Cape Town start-up Yastic has taken SMS technology and combined it with online “penny auctions” to bring text-based bidding to SA.

Founder and CEO Richard Craib says using SMS to submit bids for products differentiates Yastic from its local competitors. “SMS is used more than credit cards and people are generally happier using the service for payment than online card transactions,” says Craib.

Yastic puts one product at a time on its website for auction, and users are able to SMS a short code to enter a bid. Using SMS means consumers don’t have to register on the site to bid in an auction. It also means Yastic does not have to be responsible for credit card information.

“When you SMS, we have your phone number, and that is all we need to contact you if you have won a bid,” he says.

Users are given a real-time view of how the auction is proceeding and can see their phone number on the site, with a few digits starred out, as soon as the bid has been placed.

Other than SMS, Yastic works in the same way as other penny auction models. Users place a bid (R5 for a Yastic SMS) for an item on auction, which is listed at a low price. Each subsequent bid drives up the price of the item by 15c, with the timer on the auction increased by 30 seconds.

Whatever the price of the item when the auction is completed is what the winner will pay for that particular item. “It is a game of strategy. It gets exciting,” says Craib.

The model has received much criticism in SA, with suggestions it could constitute gambling. However, the National Lotteries Board recently said the system is not classified as gambling and is legal.

“There may still be issues with the Consumer Protection Act, but we will have to study that in detail. It will be easy for us to make the right changes to fit with legislation,” says Craib.

Other critics have said sites like these often use “bots” (software robots) to drive up the price of the product being auctioned. However, Craib says Yastic has made every effort to be as transparent as possible.

As a means to protect customers, Yastic has implemented a service called “buy it now”. This feature allows bidders that did not win an auction to buy the item at the same price as they would have in a retail store, minus the amount of money they bid.

“This is another differentiator for our business. I haven’t seen it anywhere else, but we felt we had to implement it. It basically lets people get the money back that they bid,” he says.

Yastic launched in January 2010, but a technical glitch in the system meant it had to go back to the drawing board for a few months and later relaunch the website.

“We went to market quite quickly and realised that we needed to do some ironing-out of our service,” says Craib.

At the time, the company launched with enough money for two auctions. “We had about R5 000 to launch,” he says.

Within a month, though, the company had received a R1m investment from well-known angel investor Michael Leeman, best known for his investment in Skyrove.

Craib says Leeman has not only provided Yastic with a financial injection, but also business advice and mentorship. “He has been an invaluable investor.”

Yastic will launch another revenue-generating scheme over the next few weeks: it plans to allow news sites, blogs and other websites to embed the Yastic auction on their sites and offer a revenue sharing incentive, similar to Google’s AdSense.

The company also has a US website, but the SMS model is as popular there. — Candice Jones, TechCentral

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