There are several models for auction websites. Auction houses may make money by taking a cut of the selling price, such as demanding 10% of the final sale price. This is called a commission fee or final value fee. In these cases, the commission may not be owed if no one bids on the item or a minimum price is not met. Or auction houses require merchants to pay a flat fee to have their product put up for bid; these are called listing fees.
Another auction model is called the bidding fee model; this model is used by DealDash.com. Penny auctions allow products to be offered for very low asking prices by requiring customers to pay for their bids. The penny auction site is paid for by those who buy bids, and merchants listing items on the auction site know that all bidders are serious. Customers benefit from this system because it minimizes bidding wars and frivolous bids because people must pay for each of their bids. Penny auction sites reduce the problem with bidding by “bots” because the bids are not free. Some auction sites offer legitimate bidding functions that will issue new bids for a consumer up to a set list price, but consumers have a real chance of winning the bids because they are not bidding against a computer. Some penny auction sites offer a consolation to those who don’t win the bid by letting them buy the product at list price with a discount equal to the bids they entered. Sellers enjoy this feature because they do not have to pay to have their products listed or even relisted. This is why penny auction sites like DealDash.com can literally list something for a penny; the manufacturer simply needs to move the inventory and is using the penny auction site to do so for free. The auction site earns money by selling the right to bid on the item, whose listing price may actually start at one cent. The price will go up slowly in most cases because consumers have to be careful with their bids in the competition for the item. This is why you can actually get items for 5% of retail on penny auction sites.