Are gold Sites Profitable - My Stance on why 1/2 the industry is not profiting due to hidden fees

This is a thread I've been meaning to make for a while that I thought would make some interesting discussion.

Now, this thread is speculation based on personal experiences, this is not saying everyone shares these experiences or outcomes.

I do not mention any sites in a negative light nor do I intend to insult anyone - If u want what I say about your site removed send me a PM and I'll happily remove it for you.

Now lets discuss the current industry as it sits:

- We know there are ~27 Active gold sites(See my other "where are gold sites located" thread).

- We know that on average the top tier gold sites average 20% margins while middle/lower tier fight for 10-15%(Or so most gold sites believe their getting, example rsgoldfund always gets 15% on average, sometimes that makes us more expensive but we are historically the cheapest gold site in history if u examine charts going far enough back).

Heres a chart showing some gold sites & how we compare over a 6 month time period:

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& RS3:

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-We know that 9/10 gold sites use G2apay in some form - (Going through my list I was able to find ~3 sites that did not use it).

Now here is where things get interesting:

Currently there are roughly 6 juggernauts in the industry - You all know who they are, the remaining 21 or so sites all fight for scraps in some form. These 6 juggernauts tend to sit @ 25% margins so what I'm about to say doesn't effect them as much.

Now lets do some math based on todays average market(?):

Today the average buy price for a gold site was between $1.00-$1.05/m.
Today the average sell price for a gold site was between $1.19-$1.29/m

That leaves between $14-$29 per 100m on the table(14-29% margins) - Of that 20-29% range, the vast majority belongs to the 6 juggernauts, for the majority(21) gold sites we likely average in the 14-18% range.

Now some simple math:
Say I am Ariba gold(example, u can plug anyone), I am purchasing today on average @ $1.02/m+fees and I am selling for $1.20/m on average, so you make $18.00 USD per 100m right?

No.

Now lets remember that 90% of the industry uses g2apay - that means that per transaction Ariba gold
pays the following(This is taken right from official g2a sources):

Paypal they pay 3.49% +$0.40 USD per transaction - That means that on 100m 07 which a customer bought for $120.00 USD they paid $4.19 + $0.40 aka $4.59 on that 100m 07. Now simple math:

$120.00-$4.59= $115.41, which means after processing fees Ariba gold is still +$13.41 per 100m 07.

Now here's where things get problematic for gold sites:

First off you have to keep in mind fees when buying(through pp/skrill/crypto) are on average approx. 1%. So that 100m 07 aribagold bought @ $1.02 they on average pay 1% which is $1.02 per 100m 07.

Now:
After buying fees & selling fees Ariba has received $120-$4.59 processing fees- $1.02 sending fees leaving them with $114.39 after some fees which still leaves a reasonable $12.39 profit per 100m sold.

However we have to keep In mind g2a charges currency conversion fees - This is one of the scams of g2apay that gold sites don't even realize is happening & is why my argument is that Ariba & other sites are going bankrupt without even knowing it.

G2a's default currency is EUR, approx 85% of my gold sites sales are non-euro meaning when the transaction is made - It automatically removes 2.49% as a currency conversion fee no matter what you do if its non-euro.

Now lets do some additional math: 100m 07 sold for $120.00 we established has $5.61 in fees so far, u have to take the 2.49% currency conversion fees off the original amount thus $120.00 x 0.0249 is $2.99 which for simplicity I will round to $3.00 USD. Now we established that we had $114.39 left over before conversion fees so $114.39-$3.00=$111.39 leaving Ariba gold with $9.39 in profit per 100m 07.

Now here's the kick in the nuts: There is actually a SECOND currency conversion fee being applied by G2A - You see they only allow cash outs via certain currency's, so say ur default g2apay balance is USD and everything auto converts(which u cant turn off FYI, I've tried emailing support, u cant) - Well say you want a bitcoin cashout right? So you originally paid 2.49% to get that EURO to USD through automatic conversions that u cant stop - Well get this - You will pay ANOTHER 2.49% to convert that USD back to EURO to get it out of g2apay through bitcoin(also applies to several other methods) so in the above example:

You would actually pay $5.98($6) in currency conversion fees *No matter what you do* which means we have to subtract an additional $3.00 USD off our margin thus: $111.39 left - another $3.00 in conversion fees brings Ariba gold down to $108.39 per 100m 07 sold or $6.39 profit per 100m 07.

