PA Now Supports Bitcoin Payments

[Arcus Isidar]

I understand that PA has plenty of overhead, but the reality is that BTC processing fees are lower than Paypal. You do not need to offer any protection to sellers with BTC, since BTC is 100% irreversible. Buyers essentially forfeit all of their protections when using BTC, and in this industry they expect compensation for that forfeiture.

I am not here claiming that PA's fees are killing us. PA obviously provides orders to many sellers which they would not receive by selling on other platforms. However, they've slowly introduced new fees over history, and now you would be hard-pressed to explain how the 10% you charge does not provide your business enough profit.

PlayerAuctions charges the full transaction costs on both ends of the transaction to the buyer and seller. These are not included in the 10%. The only variable cost you incur on transactions after that point is fraud. You've mentioned your fraud rates to be somewhere around 0.5%. So now you have a 9.5% gross profit margin on all revenue.

Revenues on PA must be near or above $100 Million USD per year. That means you have $9.5M to pay employees, use for marketing, and other overhead. Your employees are mostly based in the Philippines, where labour is very cheap. Even if the average employee cost $100,000 USD annually to retain, that would still be only $5 Million USD @ 50 employees. The real cost of retaining an employee in the Philippines is probably no more than $20,000. Now, you have your marketing costs. These costs are partially used to grow the business, and partially used to maintain current revenues. Either way, you'd be hard-pressed to spend more than $1-1.5M on advertising / marketing. Even an ad on Sythe wouldn't run more than $20,000 per year.

Tell me if I'm missing something. Perhaps I've overvalued you revenues, or under-priced your employee costs. But really, I think you guys should be soaring in your current business structure, and I'd argue that if you aren't, your management team is doing something very wrong.

To earn $100M revenue per year, PA would need to be bringing in $273k daily. Looking at my ordering history and order #'s. I can safely say PA gets approximately 700~ new orders daily. Let's assume PA refunds / cancels about 10% of orders (probably a bit less). Jacob has mentioned before an average order is around $60.

That gives us approximately $40k~ per day in revenue = ~$15 Million per year.

With a 9.5% margin including fraud that's about $1.4 Million before paying any expenses.

So, with that $1.4 Million in income before any overhead, remember:

- Employees (~50 * $20,000) = $1.0 Million.
- Office space (Shanghai + Manila) holding 50 employees combined - not sure on this one but maybe a few thousand each per month. Let's say $10k * 12 = $120K
- Marketing costs: this one's a toss up, I don't have a good guess. I spend a couple grand on marketing so if PA spends a conservative amount on marketing proportionate to my business let's say PA spends about $10-15k a month on marketing. $120-$168K
- Other expenses: anything I've missed.

You can change the numbers however you want to make them more realistic. I'm sure the average employee at PA earns less than $20,000 a year. Maybe they spend more on marketing, etc. We don't really know all the details.

Without getting into every nitty gritty detail I'm sure we can all see that PA employees aren't pushing cash around with wheelbarrows.

However - a business that is taking in my projected earnings should be making money, and if not it should certainly look at ways to change that.

 

[zgangz]

It would be cool if pa YOLO'ed it a bit more on the bigger orders people have to jump through hoops as it is with verifying orders, most of my large orders ($500+) get canceled as PA just makes it too hard for the customer.