You’ve probably seen ads on TV and the Internet for Florida-based Cash4Gold, a service that buys gold from people (watches, rings, other jewelry, etc.) via the mail. You send in your stuff, the company sends you money. You have twelve days to say you don’t accept their offer and you get your gold back. The company pays shipping (both ways if necessary) plus insurance.
The service launched in early 2007 to a perfect storm of soaring gold prices and a down economy. But still, it’s more than surprising that the company raked in $90 million in revenue in 2008, the second year of operations, according to a source close to the company. Profit, even after paying out cash to sellers and a huge marketing spend, was in the $30 million range.
Revenues in 2009 are on track to hit $160 million, says our source, with a similar profit margin. That implies $50 million or so in 2009 profits.
The company decided to buy a Super Bowl commercial in 2009, featuring MC Hammer (pictured in image above, sans dignity) and Ed McMahon. You can watch it here (embedding is disabled for some reason). Television, not Internet advertising, continues to be their most profitable marketing, says our source.
The business velocity attracted the venture capitalists, of course. Sometime this year the company took a sizable investment from Mangrove Capital Partners and possibly other investors as well. Mangrove is notable because they’re a European firm (and also one of the first investors in Skype).
So what’s next for Cash4Gold? Competition. A number of clones have launched in the U.S., which is driving marketing costs up. The company recently launched operations in the UK and will continue international expansion. They’re going to have to do some serious brand building and lock up key strategic partnerships if they intend to create a long term business. But in the meantime they’ve made a ton of money off a very simple but very good idea.
Unfortunately their sister site money4jam.com didn’t really take off..
meth4gold.com!
leprechaungold4yourgold.com!
Did you notice that the search term “cash4gold scam” displays sponsored links?!
Its a recession what can you expect? Also stop by your local pawn shop and ask how business is
wow, meth for cash?
We’ve got a better story on C4G.
http://singlepi...d-for-how-long/
I love The Onion’s video on the US government getting out of debts by selling their gold to Cash4Gold: http://www.theo...ld_reserves_for
haha… hadn’t seen that one. I love ONN
raking in the money and totally NOT an Internet company
They took in Venture money from a Skype investor, as such, I think TC worthy. They also have a website, I see no harm in a “feel good and PROFITABLE” company… nice change from the Twitter and Facebook stuff, don’t you think?
Jon @ WoodMarvels.com
How is this a “feel good” company? They offer people significantly less money than their gold is worth and prey on people’s ignorance and desperation. If those profit margins are right, they’re basically stealing from the uninformed. Search online and you’ll find a ton of scam stories about them. It is a very, very shady business and there is nothing respectable or tech-worthy about them (other than that they are making a lot of money).
there must be a difference between doing business and stealing from people. I can not believe that this company is still in business. goverment should bring some regulations and monitoring to this industry. due to the recession people are desperate and this company is taking advantage from people. how the owners can sleep at nights. they are taking advantage of people in need of money.
People can always decide to go elsewhere, there is no theft unless it’s against that persons wishes. They need cash, this company needs gold… “fair market value” is whatever the two parties agree to. This is called capitalism and it’s the reason why you, I and every other business IS in business.
Jon @ WoodMarvels.com
Who else is taking advantage of people needing money but our beloved government itself. What our government (not “we the people”) did with our (the nations) gold and our overall monetary system over the past 100 years makes Cash4Gold look like small time street thugs. I bet the government would really love to regulate and protect us…oops, I mean “protect our gold”.
Mark Cuban once told me my hair smelled nice. By your logic, I’m practically dating him.
http://www.flic...son/2363302521/
Ok, where is the brick and mortar Cash4Gold that I can go visit, spotrunner?
You dial 1-877-GOLD 590 and ask for a kit. That’s what most of their customers do. It’s primarily a phone and USPS play, not an internet play.
They are a mail order scrap metal dealer with a big ad budget and crappy prices.
I hear Zuckerberg’s summer camp bunk-mate’s sister’s ex-boyfriend’s mom opened up a boutique bakery. I *think* they have a website. Maybe you could direct your wicked skills of investigative tech “journalism” in that direction.
I mean, come on.. Facebook took VC money, and the bakery owner’s son once nailed the sister of Zuckerberg’s summer camp bunk-mate, I mean, that’s gotta be incredibly relevant to the TC audience, right? Am I right?
Unfortunately they are only a click and mortar,
No upset person can go “kick there butt”
It appears they are litigious scammers. Running scams is a great way to rake in money.
http://consumer...ant-you-to-read
What kind of journalist would not mention this in their story? Fluff piece.
