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By Kim Komando, Gannett

The offers seem irresistible: an iPad 2 for $50, the iPhone 4 for $50 and a whiz-bang SLR for $100.Recently, there has been a rise in penny auction sites touting such deals. They go by names like Quibids and SwipeBid. Unfortunately, too many people learn about the hidden dangers of penny auctions the hard way.

By David Zalubowski, AP

Many people learn about the hidden dangers of penny auctions the hard way.

Here's how penny auctions work. First know that they are nothing like eBay. Users don't post auction items; the site does. Items are usually popular, high-end electronics like iPads, laptops, cameras and televisions.

Bidding isn't free. You need to buy a bid package. You may get 100 bids for $50, but often bids are $1 each. The price of auction items usually starts at $0. Each bid bumps the price up a penny. It also adds 10 to 20 seconds to a countdown clock. The goal is to be the high bidder when the clock runs out.

The big flashing countdown clock is a penny auction staple. It contributes to the excitement of the bidding. Many people get caught up in this excitement. It is much like gambling. Users seem to like the bidding as much as the potential deals.

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The truth is, you are unlikely to win auctions, particularly when starting out. In the event you do win an auction, you probably haven't won the product. You've only won the right to perhaps buy the product at the final price.

To put things into perspective, say you won an auction for an iPad with a $500 retail value. You placed 200 bids that cost $1 each. The final price on the iPad is $50. The iPad will cost you $250, if you are lucky enough to get it.

Remember, each new bid extends the time of the auction. If you bid and don't win the auction, you lost the money that you spent in bids. This type of auction is not for the faint-hearted.

Let's look at what the site made. To push the final price to $50, there would have been 5,000 bids. So the site earned $5,000 in bids, plus $50 for the iPad. After taking into account the price of the iPad, the site made $4,550. It's clear who the real winner is.

It is easy to see why owners start penny auction sites: The numbers are tempting. It may surprise you, though, that many owners regret starting their sites.

These sites can be slow to take off. Sites need a large number of bidders for auctions to pay off. Otherwise, they're simply selling expensive items at a huge loss. Of course, it is difficult to get traffic to a new site. They may only be able to offer a few auctions a day when starting out.

Don't feel sorry for owners of penny auction sites, though. They have strategies to overcome these obstacles. It looks like sites gang up to smear the reputations of other competitors. They start fake blogs touting the benefits of their own site.

That's just the tip of the iceberg. There are many reports of penny auction sites using automated software to push bidding higher. Job listings on coding sites confirm that some sites use this software. It's a way to make sure they break even on an auction.

In some cases, winners may not get the promised item. In others, they wait weeks, enduring bad customer service. Sites often close down without notice. Members' unused bids aren't refunded.

At this point, there is little oversight of penny auction sites. This could change, especially since heavyweight Quibids faces a class-action lawsuit. The suit alleges that the auctions are thinly disguised gambling. That sounds about right.