DealDash Business Model – How does DealDash Make Money

If you are familiar with bidding and auction sites, then you might have probably known DealDash. DealDash is one of the popular auction sites founded in 2009 and headquartered in the US and Finland.

Though auction is a familiar term for centuries, eBay being the popular one for decades, running an auction-based company is not an easy thing. It needs a lot of research and knowledge and adherence to legal policies. Else, the company may end up as a scam. However, DealDash has been in the game for a decade, despite controversies. Wondering what is its business model and how DealDash makes money? You will find the answers in this article. But before jumping into the DealDash business model, let us see what DealDash is. So, shall we get started?

What is DealDash?

DealDash is a bidding fee auction site or penny auction site that lets users bid for a product, the final and highest bidder wins the auction. As the users have to pay to participate in the auctions, it sells bids in packs of 100s and different sizes. Sometimes, it offers discounts on bids. However, the more bids people buy, the more money it makes.

DealDash was founded in 2009 by William Wolfram, a Finnish entrepreneur. The surprising fact is that the founder was just 16 years at the time he started DealDash.

DealDash is available as both the website and the mobile app. It offers a wide range of eCommerce products such as electronics, home goods, jewelry, fashion and lifestyle for auctions.

Among multiple auction sites, what makes DealDash stand out is – The company lets bidders who are not fortunate enough to win the bidding game to get back their bids. Confused? It lets lost bidders to buy the product for the retail price and gives back all the placed bids.

The company is partnered with popular eCommerce retailers such as Walmart.

How Bidding on DealDash Works?

  • Users enter into the bidding process with their purchased bids.
  • Every time a user places a bid, the price is raised by $1.01 or 1 cent.
  • The auction clock restarts from 10 seconds or up to 30 seconds based on the bid each time someone bids.
  • If no one bids after the clock run out, the last bidder wins the auction.

Okay, now let’s get into the actual topic DealDash business model.

Read: Shopify Business Model – How does Shopify Make Money

DealDash Business Model

As said, DealDash is a bidding fee auction site that works almost the same as other auction sites where users enter a bidding process by paying some money to win the auction item. But here the company is a little different by letting bidders get back placed bids if they lose with the “Buy it Now & Get Back your Bids Back for Free” option. For that, they need to buy the items for retail prices (lesser than the market price). Thus it is a win-win for both bidders and the company.

Moreover, the site has a few gamification elements that boost user experience. For example, whenever a user becomes the highest bidder his progress bar fills up. When the progress bar of users fills up entirely, they “Level up”, meaning they can win in more auctions weekly.

These features are not only making users loyal to the platform but the platform’s engagement increased to 6 times.

Read: Etsy Business Model – How Etsy makes Money

How DealDash Makes Money?

With the successful business model and smart strategies, it is not tough for DealDash to make money. With over 8 million users on the platform, it makes a good amount of money. It was estimated that the company made over $9.7 million of profit as of 2018. In fact, within just 4 years of its launch (in 2013), the company made $44 million in revenue.

Though there are no current exact numbers related to DealDash, it is clear that it makes a good deal of profits.

Bids

DealDash sells bids typically 12 to 60 cents each in a pack of 100 or other sizes. Users save up to 95% of money purchasing bids instead of real money. This is also how DealDash makes more than half of its revenue. DealDash earns money from unspent bids. However, the company retains its customers luring with loyalty. As the auction industry itself is an addictive space, it is no short of customers.

Say, a watch is for an auction on the platform whose actual cost is $20. The auction begins at $0, every time someone places a bid, the price of the items goes by 1 cent. Thus the bidder who placed the final bid wins the item for the bid he placed (assume $5). 

Now, DealDash earns the bid amount from the winner ($5) plus the remaining bids of other bidders who lost. This way the company makes more than what the product actually costs. Additionally, with the Buy It Now features, it makes money from eCommerce stores even though it returns the placed bids to the bidder who opted for this option.

Want to know how PayPal makes money? Read PayPal Business Model

Sales (Referral Fees)

As said, not only the Buy It Now (& Get Back Bids) feature makes the company different from its competitors but brings more profit. Firstly, it is attracting more customers with the strategy of giving them their bids back, thus increasing its number of participants. Secondly, it earns a referral fee from the retailer for making sales. The only catch is bidders have to buy the product for full price or retail price to get back the placed bids.

Hence, it is advisable to only bid for products they want to really buy. So, they can win it in the auction or else buy it for the retail price- bearing zero loss.

Funding

DealDash has raised around $2 million in funding from investors. Its investors include David Friend, Ari Korhonen, Finnvera and others.

Controversies

A few Consumer reports are claiming that the prices of products from the But It Now option are higher than the actual market place, sold on Amazon. Besides, it is reported that DealDash represents certain unknown brands as luxury brands. But actually, such products are proved to be cheap imitations and generic products.

However, despite all these controversies, DealDash hasn’t seen any downfall at any time in terms of revenue.

Bottom Line

No matter the controversies and complaints, DealDash is not going to see any downfalls in the bottom line. Though the appetite towards easy earning which generally any auction site has is the major reason, the gamification elements, outstanding features such as Buy It Now & Get Back Bids also contributed to the success of DealDash. The consumer base and engagement with the company are growing steadily as per social media networks, though the numbers are unknown. However, with such a user base, the company makes good profits currently and it is likely to continue the same in the future.

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