TUESDAY,27 January 2015   THE DOMAINS
According to the news from Domain .cn 1(1)on January 27th,Joseph Peterson explores the problem of shill bidding at Flippa.

Flippa BidAre you paying more than you should to buy a domain name at auction? That might be the case at some online venues.

Throughout 2014, it was possible to purchase fake bids and endorsements for Flippa auctions from a website explicitly offering shill services for sale in broad daylight. Even those of us familiar with the practice of buddy bidding, perhaps concerned about employee participation in auctions, or who have suspected that more formal shill bidding networks operate behind the scenes should be surprised by just how brazen these folks were … and by how long they have been able to get away with it.

That site was FlippaBid.com. At some point between December 16 (when I first learned of FlippaBid.com) and December 19 (when I pitched this article to Andrew Allemann), that website went missing. Possibly, someone finally complained and got them shut down. I say “finally” because DomainTools.com has preserved a revealing screen shot from March 17, a full 9 months earlier. Click here to see FlippaBid.com in action.

You’ll see a website with better graphic design than many legitimate businesses can boast of, suggesting that this was a commercially viable operation for 9 months. My hunch is that they began placing fake bids and comments at Flippa before they thought of formalizing their services with a website. In fact, their site claimed that they had been providing “bidding services” for 3 years, which would date their inception somewhere in the vicinity of March, 2011 … roughly 4 years ago.

$5 was enough to buy a fake bid below reserve. $10 would get you bogus bids above $200, placed using a Flippa account verified by credit card. If you wanted to provoke a bidding war above the reserve, then bids cost $20 – $25 (depending on desired bidder credentials). Rounding out its menu of 6 service “packages”, FlippaBid.com offered endorsements in the comments section below your Flippa listing.

flippabid-offer

FlippaBid.com boasted of the breadth of its operations:

We Have 50 Eperienced Flippa Bidders [sic]

Blog post titles like this one show that they appreciated clients’ need for security and privacy while scamming buyers:

Your Safety and Secrecy is our first Preference

They showcased real professionalism:

We deliver within 1-5 hours with 100% risk free guarantee

Not only did FlippaBid.com offer refunds in the event that one of its shill bidders was banned or suspended; they laced their website with testimonials and were set up to accept multiple payment options for your convenience.

While FlippaBid.com went the extra step of creating a website for its service, others have offered bidding services on sites like Fiverr.

Flippa.com, a prominent auction platform for websites and domains, has long been criticized for its susceptibility to shill bidding. There are high bids that stop just short of the reserve price (thereby facing no obligation to pay). There is frequent/early bidding, which dramatically increases auction visibility. There are Parades of fervent comments from assorted individuals (many of whom are later banned or suspended) endorsing whatever is for sale. (For the record, I’m not implying that any given auction involves shills.)

Flippa has taken some action to cut down on such practices. Kevin Fink, Flippa’s Director of Domains, said that Flippa has

suspended and severed ties with some of our most successful (and for us, profitable) sellers

That’s important. And commendable, as far is goes. To be absolutely clear, shill bidding “is strictly forbidden on Flippa“. Yet when Flippa does close down an account due to abuse, the company is unlikely to shine a spotlight on past fraudulent bids – bids that may have inflated purchase prices and which certainly diminished the visibility of concurrent, legitimate, paid-for listings. As long as suspicious cases are quietly reported to Flippa management and (at best) quietly shut down, the larger issue of ongoing shill bidding remains unaddressed.

Why does Flippa attract shill bidders, “buddy bidding”, and potentially fake comments?

Unlike most domain auction platforms, Flippa charges a base listing fee and pushes customers toward upgrades costing as much as $349 per auction. Standard Flippa listings have literally shrunk so that these days they’re harder to spot on the screen! Flippa gives out these $349 upgrades to some sellers at no cost and frequently includes their listings in promotional emails; so there’s considerable extra pressure to compete for visibility.

That leaves sellers with two options for boosting on-site exposure: expensive upgrades or bids. Since buyers have an incentive to wait until the last moment, sniping auctions or negotiating after they’ve ended poorly, even attractive listings may not receive bids until the opportunity for extra exposure has passed. Therefore, soliciting bids from friends or even buying them is a tempting proposition.

Going the legitimate route, $49 would buy a Flippa customer a few hours of exposure as a “Home Page Listing” until their domain is knocked off by the next person paying. But a mere $5 spent at FlippaBid.com would have bought a $200 bid, visible to everyone for a full 30 days and archived as a permanent sign of “buyer” interest.  That same $50 could have bought 10 bids from 10 unique bidders, all the way up to $200.  Or else 5 bids from 5 distinct bidders up to any amount your heart desires – say $266,000!

