Company pitches a model that provides an incentive to place bids.
Picture this: you’re bidding in a domain auction. It goes on for hours, and you end up capitulating to some other domain investor. But you don’t walk away empty-handed.
That’s the idea behind GBM’s auction model.
The company’s auction technology incentivizes people to bid in auctions by giving them a bit of money for each bid they place. The incentive is calculated based on how much they outbid the previous bidder, with a higher percentage for bigger outbids.
For example, if the current bid is $100 and you bid $110, you might receive a $1 incentive when (if) you are outbid. If your bid increment is much higher, say $200, you might get a $20 incentive for your bid. (Marketplaces can customize the incentive structure.)
This incentivizes bidders to immediately bid up to the value they think the asset is worth; if they end up being outbid, they get a larger payout than if they bid in smaller increments.
I know what you’re thinking: isn’t there already a lot of shill bidding in domain auctions? Do I really want people in an auction who have no intention of winning?
It’s a fair argument. And certainly, this auction model will bring out many people who aren’t in it to win it.
But GBM’s model ensures that bidders actually pay, which could cut down on this a bit. It’s currently underpinned by smart contracts and blockchain technology. All bids are instantly funded from wallets and returned when someone is outbid. So when someone wins an auction, they have already paid and can’t walk away.
To date, GBM has focused on NFT auctions. However, it wants to partner with domain marketplaces to bring the technology to new audiences.
A big issue right now is the requirement to use crypto. Hugo McDonaugh, GBM co-founder and CEO, told Domain Name Wire that the next step is to enable fiat payments via pre-funded accounts. By making a deposit with a marketplace, all bids can be instantly funded to guarantee payment. In the future, GBM will try to work with payment providers who can handle real-time payments that don’t require deposits.
GBM has run over 70,000 auctions. It says its data show that final auction prices are typically 150% to 200% of what they would have been without the incentives.
That sounds great for sellers. Buyers might have a different opinion.
This video explains GBM’s model. I’m curious what readers think.
I think it should be tested, however it makes me think about the incentive for a seller to place fake bids as a buyer to try and get second place. Therefore get a higher price, and recoup part of the auction fees.
so it will be interesting because of the transparent nature of the blockchain, to be able to see all bids and wallets, and spot any collusion…so not just the auction platform can audit.. ie halverez..
This is what makes it a TRUE auction. If a seller bids in the auction, they run the risk of actually winning and there is no way for them to back out or not pay, so the penalty is real. In fact, you could say that if an owner is bidding in an auction for their own domain, they are in essence PAYING to apply a reserve to the auction. This fact, in my opinion, implies even better price discovery. True price discovery would price an item at the highest value it has to any individual, regardless of all other interested or disinterested parties.
So if the item has a higher value to the seller than any potential buyers, then the seller will have to PAY to keep the item. The fee they pay goes partially to the house and partially to the other bidders, compensating them for their participation. The closer they bid to the final price, the more they get paid. The fast they bid (in terms of number of bids, not time necessarily), the more they get paid.
In the current system, like GoDaddy auctions, if the domain gets renewed or the winning bidder doesn’t pay, it is a total loss of time for participants. In the bid-to-earn scenario, all participants are PAID based on their relative contribution (how fast and how close to the final price they bid) to the overall auction.
People with strong knowledge of domain values and current market conditions could make a significant living just driving price discovery by bidding in auctions, even if they are not WINNING those auctions.
This system, because of the “bonded” payments and true auction nature, eliminates 100% of auction fraud in my opinion. I have spent a great deal of time thinking about this and I do not see any way for someone to game the system or defraud other bidders.
This system will create, over time, incredible market and price efficiency. Closing the spreads between wholesale prices and end user prices.
Interesting perspective regarding sellers bidding in the auction. I think it would need to be made transparent if this were the case (and by transparent, I mean very obvious when the seller bids).
Although in theory you’re right about “True price discovery would price an item at the highest value it has to any individual, regardless of all other interested or disinterested parties” I think all of us who bid in domain auctions admit we go over our budget when someone else is bidding, merely because we realize someone else places a similar value on the domain as we do.
Hey brother do you have a tldr version. My bad but adhd issues bro
The seller is the one who pays the incentive out to bidders who are outbid, which means that there is no benefit to the seller placing ‘fake’ bids.
Throw in a box of Cracker Jack with each of my bids, and I’m in!
But seriously; as far as paying bidders to bid, this is a ridiculous idea.
On the other hand, I’m with Andrew insofar as the iron-clad protection against shill bidding being a winner. A big winner. Frankly amazing that no (at least major) sales platform hasn’t instituted such bid assurance.
I think Sav.com has something close to it…it preauthorizes your bids on a credit card.
SCAM HANK ALVAREZ 2.0
Thank you to Andrew Allemann for writing this article about our auction model, we appreciate your time and insight!
It speaks volumes that Andrew Rosener has personally commented on this article to express his enthusiasm for the Bid-to-Earn auction model!
We invite any domain investors and traders to try it out for themselves on our platform: https://gbm.domains