Earlier I wrote about the frenzy buying Plastation 3s on eBay and lessons from it. There's a smaller scale frenzy going on now about the iPhone, which doesn't go on sale until 6pm today. With the PS3, many stores pre-sold them, and others lined up. In theory Apple/AT&T are not pre-selling, and limiting people to 2 units, though many eBay sellers are claiming otherwise.

The going price for people who claim they have one, either for some unstated reason, or because they are first in line at some store, is about $1100, almost twice the cost. A tidy profit for those who wait in line, time their auction well and have a good enough eBay reputation to get people to believe them. Quite a number of such auctions have closed at such prices with "buy it now." If you live in a town without a frenzy and line it might do you well to go down to pick up two iPods. Bring your laptop with wireless access to update your eBay auction. None of the auctions I have seen have gone so far as to show a picture of the seller waiting in line to prove it.

eBay has put down some hard terms on iPhone sellers and pre-sellers. It says it does not allow pre-sales, but seems to be allowing those sellers who claim they can guarantee a phone. It requires a picture of the actual item in hand, with a non-photoshopped sign in the picture with the seller's eBay name. A number of items show a stock photo with an obviously photoshopped tag. In spite of the publicised limit of 2, a number of people claim they have 4 or more.

It seems Apple may have deliberately tried to discourage this by releasing at 6pm on Friday, too late to get to Fedex in most places. Thus all most sellers can offer is getting the phone Monday, which is much less appealing, since that leaves a long window to learn that there are plenty more available Monday, and loses the all-important bragging rights of having an iPhone at weekend social events. Had they released it just a few hours earlier, I think sales like this would have been far more lucrative. (While Apple would not want to leave money on the table, it's possible high eBay prices would add to the hype and be in their interest.)

As before, I predict timing of auctions will be very important. At this point even a 1 day auction will close after 18 hours of iPhone sales, adding a lot of rish. The PS3 kept its high value for much of the Christmas season, but the iPhone, if not undersupplied, may drop to retail in as little as a day. A standard 1 week auction would be a big mistake. Frankly I think paying $1200 (or a $300 wait-in-line fee) is pretty silly.

The iPhone, by the way, seems like a cool generalized device. A handheld that has the basic I/O tools including GSM phone and is otherwise completely made of touchscreen seems a good general device for the future. Better with a small bluetooth keyboard. Whether this device will be "the one" remains to be seen, of course.

Update:

The price of iPhones quickly dropped. On July 3, about 13,000 auctions have taken place, though a large portion did not close. Real profit was made by people who "pre-sold" or sold in the first hours (east coast time.) By later in the day, profit could be made but it was dropping down to below $100 on 4gb and $200 on 8gb. With the costs of local sales tax ($50 in many places), eBay fees (about $25) and PayPal fees (possibly another $25) and finally the overnight shipping most buyers demanded, you need a serious margin for a good profit. Almost all sellers offered free overnight shipping, and of course buyers buying out of state would bid higher because they would not find themselves paying sales tax.

By July 3, prices have fallen so that some sellers are losing money on the deal, though not much. iPhone speculation was relatively "safe" in that it will be some time before you have to sell the item below the retail price, but you would not make up for your time. Right now a typical iPhone 8gb sale is at $700 which only covers costs if you bought in a state with low or zero sales tax, or bought with a resale licence.

As before, profit required good timing of your auction. Either entering an early auction that would close early or very carefully choosing a buy-it-now price that was good enough to attract a quick sale was the best strategy. A few crazy buyers paid very high buy-it-now prices but most such auctions went unfilled.

Worse, a large number of auctions closed with fake bidders. On the weekend, one fake bidder bid high on all the high buy it now options, effectively being a vandal. This bidder presumably used an account that can't be traced and won't pay, but ruined the aspirations of all those speculators, who will now probably lose a small amount of money at the new price.