GamerPay (https://gamerpay.gg/) is a scam-free marketplace for gaming skins and assets.
46% of gamers trading skins have been scammed more than once for either their money or their skins (survey of 5,000 gamers). 50% of gamers are under 18 and this their first online trading/cash experience. We solve this problem by integrating with Steam and making use of escrow, validating all trades. We are regulated by European Financial Services, and have a compliant way of onboarding minors, with parental consent.
I am the owner of Scandinavia's largest Counter-Strike community, with 82k members. Not a day goes by where I am not contacted by young people who lost their money buying and selling skins. They often get depressed, either because they lost a lot of money, or because it was part of their identity. In one case, a young guy lost all the money he had received from his confirmation, roughly 5000 dollars. He was ashamed and afraid to tell his family and friends. In another case, one that really got to me, a 17 year old was persuaded to give his ID to "prove his legitimacy" in a trade. The scammer saved the picture with him holding his ID, then created a fake profile and scammed hundreds of others, getting the 17-year old in trouble with the police and attacked on social media.
We did extensive surveys, found that this is a surprisingly big problem (the gaming market is of course huge) and decided that something needed to be done. Current solutions were obscure, too expensive, or unavailable due to region or age.
Example of how it works with us: a young gamer from the UK meets a US gamer on Discord or Reddit. The US buyer agrees to buy the UK seller's item. They go to GamerPay where the US buyer pays for the item. We hold the money in escrow until it's validated that the UK seller has transferred the exact item. The UK seller receives the cash on to their bank account. There is no risk in who "goes first" with the money or skin. We charge a straightforward transaction fee of 5%.
One nice thing is that for the first time, safe cross-border trades are now available. We have seen sellers from Denmark (where we're from) connect with buyers from the US. We have also seen our first seller doing 100 trades in less than 6 weeks on our marketplace. We look forward to hearing your feedback!
The fact that you need to hand over a Steam API key is really worrisome, and the FAQ entry for it isn't all that reassuring [1]. You're basically just saying "no it's cool trust us". Are you encrypting these API keys? Do you delete them after each transaction?
It's kind of a honeypot if you're holding onto the keys. You don't have the ability to revoke them so if they're ever compromised it's on your users to revoke them before misuse.
It's worth noting that there's a ton of undocumented (by Valve) Web API methods [2]. If you just look at the official documentation [3] it misleads you into thinking it's a read-only API for fairly basic data. I presume that GamerPay is relying upon some of these undocumented APIs as part of their implementation.
Thanks for the feedback on the FAQ and thoughts. Agreed that the Steam API key is sensitive data and thus all keys, user data etc are secured by appropriate encryption. Same goes for cash transactions & wallets that are handled by partners that are compliant with the financial authorities (to prevent eg money laundering).
We work with the Steam APIs on a daily basis and yes some part of the documentation could be more up to date.. and it's not Stripe quality!
Why do you need the API key? Why not just do it like a traditional escrow service: you receive both the money and the item traded to a steam account you own. Then once both are received you send the money and you send a trade request giving the item to the receiver?
Using bots as middlemen imposes other challenges. First there is a 7 day tradelock of the item. Second bots are prone for scams. Third you cannot play with your skin in the meantime
I’m not in your target audience, but I love the idea and the backstory. This seems like a real strong niche that was due for some innovation. Best of luck!
I know there are a lot of disparate services like SkinBaron[0] for individual games. Is your value-add that you're regulated / you can act as a middle-man for any steam items?
Our main value adds is that we can allow minors to trade safely. You have to be 18 at Skinbaron. Another is that Skinbaron charges over 20 percent total.
Race to the bottom, ignoring the winner-take-all scenario where you do everything for everyone, when the next group comes in at 2% + copy pastes your entire website copy and you’ve already inoculated to the end market that this solution works, which they piggy back on to get traction....can you survive more than a few qualified competitors and actually make it to cash flow break even? And why won’t this be a “many make no profit” type of market that settles with many undifferentiated sellers with close to substinance level terminal margins?
Obviously marketplaces are great, your product market fit seems strong, and you have both demographics and GMV trends behind you; but you’re in a space with passionate people who might do things for free (like people host or participate in gaming forums or discords).
Even at a few engineers you’re burning cash for quite a while, but you’re touching minors (sorry, no pun) in highly regulated markets like Europe, so you probably need a few compliance dedicated FTEs. How do you resolve disputes where it’s not QUITE the $50k skin and they sue? Or do you require arbitration at signup?
How does this work in the first 3 years until you hopefully win? VC funded burn?