Uh, Mik… Oh, wait.. I see what you did there. That was supposed to be rhetorical. Clever.
I understand that it goes against the ‘change the world for the better’ mentality many people have here, and I applaud all sites such as the consumerist for informing people about the better alternatives and questionnable lawsuits, but in a free market companies can price and position how they want. If they get people to send them gold and prey for some money just because they see an amateuristic ad, that’s good for them and does not make them scammers.
+1
TC is not above giving attention and free(?) advertisement to litigious scumbags. I mean, it’s not like Cash4Gold has posted a Holocaust group on Facebook, they’re just ripping off the desperate and stupid. Huge difference.
This is nothing more clever than a pawn shop with a toll-free # and a UPS account.
Scaled up pawn shop with mass marketing during a global recession. Consolidation of a dispersed and previously untapped commodity. Yup, makes sense they’re doing well. I do think it’s fair to ask how, exactly, this fits into TechCrunch?
I wanted to say the exact same thing.
This is a stretch for TC. Did you stay up late and watch infomercials last night Arrington?
Oh. Right. Mangrove connection. Sorry.
I’m usually one to defend you when people say you are straying from the TechCrunch topic, but this one is puzzling for you.
When I saw Cash4Gold in the headline, I thought you were going to lay them bare the way you did with LifeLock.
Did Hawaii make you soft?
bring me the money!
TechCrunch is supposed to be about innovation. There is nothing innovative about taking advantage of desperate people by offering them less than a third of pawn shop price for their jewelery, AFTER you already have their stuff in an envelope.
Just because the people are dumb enough to send their stuff in doesn’t make it right.
JP,
I totally agree with you.
They are taking advantage of the uninformed person.
A senior citizen friend of my mother was taken advantage of.
They finally sent her a check for $ 1xx.
My gut tells me the jewelry was worth thousands.
(I understand jewelry mark-up.)
After hearing about this situation, I hope they get shut down for fraud.
The VCs might end up losing their investment.
The VCs should lose their investment. IMHO there are just as guily as the scummers running these companies.
Talk about taking the pennies off a dead man’s eyes…SCUM
The VCs funding this company are alas falling prey to the same herding that caused VCs grief during the dotcom bubble- failing to see a bubble inflating in real time.
The gold price is the latest commodity bubble, and its bursting is inevitable:
http://amusis.com/?p=1233
You missed the point. It doesn’t matter what the gold price is. They (C4G) offer you some percentage of the actual value of your gold. If the gold price goes down, you get less. They still get their cut.
Plus, with the the way the dollar is going, don’t expect gold to come down anytime soon…
“Television, not Internet advertising, continues to be their most profitable marketing, says our source.”
Call me a genius (pretty please), but the people who buy gold jewellery and are stupid enough to sell it for a fraction of its market value aren’t people that normally use a computer. I could be a police officer with generalisations like that….
Hmm, I guess it’s time for some real raking..
Michael, you do know that this is a complete scam, right?
Why is it a scam?
Read This. Talks about how the biz works from a former employee.
http://www.shoe...former-employee
Based in Florida …
My thoughts exactly.
So if a scam is venture backed it’s all good?
This is a great lesson in risk management, understanding your customer and business model.
Cost of a Superbowl ad = $2.4 M
Cost of an expensive business model (w/ free shipping) = v. high
As a VC would you have invested in this company?
Please read the link posted above at Consumerist. Not exactly the company I’d expect to be profiled here.
Wonder if jewelry theft has gone up. Need some money? Grab the necklace of the closest chump and send it in!
the idea of sending gold in the post isnt something that thrills me.
It appears Aronson is totally unethical.
Why would a VC get involved? Most of the time, they are investing based on the character of management.
Taking your numbers of $ 90 mil. revenue and your estimate of $ 30. mil. profit, why do they need VC?
It is not like the company needs to invest multi-millions in manufacturing equipment, buildings, research and inventory.
The melted down gold is very easy to sell. I’m sure he has a plenty of commercial buyers who pay almost immediately.
Aronson’s gross profit and inventory turns would make Walmart envious.
His highest cost must be advertising.
This guy is a scammer and the VCs are his next mark.
Over the next few years they will have to give all those profits back in lawsuits and fines. This is on par with “Girls Gone Wild” implosion, not a solid company.
