The missing piece of the puzzle glues it all together.

When domain auction platform Bido announced its “Bido Guarantee Program”, I was a bit confused as to why any buyers would participate. Essentially, buyers would participate in a pre-auction where they could bid for domains. The seller could choose to accept the winning bid in the pre-auction, send the auction to a “real” auction with the pre-auction bid as the starting bid, or walk away.

This didn’t sound too appealing to pre-auction buyers. They would essentially bid up the prices of domains, only to face more competition in the real auction.

But there’s one detail that wasn’t in Bido’s original explanation: pre-auction winners get a cut of the commission if they don’t end up winning the “real auction”.

Let’s say I’m a bidder in the guarantee program. In the pre-auction I win with a bid of $500 for a domain. The seller decides to send it to a real auction and the domain sells for $1,000 to someone else. That means I’d get 50% of the total commission (4% of the sales price), or $40. It would give me an incentive to bid high in the pre-auction (let alone participate at all). This should push domain sales prices higher on Bido.

My only worry, as I’ve discussed before, is that this makes things more complicated. But I think it’s a nifty addition to Bido.

Current guarantee bidders include NameMedia, Parked, Domaining, Reinvent, and several other companies.

© DomainNameWire.com 2009.

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Related posts:

1. New Domain Name Auction Platform Bido Launches
2. Bido Drops “Guarantees” In Domain Auctions
3. Bido Reinstates Reserve Pricing (with a Catch)