Outbid in Ambush

By Leonie Schulze

November 29, 2018 – Sniping. This is a term we usually encounter when we read news stories about combat and war. However, it has also been used metaphorically in the auction world for quite a while now. In this context, it refers to the act of placing a bid just before bidding is scheduled to close. We are talking about split seconds here. You strike the deal before it is too late. This strategy has been used ever since the first online auctions were held, particularly in online auctions that end at a fixed time. In the beginning, bidders still had to do this manually, but it did not take long for corresponding software to be put on the market, which would take this laborious task off of their hands.

Live bidding and online auctions have become the norm in the coin business.

Live bidding and online auctions have become the norm in the coin business.

Auction Sniping also causes problems

This phenomenon sparks all sorts of reactions: anger, delight, annoyance, indifference. Essentially, auction sniping is not inherently bad. These programs have made bidding a lot more comfortable. As soon as you have entered your personal maximum bid, you can lean back and go about your daily routine. In the eyes of those who use sniping software regularly, it is even considered a blessing. The fact that this can often lead to a fairly low-priced winning bid is certainly something they enjoy and which is much easier than the old-school bidding wars resulting in prices skyrocketing in the days and hours before the end of an auction. However, this only works if there are not dozens of other bidders who have also resorted to using auction sniping software and thus cause the price to increase drastically within the last couple of seconds after all.

From the coin dealers’ standpoint, there are two problems that go hand in hand with auction sniping: on the one hand, lots are often sold at much lower prices if bidders use sniping software than if they engage in traditional bidding wars. On the other hand, it has come to our attention that in several instances bidders refused to pay the price sniping software had entered on their behalf. If several bidders use these programs as “auction representatives” and have individually added fairly high maximum bids, but then stop paying attention to the following price development, a virtual competition between snipers can be the result. Hence, the hammer price can potentially be much higher than regular bidding could have achieved. A word of caution is in order: anyone who makes use of such programs has to be aware of the consequences. There is a good chance the maximum bid you enter will actually be reached, especially if other bidders are using sniping software as well. It is possible that the price of a coin with a starting bid of 100 euros increases to 700 euros within seconds. If that is the case, you have to be willing to pay the respective price.

Possible countermeasures

Numerous auction houses have implemented their own tools in the meantime which have essentially made the practice of sniping impossible. The easiest option, which a lot of coin dealers already make use of, is to have a lot remain open for as long as people are bidding on it. This allows those who are actively following the auction to adjust their bids according to the price development.

Another option is for auction houses to install so-called Captcha software on their websites. This program asks users to type in a specific sequence of letters or to solve little picture puzzles in order to prove they are, in fact, not a robot. As sniping software appears incapable of bypassing or solving these puzzles so far, the mere attempt to use it for coin auctions becomes irrelevant. However, Captcha programs considerably delay the placing of a bid and thus could result in a human bidder not winning a lot should his fingers move too slowly.

Other auction houses have invented their own tools that aim at making the work of sniping software suppliers more difficult. Heritage Auctions, for example, offers their customers a so-called “Bid Protection”-function. It allows for bidders to determine the automatic increase of their bids by up to three increments, which are added if and when they are outbid. This system works just as quickly as sniping.

So far, auction sniping has primarily been discussed in the context of Ebay auctions. But it has definitely found its way into the world of classical numismatics. We cannot stop the digitalization and automatization of auctions. At the same time, however, we should not lose sight of a certain human touch and moral code. If you place a bid and win the lot, then you have to pay for it, too. No matter if you clicked on the “enter bid”-button yourself or if you had a program do it for you.

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