Now the final fee charged by g2apay is a cashout fee - Previously if u cashed out over 10,000 euro you would NOT be charged this 1% - However it is now MANDATORY.

So that means for Ariba gold $120.00 x 0.01 is =$1.20, thus the remaining $108.39 -$1.20 leaves $107.19 left or $5.19 profit per 100m 07 after everything is said and done *on G2A'S END*.

Now at this point you have to be asking yourself what the fuck is with all these fees - surely there cant be more - Well let me tell you just how g2apay & banks across the world fuck you as a merchant.

There is actually *another currency conversion fee* - you read that right - that is a total of THREE currency conversion fees - This one isn't charged by g2apay however - it's charged by your bank. Now heres what I believe is happening: During the second currency conversion(during cashout) you actually ARENT having that currency converted - Their just charging you for it then sending it to ur bank as the first currency, so if u requested a cashout via USD to ur BANK What I believe g2a is doing is their sending the wire as EUR and the US treasury is actually converting that EUR to USD for your bank. Now how do I know this? Once every 2 months I have seen random charges appear on my bank - Their stated as a "Service Charge" and range between $10-$200, however unlike normal service charges these are not clickable - You cannot see the details of them - I had to manually go into my bank and ask for the details which to my shock my banker informed me that they were for US treasury conversion charges applied by the US treasury that the bank cannot negate/refund as its on a federal level.

Now where does this 3rd currency conversion happen? The answer is it happens in any country that does not have a default currency of EURO meaning Canada, United States, Australia, so on.

The fee does not immediately appear - my bank informed me federal treasury charges apply on the NEXT accounts statement - so that cashout I got on Jan 27th when my period ended Jan 26th? Yeah I wont see that charge appear until MARCH, u read that right, the fee wont show up until MARCH. When the cashout was requested back on Jan 20th and processed the 27th.

Now you have to be asking yourself, there is no treasury fee of 2.49% or set rate so what are u talking about? There actually IS a fee - You see currencys change value and from the time of the transfer taking place-> what you receive currencys will of greatly charged value(As its normally a week for a g2a cashout) meaning if the treasury initially swapped g2a's wire @ a rate of say 0.85 euro to 1 USD but you don't get the wire for another 3-5 days to ur bank and all of a sudden the EURO goes down in value - the treasury will charge you the difference as a treasury exchange fee(I'm trying to explain this as the best I can), so lets for simplicity say that on average u lose 2.49% per conversion(currencys flux a lot more than 2.49% a week some of them so this is generous).

We ha $107.19 left after selling 100m 07 as Ariba gold, the final fee applied is an additional 2.49% through bank however the final 2.49% is taken from the cashout amount - not the orginal value thus meaning that 107.19 x 0.0249 is another $2.66.

$107.19-$2.66 = $104.53

So to sum it up, after 3 currency exchange fees(there are ways to avoid the 3rd one or certain conditions - I.E ur in a country whos default currency is EUR), the processing fee, the withdraw fee and 1% sending fees on average, The 100m 07 Ariba gold bought @ $102.00 they ended up receiving $104.53 meaning that the site profited $2.53 per 100m 07.

To put that in perspective, If Ariba gold bought a top sythe banner for $2100 a month @ $70/day, ariba gold would have to do 2.766b 07 in sales a day JUST to break even on that sythe banner.

That is not including: SEO work, Any other ads, payroll, bans, or any other factors.

That is why the industry is straining and ur seeing bigger spreads of buying & selling rates - People realize their losing money but they don't know how - Gold sites have so much money in play that sometimes you just cant properly manage it because G2A does so many things to it without ever telling you.

So the tl;dr is that I would argue 50% of the industry is slowly losing money without even realizing it *AT LEAST*.

I will also say that Rsgoldfund shares the same problem as Ariba and other sites - That's why I stopped our price war and had a tool built - I realized I've been bleeding a fortune without even properly understanding how, I would argue any margin under 20% ends in a loss in the industry in current day.