It's an escrow + marketplace service. Your argument can be used against anything like eBay, Etsy, Poshmark, etc. You're assuming that the OP stagnates while copycats emerge around them, which is also a horrible assumption.
Also, "free" cannot host websites, hire workers, add features (as quickly). It's funny you mention that their service will require multiple compliance officers while you simultaneously think there's also someone who can do it for free because they're passionate.
Lastly, a skin is a skin. There's no "not quite like it" because it's a digital good, not a sandwich. I'm sure they'll use their retained lawyer when someone sues for 50k.
Overall, it sounds like you're not even against their specific product, but the idea of being a venture funded startup.
I’d flip it (rather tongue and cheek) and say that it’s you that doesn’t appreciate market places. And here’s why.
Saying eBay (your listed comp) that can sell (almost) anything, in almost every jurisdiction with probably minimal config change, at different $ values (you can buy a server on eBay), w/ both consumer and SMB sellers, and like importantly preceded this idea and implementation by a solid (guess) 15 years and along the way was the first and many technical / tricky problems for these types of models has the same business model as a vertical marketplace is kind of baffling. Let’s ignore take rate, how does your GMV scale to within two orders of magnitude at terminal compared to eBay selling skins? And how much cash did you use to get there? Is it even NPV positive to do that without knowing the cohort behavior (I’d bet the gamers are huge repeats, but they may be less loyal to Brand vs Product than say an Etsy seller; importantly you have no idea a priori). Sure gaming TAM is probably huge, but taking OPs words as written (and being kind they can or will likely pivot) the serviceable piece of the market that relates to sort of second order entertainment derivative goods is what? (I.e. if buying the game is the gating item, and is costly like some AAA titles currently are, clearly that has to somehow impact the skin market, although obviously in some cases it can be bigger). Maybe I was poor as a kid but a $70 entry price to a given market would have been debilitating to remaining disposable income. Maybe that’s changed (higher allowances or greater income variability growing those cumulative available $s for transaction).
Maybe I’m an idiot but if you put on a table 4 cards, each with the unit economics of each transaction and the cumulative economics of that “customer” as defined between your stated: eBay, poshmark, Etsy, and a business deriving value on partially the disposable income of minors in sort of fuzzy space that albeit is probably exploding.... from a distance the established ones sure look a lot better (but of course that’s survivorship bias vs a early high growth startup with unknown potential).
I’ve seen the economics of some of the booming gambling/online casino/sports betting businesses that are trendy now due in part to deregulation. Leaving aside the customer acquisition cost discussion (go check what fan fuel is spending per customer in the initial US deregulated states), and the compliance overhang will always at least somewhat drag on economics. It simply has to. This is sort of anecdotal and based on a podcast, but Coinbase has what seems to be a very large legal team; obviously not identical models but I can’t see PayPal having that many attorneys on staff. Ceteris paribus the lower complaisance overhang has to at least somewhat be a drag on margins.
Net Net, businesses are different, people are different, industries are different ...everything is different at a deep enough level. You can like some but not all marketplace businesses based on how they operate and the strategy they take and how mature/captured the underlying market is IMHO.
Thanks for your thoughts - you cover a lot of land:)
I sense a bit of apples and bananas here comparing a newly started vs super incumbents (that were once small too in markets that likely didnt make sense for everyone at the time:))
We think the skin markets deserve something similar to Coinbase for crypto -> a place where I can trade with full confidence, it's easy to use and has what I am looking for.
100% not fair. Good catch! And deeper I wondered if the comparison example really broke in terms of the “sidededness” of the market or whatever the term was in the (AndersonHorowirz linked?) book on evaluating marketplaces.
If anything the “manual” feel of the minors onboarding looks so much like AirBnb, etc, you have to wonder if the company is sort of bound to succeed due to start.
Good luck on your ramp!
Is there a to email/contact you privately? I have a case study that’s very very close in big famous investor funded adjacent market that went sideways due a tiny detail; it’s public but would be more considerate to talk 1 on 1.
And what would prevent us from accepting minors as our clients or lowering our commission? Both would be possible with the push of a button and some changes in our TOS. We probably won't do either and there are reasons for that. Just trying to dismiss this point.
Interesting discussion overall...greetings from Hannes (CEO SkinBaron GmbH)
You are right, you could do that. It would mean some changes to your KYC flow, and probably also a few chats with the bank to stay compliant. Lowering comissions sure. I am not aware of your costbase but could be doable. Now that you are here, why do you charge so high fees? And what are your thougths about Netease looking towards the west?