These guys are not totally legit, Take Down This Post!…and beside, this has nothing to do with TECH
It’s easy to make money when your pay outs are less than 20% of the value of the gold.
http://news.coi...-of-gold-value/
Ahahahah, “A gold medallion of me wearing a gold medallion!”
my wife sent in some jewelry, it was worth about 250-350, based on an appraisal we had done as she had thought it could have been worth alot more. they sent her a check for 19.10. she called, they doubled in to 38 bucks. she asked for the jewelry to be sent back, which is permitted. sold it on craigslist for 150 bucks. they just melt down the gold and resell it at huge margins. not sure the tech connection.
Not sure of the tech connection? Dude, you sold her gold on Craigslist. Craigslist is *on* teh intarwebs!
Oh, and I’m pretty sure you used the Internet to retrieve this post before you read it. That’s even more of a tech connection.
And, in case you didn’t notice; That grainy screen shot of MC Hammer? It’s got “.COM” on it. Right there at the bottom.
I’m starting to believe that “Tech Crunch” is an ancient Latin phrase which translates as, “Whatever the f*** Mike wants it to mean at any given moment.” But, that’s just a theory.
it would have been funny to see a techcrunch affiliate link to the website. I’m sure they give out big commissions to advertisers who drive new customers their way.
as pointed out above, this is a scam: http://www.xcom...sh4gold-c2.html the consumerist article linked includes this post and much more
buying low and selling high certainly isn’t a scam.
That depends.
For example, if you advertise that you’re paying a fair price for the gold, and then actually pay something in the neighborhood of 10% – 25% of the true value of the gold, then I really think it is a scam.
At the very least it’s deceptive marketing, i.e. one step removed from fraud.
that doesnt actually respond to the points the linked article makes. The scam is in trapping the consumer in unconscionable t&cs in order to buy low, ex using the time it takes to mail the check to consume the 10 days allotted to refuse their offer.
Why anyone would fall for this once is beyond me. If they actually have the kind of repeat business it takes to build a real durable company then… well id be surprised and revise my scam comment.
Mike,
C4G is not the most legitimate of businesses. I met an executive (I live in south Florida) who was very upfront about how little they actually pay out to people. In fact their call center is run by telemarketers who have a compensation system that essentially rewards them for getting people to accept as little money as possible. Very “boiler room” was one of the quotes I remember from him.
I’m surprised that you would profile a company like this, which operates with essentially predatory business practices. Slow news day?
ah, you managed to slip the slow news day comment in. congratulations.
This is a venture backed company that may do $50 million in profit this year. If you can’t figure out why we wrote about them, reread this paragraph.
I think you’re just happy to see another company with a disgustingly bloated owner.
Well I reread your post and it still comes off as a glowing endorsement of the company.
“But in the meantime they’ve made a ton of money off a very simple but very good idea.”
Since when did screwing people become a good idea? C4G is wildly profitable because they operate under predatory business practices. They’ll attempt to pay individuals who are desperate 5% of what their gold is worth and not even blink.
Most of their customers must only have TV and not internet access because a :30 second search on them reveals a mountain of complaints, what’s your excuse.
Also Mike according to their own press statements C4G is selling 6000 OZ of gold a week. That about $300M a year in sales.
I think we’ve got a better handle on how much money C4G is making. At the very least a more informative article.
http://singlepi...d-for-how-long/
“In fact their call center is run by telemarketers who have a compensation system that essentially rewards them for getting people to accept as little money as possible.”
Hahahhaa.
Cash4Gold is 2 legit to quit.
Hay! Haaaay!
They are making a ton of money out there and they don’t actually give the biggest payouts. Mainly because of their advertising budget. I have done some research on this and http://www.usgoldrefining.com has proven the biggest payouts by a long shot.
Edward,
I agree with your assessment. http://www.usgoldrefining.com definitely pays more. I did my own research too. If you can make $50 Million in profits in less than a year, you certainly can afford to spend big money on a superbowl commercial.
that’s it, i’m investing in Snuggies
Agreed. TC lends legitimacy to the companies they cover, and should exercise a bit more judgment on covering something like this. Tech connection with Mangrove is embarrasing rather than a reason to be included here. Sorry to get all socially responsible, but come on Michael…
Of course their Television advertising has a higher ROI for them. Their target segmentation is an older generation who is a) uneducated in scams enough to actually buy into the “send us your stuff and we will send you a magical check at a non contracted amount” and b) that type of customer is less likely to use the internet. With those kinds of revenues they need VOLUME of customers ~ only found via TV for now.
Is Arrington making a judgement one way or another, even implicitly? I don’t think so. It could even be argued that by shedding light on the Mangrove connection, he is showing social responsibility.
