway. Get comfortable with thatand be glad the proxy software helped you stay within your limits.

Of course, some bidders don't like proxy bidding. It is true that if two or more people are bidding for the same item, the bids can automatically (and quickly) rocket up until they max out. For this reason, some bidders prefer to bid the bare minimum on every single one of their bidseffectively defeating the purpose of the proxy software. Of course, if you choose to operate this way, you have to be a lot more hands-on with your bidding, essentially checking back on all your bids as frequently as necessary to ensure that you always end up on top.