Patreon raises big round at $450M valuation
techcrunch.com
techcrunch.com
scenario 1: If artists just want a straight monetary passthrough, then artists-owned entity like ASCAP (collects music royalties) may be workable. ASCAP is "boring", but it does what it needs to do.
scenario 2: However, if artists want a payment platform that evolves towards a combination of Facebook+Medium+Ticketmaster+Slack+Youtube+cdn+etc, a co-op model will be underfunded. (In this scenario, you'd have to imagine that there would be future features that artists don't even know they want.)
In the marketplace of ideas, it's possible for both business models to be offered. E.g. artists sign up for co-op platform because it's 2% fee instead of VC-backed Patreon for 5% fee. However, it's possible for artists en-masse to abandon the co-op business for the VC-funded business because its enriched platform gives them ability to earn more which overshadows the higher 5% fee.
So the people giving Patreon money are not necessarily satisfied with 1% less fees than Youtube advertisers pay because they aren't advertisers and advertisers aren't using Patreon to fund creators.
A bigger problem than that they take a cut is probably some expectations management on why, what that cut does for everyone, and what it would mean to not have it.
That's not really the criticism you're responding to though. It's not "People will be upset Patreon makes money", it is "people will be upset that Patreon will have to take SO MUCH MONEY from people giving it to others to justify their valuation."
All they have to do is maintain growth. They don't have to make any weird sacrifices for revenue like a lot of social startups that raised billions under the pretext of making money later.
I think this space is going to be sufficiently competitive over the next few years that I don't expect Patreon to be able to just run away with people's money without consequences. In fact I'm racking my brain here to come up with what Patreon would want to do as a moat and I'm not coming up with anything. (Anything sensible, anyhow. The frequent suggestion that they could do their own YouTube would build a moat, alright, but the evidence is that it would build a moat around a cash flow model in which you guarantee that you'll never make any money, and, well, those don't really need moats very much....)
According to Wikipedia they are at around $150m/year already. I think it is totally feasible that they could increase that to $450m/year and not have to increase their 5% fee.
Seems like a reasonable valuation to me.
I keep telling people just to use a PayPal Donate button.
Unless you're in the top 1% of people on Patreon, you would do better just ensuring that more of the donations that exist ends up in your pocket.
If Patreon isn't delivering more donors than your content and self-marketing can attract... you are losing out.
I still do an occasional one-off donation to somebody who doesn't use Patreon, but as far as recurring billing for long-term support, this is all I use now.
They would need a lot more than $22.5m in revenue to generate that much profit
A tiny fraction of that will be earnings.
Hence a problem with the valuation.
Assuming they have 10% margins - that means sales of 10x what you described in order for the valuation to make sense.
Note that Twitter and many others, have never even turned a profit, and are still billions away from breaking even.
One would 'expect' Twitters 'costs' to be low as well, I mean, it's a very simple service, and 'infrastructure costs' are not huge for them.
And yet - they still lose money.
Taking on a huge amount of money is an easy way to start being inefficient. This is looking like an 'Etsy' story.
If Patreon gets winner-take-all huge, the BoD could literally steer culture by drawing the boundary lines on acceptable content. High amount of intangible value there.
Most internet sites run into conflicts with content because they're trying to make a profit through ad revenue. Mainstream advertisers don't want their ad next to porn/controversial things, and may not want to advertise on even the non-controversial part of the site if the site is associated with porn/controversial things in the minds of the public.
Patreon's business model doesn't really run into that issue.
I remember hearing him talk about his idea for Patreon on some of those YouTube videos. He seems like a pretty nice guy, so I am super excited for him to hear that Patreon has been such a great success!!
Let's hope they can continue their mission and keep taking it to positive places from here!
Given that many are getting paid for publishing videos of what they do, it would be a great feature.
There's precedent too since twitch has had this exact model for years now.
If I were a big successful Youtuber, which I'm not and will never be, I wouldn't go near a patron service provided by the same company whose practices were driving me away from them to begin with.
They will do $7.5 million in net revenue in 2017.
Then assuming the growth rate doesn't slow (remember, growth rates usually get slower over time), $18 million in net revenue in 2018, and $43 million in net revenue in 2019.
Net revenue, not net income.
$450mm seems overvalued.
There is still a lot of potential of revenue coming in from existing big content creators switching to the platform. When Philip DeFrance started his Patreon a few months ago he became the #2 most sponsored creator in Patreon in a few days, and his channel is "only" ranked ~350th by number of subscribers.
https://news.ycombinator.com/item?id=14927517
I've never seen anything more effective at enabling content that is routinely censored by credit card companies. [...] Patreon is a layer of abstraction that has enabled a startling opening up of opportunity for censored content, and that's shown in the NSFW side of Patreon.
https://www.google.com/search?q=patreon+nsfw&oq=patreon+nsfw...