NetEase's success will depend on their willingness to understand and adapt to EU mentality. There are many big failures of marketplaces that tried to expand to different continents, look at Rakuten's failed EU expansion for example. Also one of the reasons why we don't do an expansion to Asia or the US (yet).
So NetEase is the least of our worries for the future, macro factors and the success of CS:GO including Valve's strategic decisions with the game play a much bigger role than any competition in my opinion.
Why do we take high fees? We could obviously outsource employees and other expensive tasks to lower the cost base significantly, but it would not be needed. The margin is very good with our current cost basis already.
Raising our fees from 10 to 15 % was a decision made after OPskins and BitSkins both played themselves and went offline / took a pause. We had more inflow of users than we could handle. Now we can handle the inflow, but don't see a reduction from 15 to 10 % as the right decision to drive user growth. Of course if the market adapts as a whole and everyone takes a lower commission, we would have to do the same in the end.
Most marketplaces fall under obscure or to expensive. And pretty much none of them have built a compliant way of onbording minors who suffer the most from scamming. So they are all 18 plus.
changing currency doesn't seem to work for me, stuck in EUR.
Anyways, this is great. Between lootbear, csmoney, and steam marketplace, I think i like your model best since it translates directly to cold hard cash. However, last I seen this model in the wild, it got banned.. re: OPSkins. How are you circumventing that?
OpSkins got banned because they tried to circumvent the 7 day tradelock, and they we also moving closer to the position csgoempire have today which is skin gambling. We dont want to be that. We want to do for skins, what coinbase did for crypto
Since when did rules/laws start mattering for vc-backed startups? Continue paying fines until you're large enough to bribe, I mean lobby, for the law to change. It's just cost of doing business.
It's very difficult to go after/shut down sites that breach ToS like this. See nearly every gold-selling site for any MMORPG in existence. They do sometimes get shutdown eventually but typically after many years and they often re-open with a new brand name.
Honestly it's just bittersweet that YC does due dilligence like this for gaming startups. I mean some of them are cool businesses (like this one), but I'm a little salty since selling items not through steam is absolutely against valve's TOS. Remember that startup that wanted to do an mmo with thousands of players, VR etc etc and the demo was a compilation of free assets in UE4..?
I think that GamerPay might be in the clear, but they require Web API keys from users. The terms [1] of those keys don't seem to allow for sharing API keys with third parties like this:
>
2. License to Steam Web API & Steam Data. Subject to these Terms of Use, you may access the Steam Web API, implement the Steam Web API in your Application, and distribute Steam Data to end users for their personal use via your Application, all in accordance with the Steam Web API documentation. This license is subject to the following restrictions: [snip]
> You agree to keep your Steam Web API key confidential, and not to share it with any third party. This license is personal to you and specific to your Application. You agree that you will be personally responsible for the use of your Steam Web API key.
When you request an API key from Steam they ask you to include the domain of your application. GamerPay instructs users to just put their own username in that field.
46% of gamers trading skins have been scammed more than once for either their money or their skins (survey of 5,000 gamers). 50% of gamers are under 18 and this their first online trading/cash experience. We solve this problem by integrating with Steam and making use of escrow, validating all trades. We are regulated by European Financial Services, and have a compliant way of onboarding minors, with parental consent.
I am the owner of Scandinavia's largest Counter-Strike community, with 82k members. Not a day goes by where I am not contacted by young people who lost their money buying and selling skins. They often get depressed, either because they lost a lot of money, or because it was part of their identity. In one case, a young guy lost all the money he had received from his confirmation, roughly 5000 dollars. He was ashamed and afraid to tell his family and friends. In another case, one that really got to me, a 17 year old was persuaded to give his ID to "prove his legitimacy" in a trade. The scammer saved the picture with him holding his ID, then created a fake profile and scammed hundreds of others, getting the 17-year old in trouble with the police and attacked on social media.
We did extensive surveys, found that this is a surprisingly big problem (the gaming market is of course huge) and decided that something needed to be done. Current solutions were obscure, too expensive, or unavailable due to region or age.
Example of how it works with us: a young gamer from the UK meets a US gamer on Discord or Reddit. The US buyer agrees to buy the UK seller's item. They go to GamerPay where the US buyer pays for the item. We hold the money in escrow until it's validated that the UK seller has transferred the exact item. The UK seller receives the cash on to their bank account. There is no risk in who "goes first" with the money or skin. We charge a straightforward transaction fee of 5%.
One nice thing is that for the first time, safe cross-border trades are now available. We have seen sellers from Denmark (where we're from) connect with buyers from the US. We have also seen our first seller doing 100 trades in less than 6 weeks on our marketplace. We look forward to hearing your feedback!