DealDash is a bidding fee auction site. Along with similar sites, it has been criticized by consumer groups for being costly to users and having similarities to gambling. In most cases, bidders spend substantial sums of money without winning anything.
History
DealDash was founded in 2009 by William Wolfram, a 16-year-old Finnish entrepreneur, who had lost $20 bidding unsuccessfully for a MacBook on an earlier penny auction site. Wolfram had generated approximately $500,000 in affiliate sales a year earlier buying popular YouTube videos for $50, borrowed from his mother, then collecting revenue from affiliate marketing links he would add. He used the money he had saved to start DealDash. The company's business model, as with prior sites, is that customers enter a bidding process where they pay for each bid on an item, regardless of whether they succeed or not. Each bid marginally increases the price of the item until the end of the auction, at which point the item is sold to the final bidder. DealDash differs from predecessors mainly in that losing bidders are given an option to apply money they had spent unsuccessfully bidding on an item towards purchasing the item at a posted retail price. DealDash obtained early financing from a youth program of Tekes, a Finnish public funding agency. It later raised approximately $1.5 to $2 million in venture financing from the Chief Executive Officers of Rovio Entertainment and Carbonite. The company grew quickly, quadrupling its revenue yearly for its first three years. As of early 2012 it was earning $1 million profits on $44 million revenue. By 2013 it had 67 employees, yearly revenues approaching $100 million, and was ranked as Finland's second-most visible startup based on attention from media, bloggers, influencers, and users. According to Socialbakers, DealDash was the most talked about brand on Facebook's "People Talking About This" during a period in May 2013, and had the highest engagement rate that September. In 2013, when Wolfram was still 20 years old, DealDash moved its headquarters from Helsinki, Finland to Minneapolis, Minnesota. In August of that year, the company also created the site DealDashReviewed.com to house and aggregate reviews and testimonials from their customers.
Business model
DealDash, like other auction sites, has been described as a gamified approach to e-commerce. To participate, registered bidders first buy "bids" priced at $0.60 each, that they may spend bidding on auctions. Standard auctions begin with an opening price of $0.00, with every bid placed increasing the price by $0.01 and removing one paid "bid credit" from the user's balance. Bidders may choose to place single bids, by manually clicking the bid button, or through an automatic bidding tool called the "BidBuddy". An auction clock restarts from a maximum of 10–30 seconds, depending on the auction, every time a bid is placed. If no new bids are placed before the clock runs out, the last and highest bidder is declared the winner of the auction.
Criticism
DealDash has been criticized for offering poor value to customers and for making disclosures only in fine print. Penny auction sites, including DealDash specifically, have often been criticized for failing to disclose or include the cost of bids in what customers actually spend in total to win a product. In a conventional auction, bids are based on prices that participants are willing to pay, with the item sold to the final bidder within a set period that bids the highest price. This usually allocates the item to the person who is willing to pay the most. By contrast, penny auctions award items to parties that are persistent or lucky enough to place the final bid, with money raised primarily from the cost of bidding rather than the final price of the item. In most cases, users spend substantial sums of money without winning anything. DealDash and others have been compared to gambling by consumer groups. According to Consumer Reports, the "buy it now" prices can be significantly higher than the same products on Amazon.com. Unsuccessful bidders not using the option lose the value of the bids placed. A company spokesperson says DealDash generates significant business from bidders who choose to buy items after losing, with hundreds of orders processed daily. Consumer Reports also reported that many “luxury” brands touted on Deal Dash are non-existent beyond the website and their trademarks are registered by the owner of DealDash, through another company that he is associated with, namely Galton Voysey. Consumer organizationTruth in Advertising reported that a DealDash television commercial shows "Roseanna" winning a $349 kitchen mixer for "less than $25". Small print explains she bid 761 times on that mixer, which cost her over $456, plus the $25 "price" she won it for. This means she paid closer to $481 - well over the stated $349 retail price. Both Truth in Advertising and Consumer Reports noted that DealDash's own terms of service tell users that they are likely to spend more than the retail cost for products and are unlikely to save money using the site.
