Live auctions with online bidding - the problem with split increments

The Matrix

For thousands of years, the auction business has generally worked the same way. Items offered are assembled in a central location, bidders show up in person, an auctioneer calls the bids from the crowd, winning bids are awarded, items are paid for and transactions are done. That is, until the Internet popped up and dumped hundreds, if not thousands of new twists and facets into the mix of how auctions are conducted.

There is one twist I'd like to focus on in particular today. It's one that has appeared more than a few times now at Burns Auction & Appraisal as the source of confusion and sometimes hurt feelings. While some of the signs of this issue have often popped up for us, it wasn't until recently that we've been able to identify and decipher this one particular quirk in running a live auction with an online simulcast. 

To start - let's first get some background out of the way. We conduct regular auctions at our auction gallery with both live and online bidding. The live bidding is the traditional sort of bidding most folks are familiar with. The online component is what has introduced so many bidders around the world to us. 

We typically post our auctions to online bidding sites LiveAuctioneers.com and AuctionZip.com several days before auction day. Each lot includes photos and an item description. Bidders can enter bids ahead of time on items, and when we get to that item on auction day in real time, those bids pop up on a computer screen and an employee executes the bids against the people in the room. Online bidders can also bid in real time during our auctions. When we get to lot 10, for example, they see lot 10and can see where the bid is at, and then place their own bid which is then sent through the net to us, and announced by our employee working the online terminal. 

Bidding online in real time looks like this. This is an auction being run on LiveAuctioneers on  Nov. 7, 2013:

For each lot, the bidding runs fairly smoothly. Bidders in the room can bid on an item and so can the online bidders. The high bid is still the winning bid - with one unusual exception - and herein lies the quirk we have run into from time to time.

We've found that the online auction platforms that we use - AuctionZip Live and LiveAuctioneers - essentially do not allow for split-increment bids often held up by bidders in the room. Here is a simple example:

Bidder 1 puts in a bid of $10 online on an item before the auction.

The auction starts, and the item opens at $5 online with a bid from Bidder 1. 

Bidder 2, live in the auction gallery, asks the auctioneer to split the bid - that is, to bid $7.50 instead of $10. 

We take that $7.50 in the room - but can't enter a $7.50 online. The next available online bid option is $10 because either the system doesn't take a split bid, or makes it very difficult to do so. We enter the floor bid of $7.50 online as a bid of $10 online because the computer system has to be kept up with the right bidder (floor or net) but won't take $7.50, but instead will only take bids in set increments such as 5, 10, 25 etc.

The problem with this is that the person who bids $10 online doesn't win the item. It sells to the floor at $7.50 because the $7.50 bid from the floor had to be entered as $10, thus kicking the internet bidder's $10 high bid out. 

The result can be a confused online bidders who wonder "If the online system said the item sold at $10, why didn't I win it since my high bid was $10?"

Even with a bidding platform that does allow split bids, auction increments are often set before the auction. For instance, we use $5 bid increments online up to $100. If we took a floor bid of $7.50 and could enter it, the next available online would be $12.50, which would still keep a $10 online bidder from winning the bid against a $7.50 floor bid.

Here is a real-world example. A bidder put in an Internet bid of $50 on an item online. We had her online bid at $45, but then received a split increment bid in the auction house of $47.50. Our terminal operator, unable to enter a split bid in the system, entered the floor bid on the net at $50. That kicked out the $50 bid the internet bidder had put in, even though the high bid was only $47.50. The item sold for $47.50 and was entered in our books as selling for that price, but still, it showed as sold $50 online because of our inability to put in a split bid. Here is the readout from AuctionZip. The blacked out bidder is the online bidder:

At the moment, it isn't clear that there is a perfect solution to this issue. The consequence is that on occasion, items sell for a split increment's amount below their high online bid. Thus, an item with a $10 bid online might sell for $7.50 in the room, an item with a $50 online bid might bring $47.50 in the room. Bidders can become confused or upset when they don't win the item they bid on.

There are several possible approaches to this issue. Of course, a quick, feasible technical fix would be best. We could also limit split increment in-house bids, but our bidders are fond of splitting the bid and it would be unfair to them to prohibit this outright. 

Thus, until an efficient fix is made, the split in-house bid can beat the online bidder that has a slightly higher bid. 

We continue to advise all of our bidders to bid in person if possible. It is the most fail-safe way of getting bids through. We also accept absentee bids. 

If you can't make it in person - we always encourage bidders to bid in real time on our auctions. That way, you always have the ability to bid "just one more time" if you get outbid.