Feel free to discuss what you think.

@ARIBA @PartyPeteShop @Probemas @RSGoldRush @Ruben Eason

 

@R2Pleasent @Arcus Isidar @Divica
@Sythe @Shin

Curious to hear thoughts on the above. I see no errors in my logic or math.

 

it's more likely than not a problem unique to you

 

I mean most sites will charge the user the 3.9% processing fee so that can be taken out but yes the currency exchange fees are what really burns you.

On the bright side you are able to accumulate BTC/other cryptos which is probably where you make your money, although when the crypto market crashes it obviously does the opposite.

 

So to sum it up, after 3 currency exchange fees(there are ways to avoid the 3rd one or certain conditions - I.E ur in a country whos default currency is EUR), the processing fee, the withdraw fee and 1% sending fees on average, The 100m 07 Ariba gold bought @ $102.00 they ended up receiving $104.53 meaning that the site profited $2.53 per 100m 07.


$2.59 + 3.9% of the original $120 is $4.68

$2.59+$4.68= $7.27 per 100m

Even with a 3.9% markup its still nowhere near profitable & not all sites even charge 3.9%.

 

Exactly, everyone has their own methods to manage these things, and if they're still around they know how to do this. If you're making 2-3% per sale that's just poor managing

 

Well you were never really known to be good at noticing things, more like the opposite lol, and if it took you 25000 transactions to notice it i dont even know what to say anymore

 

If you can handle PayPal fraud and chargebacks efficiently it is way more profitable than using G2APay with all their hidden fees. For new merchants G2APay might be a good option for expanding business safely at start but in the long-term I would advise to minimize use of G2APay because of 2 main reasons:
1) After all fees + currency exchange rip off total processing fees are super high.
2) Tons of good customers getting their payments declined and G2A accounts banned.

 

Is it possible to use the g2a thing just for paypal/other risky methods and just take cyrpto straight up so no high fees from that? And just charge more for paypal

 

yes lol, there are some laws in some places that doesn't let you do that(unless you say it's a discount), but nobody cares about rsgp market really

 

So isnt OP exaggerating then, cuz i know there are some that advertise discounts for crypto

 

If you look at his previous posts he's always trying to turn his personal misconceptions and lack of knowledge into global problems

 

Most sites are perm limited on paypal though, they don't support our industry so that doesn't really work.

 

G2APay only charges you currency conversion fees if you convert the balance. You can hold a USD balance and withdraw USD without a currency conversion fee. This is assuming you use Paypal for your withdrawals, I'm not commenting on bank.

 

Have you ever noticed that their automatically converting ur balances though?

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They said that the contract we signed gave them permission to auto convert it to their default of EUR which they charge 2.49% on everything, then 2.49% to change it back from EUR->USD then the bank charges 2.49%.

I was told its mandatory - I have the option to cashout EUR to my bank but from what I understand its the same 3x currency exchange fees?

Paypal the default currency when cashing out is still ur balance in EUR which u then pay 2.49% to convert to USD so either way ur getting hit twice by my understanding? Once when it automatically does it then once when u cashout, ur still forking out 5% per $1.

With their 1% mandatory now we're getting destroyed, 6% to get out money out of g2a is insanity and if u go via bank its 8.49%!

Shit cashing out via BTC u cant do because they have caps per withdraw of $2,500 unless u get approval up to $10,000.

I mean its pick ur poison, I've basically said fuck it I'm raising prices by 5% across the board - I knew they had some side stuff going on but this is ridiculous.

I genuinely think a solid chunk of the industry is losing their asses and don't even know it, how the hell would u ever figure it out unless u manually calculated what was going on? Their reports don't show it lmfao. I only figured it out because one day I clicked the fucking "show auto conversions" button and talked to my bank!

 

That auto conversion is from queuing a foreign currency cashout when you don't have sufficient EUR balance. This likely happens when you cash out BTC since they only allow EUR (likely because they only have Euro banking relationships that will process transfers to BitPay).

There's no second conversion fee.

