Coralville-based auction Web site is off to great start

A penny auction Web site brainstormed as a class project by University of Iowa students is winning customers and awards.

Bidders on Dibzees.com are limited to bidding in one-penny increments. The low bids result in most merchandise selling at bargain prices.

Bidders must first register and buy credits in order to bid. They pay Dibzees.com 50 cents for each bid they submit, making the auctions a devious game of strategy.

Most bidders don't put in their bids until right before an auction is scheduled to expire. Each bid extends the auction by 15 seconds, and the action typically moves fast and furiously to its conclusion.

“It's insane to watch,” said Casey Everts, a co-founder of Dibzees.com and senior in the UI's Tippie College of Business. “A lot of people are very competitive and take it personally when someone tries to outbid them.”

The bidding frenzies have resulted in such illogical outcomes as a Amazon Kindle reading device being purchased for just $12, but bringing in a $400 profit for Dibzees.

Everts started the business on Sept. 15 with UI alumnus Andy Wright and Iowa State University alumnus Robert Hu. The idea to create a penny auction business came from a student who was taking an entrepreneurship class at the UI with Everts, but later dropped out of the business because of time demands.

The business plan forecast a $20,000 loss in the first year, but Dibzees.com was already making a profit after its first three months of operation. Today it has over 2,000 registered users, and 500 have won an auction.

Penny auctions are a relatively recent, although hardly new, phenomena. Sites such as swoopo.com and penneyauction.com have been proliferating online in recent years. That has resulted in some consternation among consumer protection authorities who say the sites make it too easy for consumers to overpay for products. They pass muster with legal authorities, however.

Everts said Dibzees.com tried to do it differently by offering better customer service and targeting two niche markets - college students and women.

As of Monday, $25 gift cards for retailers such as Buffalo Wild Wings, Barnes and Noble, and Amazon.com were the only items listed for sale on Dibzees.com. Everts said the site usually offers at least one special item such as a gaming system or media play. In the future, Everts said it will try offering things, such as University of Iowa Hawkeye recliner chairs, that are more tailored to its target markets.

Everts said the current size of Dizbees.com gives bidders a better chance to win than with the largest penny auction sites, and the company has tried to offer better customer service, such as merchandise delivery times, than its competitors. Most of the development work on the Web site was outsourced to a developer in Israel. Everts, Wright and Hu have been tinkering lately with the appearance of the site to give it a bit more pizazz.

The three men invested about $7,000 in startup costs in developing the site. The company won $5,000 in additional investment seed money by taking first place in the 2010 John Pappajohn Business Plan Competition.

Dibzees.com is now a finalist in another business plan competition. Everts said the potential payoff is $20,000.

The three founders run the business out of a Coralville condo that Everts shares with Hu.

Everts, whose hometown is Cedar Rapids, says running a full-time business in your senior year of college is just as hectic and chaotic as you might think.

“I thrive off working 24/7,” Everts said. “That's who I am.”