At the moment I’m writing this, only 8 auctions at Flippa have 20 or more bids. That means $100 spent at FlippaBid.com would be sufficient to keep your listing in the top 8 auctions for a full month. Why pay $349 for Flippa upgrades (e.g. a logo or a single tweet) when that same $349 can buy enough bids to keep your listing at the very top of the “Most Active” pile for 30 days?

To be fair to Flippa, the company has taken some steps to improve marketplace transparency. For example, you can see how much a bidder has transacted through the platform; and Flippa also marks commenters as banned if they are ever removed from the system.

Still, without bidder aliases and an archive of past results, it’s hard to connect the dots.

Verification remains weak. Only a phone verification is required to place comments (which can be easily achieved with a Google Voice number). A credit card pre-authorization is required to bid above $200. Such credit card verifications don’t stop shills. GoDaddy Auctions recently essentially admitted that such verifications aren’t enough and added additional verification requirements to place meaningful bids.

One big step Flippa could take is to assign bidder aliases to each bidder, much like NameJet does.

The sad truth is that marketplaces benefit from shills. Fake bids inflate final sale prices. Fake bids give the impression of bustling activity and insatiable buyer demand, leading to more revenue from seller listing fees for any site that steers sellers toward lucrative upgrades. In both respects, fake bids drive profits. Until public pressure builds up to the point that the cost of neglecting shill bidding outweighs the benefits of allowing it, no auction platform has much motivation to invest resources in quashing its own bids.

We might be getting near that tipping point, and not just at Flippa.

Domain Name Wire posed a number of questions to Flippa prior to publishing this article. Here are responses from Kevin Fink, Director of Domains at Flippa. You can reach him at domains (at) flippa.com

DNW: When did Flippa become aware of FlippaBid.com and what actions did it take to shut it down?

Fink: Due to the legal component involved in the shutdown of FlippaBid, I’m unable to comment further than to simply say — Our team cracks down on these individuals and sites, on the daily, including sellers on gig-related sites that push this kind of service. It hurts everyone involved, and we’re keen on hammering out ways we can eradicate this sort of behavior entirely. Is it possible? I’m not sure; otherwise an auction space would have figured it out by now, but I will address what we are going to do about this — and other verification / security measures — in this space, and in future posts to come.

DNW: Do you believe that the way Flippa highlights “popular” domains or sites incents people to request friends/others to place below reserve bids or post comments?

Fink: No more or less than any other outlet. All auctions are subject to this kind of behavior, and everywhere you look. What matters most to me and my day-to-day, is how we’re handling it on our end and what more we can do. How can Flippa become the most secure and trusted auction-based marketplace? We’ve made great strides; I do appreciate Joseph acknowledging that things have improved, and rightfully so. While this doesn’t dissuade our detractors and skeptics, the focus is now on upcoming changes we are aiming to implement en route to further fighting and hopefully eradicating this kind of behavior entirely.

DNW: What concrete steps has Flippa taken to cut down on shill bidding and fake comments?

Fink: As for fake comments, we’ve implemented a system that not only mutes these (so only sellers’ comments are broadcast out via email), but we are fairly active in warning, suspending and – yes – banning those that blanket self promotional comments across listings. I have personally witnessed this activity, in particular, drop tremendously.

We’ve also seen erroneous bids and deadbeat buyers dwindle considerably, and have been able to spot more duplicate accounts (and potential or actual shill bidders) than ever before throughout Flippa’s history. This is a joint-effort between our Marketplace Integrity and Customer Success departments, as well as automated checks in place to find and root-out fake accounts, fake bidders and fake buyers. We spot the vast majority of erroneous activity through this coordinated effort, and rely on eyeballs of the rest of our staff and active members of our community to report suspicious behavior, which we investigate and act upon individually.

DNW: Has Flippa considered showing bidder aliases rather than “bidder 1″ and “bidder 2″ as a way to cut down on shill bidding?

Fink: First, yes — bidder aliases are something I feel would make tremendous sense to implement. We’re also crafting some major improvements to bidder / buyer verification; more information to follow, but I would like to see these shifts rollout altogether.

I do want to state one thing about our current bidding structure, in that there’s a massive misconception that — let’s use “Bidder 1″ as an example — subsequent bids from this bidder are considered shill bidding. Rather, this could be a couple of things that often are not spoken of: first, it could be a legitimate buyer testing the reserve range. Second, it could be an automatically “upped” bid due to the high bidder’s proxy, and the way by which our system displays the order of bids.

I appreciate Andrew including me in this dialogue, and the opportunity we have — with our members and the audience reading this — to continually improve our marketplace. Please be in contact with us at any time to offer feedback, suggestions or product requests.

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