There's no third conversion fee either, if you withdraw USD you'll get the equivalent in USD. You're probably trying to withdraw amounts where you don't have sufficient balances in USD which queues auto-conversions to get you that balance or you're attributing bank-end flat fees to being conversion fees.

G2A has very fair processing fees considering the service they're providing. The vast majority of the value they get from offering G2APay is in brand recognition.

If you think you're losing money, chances are you need better accounting because G2APay isn't garnishing all of your profits.

 

I'm going to do some extensive testing of this and will post my results because I disagree with your second & 3rd statements.

P.S- Your Canadian is it not likely that its a different type of bank/banking vs American banks?

I don't know what bank everyone uses but my last cashout I received a $70.00 US treasury currency conversion charge on my statement which was simply defined as a "Service charge" until I went into my bank and they expanded on it.

That particular bank account has received ~19 deposits, of those ~19 deposits all 19 have been bank wires in excess of $25,000. Each one was suppose to be converted *before* hitting my bank yet the month after each wire I received between a $40-$200 "service charge" that was applied by the USA treasury.

I also know for a fact theres 2 fees being applied when cashing out via BTC by the way - As u stated its due to them only allowing EURO however & I personally think they buy bitcoin off some shit exchange then send it but since the max withdraw is $2,500 the impacts minimal. I doubt anyone uses BTC withdrawal anyway.

There is either something going on for Americans with the treasury or theres something wrong with my setup - No Americans have posted to confirm or deny whether this issue happens for them regarding bank & the treasury so I don't know if its just me? There's only 4 of us left so unless someone posts I'm going to assume theres something wrong on their end not mine.

One charge I once received ontop of the treasury issue was a "wire repair fee" which I was told was due to an odd way g2apay had sent the wire that time - my bank actually called g2apay and I never saw another "wire repair fee" but these treasury charges started popping up but either way I've been assured its not on my side, which means it cant be just me this is occurring to?

 

Yeah, so if the wires are >25K and you're being charged $70 then it's not a conversion fee. Conversion fees from banks costs 2% minimum and that is on the low end. You're likely a victim of the correspondent banking system - you're getting charged a lot from the routing your money takes to get from Europe to the United States. G2APay's US bank accounts are very likely in Europe, just denominated in US dollars.

They do not buy Bitcoin off any exchange, they have a contract with Bitpay to cash you out. There may be an additional 1% charge on Bitpay's end for BTC cashouts since that's the Bitpay standard charge.

 

So I'm likely not crazy then, it really is charging me more both for bank and BTC. That's all I used and my accounting was a few thousand dollars off when I just filed taxes(Which were accepted ), I spent legitimately over 2 days straight hunting for my errors or what was going on.

Something there in that whole g2apay mix/banking is costing me around $4000-$5000 a year & its not coming out of sales its actually costing me that in terms of gouging my profit.

If its NOT a currency exchange fee - There is SOMETHING in that whole g2a/btc/bank thing that is screwing with my accounting that I cannot find specifically what - I still think its currency related but honestly I cant tell.

I sent an inquiry into a g2a manager earlier today showing them my accounting and seeing what they can get out of it and where something is going on at - I'm not a accounting god but there was enough missing that when I filed taxes and looked at it I knew its something going on with g2a.

Edit(So people know I'm not screwing with you I really did file and there is an error I cannot find and I know its related to this, this part of my taxes relating to g2apay just isn't adding up and I'm sure its right):

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$3000-$5000 isn't a deal breaker but for a smaller/medium site my title seems appropriate unless this is just me which I honestly don't think it is.

 

If you're getting hit that hard by banking and conversion fees, you should really be looking for a new way to cash out. That could be getting a USD or EURO bank account that you use to receive wires, and then convert it manually yourself. There's plenty of ways to convert currency, especially 5 digit amounts, for fractions of a percent off XE.com rates. You could also withdraw your EURO through BTC, which will only have a 1-2% fee.

Right now your setup is clearly terrible.

EDIT: But on another note, G2A isn't exactly known for being the most ethical company in the world. It could be that they are charging some hidden fees that your accountant uncovered. In that case you'll need to keep digging and see what turns up.