South Africa’s cyber business boom has a new contender: online auction sites that do it their way.
South African auction website Yastic.co.za and Za.smokoo.com, which is based in the UK but has branches in America, France and South Africa, are becoming more popular by the day.
The websites often place items on auction which would normally retail for thousands of rand but bidders could end up paying a few hundred rand, or less.
The websites operate by people sending SMSes as their bids, which get deducted from airtime balances. A time bracket is given for people to place their bids and the person who manages to get the last bid in before the clock runs down, is the winner.
However, some IT experts see this type of business as being morally questionable and close to gambling.
Yastic.co.za CEO and co-founder, Richard Craib, said: “During the last 20 seconds of the auction, the timer jumps to a 20-second countdown each time someone bids, making the game one of skill – it’s all about being the last one to bid.
“Bids cost R5 each, though one can purchase bids for R4 when buying in packs of 25, which is credited to one’s account – your cellphone number. All one needs is a cellphone and an internet connection, so customers do not need to sign up to anything because the R5 gets deducted from your airtime.”
Craib and his colleagues started the company during a summer break from university in 2009 and did not intend it to become profitable, but they realised within weeks that it was clearly a profitable opportunity.
“Yastic as a company makes money off the SMS bids and not via the product.
“We source products from local suppliers and at times we look abroad, particularly for products which are new or short in supply in South Africa.”
Arthur Goldstuck, managing director of World Wide Worx, a company focused on business technology research, said that these sites were an ingenious way of making money, but they skirted the edge of gambling.
“Essentially, only the winners win big, while the losers tend to lose big, but there is clearly a market for them in South Africa, seeing that people are actively using them and generating huge revenues.
“There are extremely nice margins for making money, but I have a big problem with the ethics of the model, even though the venture is genuine and probably legal. People get caught up in the frenzy of chasing the ultra-cheap, but desirable item. As with gambling, the more they throw at their chance to win, the more committed they become to keep throwing more at it.
“In this way, such auctions can become both addictive and financially damaging – without appearing to be either,” said Goldstuck.
But Craib said that on the user front, Yastic enjoyed many regular and repeat users and had a fair number of loyal followers who defended the brand against criticism.
Yastic has been around for a little over a year and is still building and marketing its product.
“Due to our constant site development, expansion and dedication to providing the user experience, our company isn’t actually profitable as of yet, but we are looking at raising another round of venture capital investment.” - Weekend Argus