A passing reference is no way to exercise social responsibility. Compare your attitude with TC’s toward the Facebook Holocaust group.
The Mangrove connection is about as newsworthy as reporting on the churches that tech players contribute to.
“off a very simple but very good idea” seems like a pretty clear value judgment, despite the fact that the ample press on this company seem to indicate equally clearly that this “very good idea” is to exploit the desperate or under-informed.
If there are, however, ironies or critiques in this article, they are buried so deeply that they are all but irrelevant.
Really, Mangrove?
I thought they’d taken $40M from General Catalyst and Highland early this year (and I’d guess a large part of that was secondary).
http://www.xcon...superbowl-spot/
My brother has a convenience store that services all Afro-Americans. My Uncle Jayendrahi has a motel that also serves all Afros. They both do well. Any thing that targets these people will make a lot of money, as long as you can handle dangerous risks associated (e.g., theft, robbery). It seems Cash-Foe-Gold has hit the jackpot. They target Afros without having to expose themselves at the street level.
“these people” ??? …WOW
My brother has a convenience store that services all Indians and Pakistanis. They do well. Anything that targets these people will make a lot of money, as long as you can handle the dangerous risks associated with these people. These include forced marriages, honour killings, wives being burned with their dead husbands, homosexuals being murdered, couples murdered for loving someone of a different caste, religious rioting, burning of other peoples’ places of worship, corporate fraud (like Satyam), petty theft by slumdogs, and terrible movies with terrible singing.
As someone else said, yes this is Florida for you. We can also get you hooked on opiates here for cheap…
It boggles the mind why a VC would dump money into a company that has 0 long term viability. It’s a pump and dump company that probably exploded more than it’s founders thought it would. Now high on their own cool aid they are going to what exactly? Their business model relies on the economy being in the toilet and people being desperate for cash. People who are still effected by TV advertising who are not tech savvy. All of those factors are changing, there is no money to be made off knowledgeable people who have money, unless their going to sell the gold back to them cheap.
I wouldn’t be surprised to see some class action lawsuits once the economy turns around and people start thinking clearly again.
30% Profit sounds nice !
I have researched just about every cash for gold type of site and have found that http://www.usgoldrefining.com pays the highest amount for gold by far. They actually let you know how much they are going to pay before you send in your gold. These guys pay almost 3 times as much as the other sites.
Mary, I agree with you. I sent similar items to 3 different sites and received $200, $275 and then $440 from http://www.usgoldrefining.com. I am sure they are still making a good deal of money, but since they say they are a direct refiner, they seem to be able to pay out more.
Them gold reefiners done ripped me off! And there dang spammin’ pardners!
Jeremy from shoemoney wrote an interesting blog post, with information about Cash4Gold from a previous employee:
http://www.shoe...former-employee
I don’t like it one bit (Cash4Gold, that is).
Nice of MA to post up. Figured he was heads down on the crunchpad trying to get that thing out to market. C4G, Really!?
I think what Arrington is saying is
“Hey, all you tech vcs! If any of you want to make some money on side with me…”
Apart from the fact that a dot-com VC invested in C4G, how is this relevant to TC? Are restaurant reviews next?
Why not discuss a company that’s making money hand-over-fist. It must get tiring profiling companies, 99% of which will never make a profit even if the tech will send a man to the moon.
Mr. Michael Arrington is a Tech News Visionary. half his postings start with. something to the effect of “three years ago I was the first to mention…..” or “….people said I was crazy, but now…” so, none of you haters should be surpised if the company that invested in skype and just invested in this profitable, non tech company leads to some interesting tech news down the line. you all just fell
r. Michael Arrington’s I told you so bait for the distant future. Suckers
There are lots of blog and forum posts from people saying they got low-balled and as soon as they asked to have their golden returned, the C4G rep immediately offered them 3x or more than the original check sent to them… a predatory outfit at best.
Sadly I haven’t found anyone ’smart’ enough to have the gold properly appraised prior to sending it to Cash4Gold.
Hey, remember that these guys are running a business. If you take the first price that they quote you, you are an idiot. When that used car salesman wants to sell you the 1997 Honda Civic for $10k, and you say “yes”, the joke’s on you, not him.
Well at least this article is better than hearing about Facebook and Facebook Connect users..
So this company makes huge profits even after massive multi million dollar advertising campaigns?
Well at least now I know where not to send my gold, thanks techcrunch.
I believe Highland Capital and General Catalyst are Cash4Gold’s main VC backers. Wasn’t aware Mangrove was an investor too.
http://www.mass...-local-VCs.html