Simple writeup:
https://www.theverge.com/2017/8/2/16074892/patreon-erotic-mo...
Completely false, "left" YouTube channels I know of: like Philosophy Tube and Contrapoints are having serious problems with their videos being demonetised and removed. Videos which even mildly critisize capitalism are being demonetised, it's pretty much impossible to run a left wing YouTube channel without Patreon. Virtually all political videos are demonetized.
For example, PhilosophyTube wanted to make a relatively straightforward series on the history of Liberalism, but even before uploading the videos was told by YouTube(when he contacted them) that under the new rules videos like that wouldn't qualify for ads(https://twitter.com/PhilosophyTube/status/898261400786657280)
So you're displaying a huge persecution complex if you think this doesn't apply to the left even more, since Google and advertisers are large corporations, which means they are de facto fine with pro-capitalist content while obviously against helping spread or advertising on anti-capitalist content.
Can't really blame advertisers for not wanting to associate their brands with political content, especially if it's as toxic as a Jordan Peterson rant on gender, and can question the motives of anyone whose decision on whether to critique capitalism or not is based on whether they can get enough juicy ad dollars for doing so.
It does more harm than good to the individual and society to entertain the delusions of mental health conditions.
The condition of gender dysphoria is a personal issue best dealt with between the affected individual and their health care provider.
But the key driver for Peterson was that pronouncements on these issues have absolutely no place in the Canadian constitution.
I think it was only with this issue(legislative lunacy) that he started discussing this, and it wasn't out of some contempt or animosity for people inclined to dress and behave a particular way, but rather because when societies start legislating what people are and aren't allowed to say and think, things tend to go real bad, real quick.
Peterson felt a strong duty to take a stand here due to his long study of the horrors and atrocities of communism the 20th century that often stemmed from mandates imposed on acceptable speech and thought.
Lest one think that this might be an unfortunate bit of hyperbole taken out of context in what must be an unusual situation for an outspoken middle-aged religious intellectual to face, he's doubled down on it with an angry lecture series on the subject and other crackpot theories like "the idea that women were discriminated against across the course of history is appalling" and actually it's all a myth caused by the birth control pill making modern women hostile towards masculine men. I wish I was parodying that argument; I'm merely summarising it.
I doubt advertisers were upset by his studies on the Bible
Capitalism doesn't own the idea of "markets", "sales", etc. Rather, the distinction between capitalism and most other economic theories relates to the ownership of organizations and the splitting of the revenues from sales between different economic factions, eg capital and labor.
Capitalism is the position that ultimately, capital should own the organization, while things like socialism argue that the people who perform the work should have the ownership.
In almost all systems, it makes sense to monetize a video, so the owners of the organization that produced it can get some of the value they created returned to them.
There is nothing in the current system that prohibits people performing work from owning the fruits of that work.
How does socialism supersede capitalism's benefit of promoting the transfer of economic value in the form of currency, or capital, from one creative realm to another which has immense creative potential over a less abstracted approach?
Are you saying that socialism basically boils down to prohibition of people owning anything that they did not make with their own hands? And I guess handmade goods can be traded? Do they lose trade potential after they've left the hands of their original creator?
I've generally seen capitalism, not as some sort of cause that emerged from some Magnum Opus and was subsequently cheered on by ideologues in the way of socialism/marxism/communism, but rather as essentially an outgrowth of fundamentally true aspects of nature. Things have costs, energy is cycled and exchanged, etc.
Not to say societies shouldn't have laws and regulations, but when you try to impose laws and regulations that run counter to natural orders and fundamental truths you inevitably run into trouble.
Not at all. In fact, so far not at all I'm actually confused how you think that's true.
Could you elaborate on why you do? It seems important for understanding the rest of your post.
> How does socialism supersede capitalism's benefit of promoting the transfer of economic value in the form of currency, or capital, from one creative realm to another which has immense creative potential over a less abstracted approach?
Socialism is perfectly capable of that process as well -- the difference is who makes the allocation decisions, people who own capital or people who produce things via work. There are arguments for why either side might be better at that task (and in practice, a mix of the two strategies seems to work well).
> Are you saying that socialism basically boils down to prohibition of people owning anything that they did not make with their own hands? And I guess handmade goods can be traded? Do they lose trade potential after they've left the hands of their original creator?
Nope, not even close. Again, to the point I'm confused how you got that impression.
Socialism is just the idea that corporations should be co-ops of their workers rather than property of their shareholders. (Well, okay, there's some fiddly details in particular models, but that's the gist of the difference between capitalism and socialism -- if you structure society around corporations owned by investors or owned by workers.)
> I've generally seen capitalism, not as some sort of cause that emerged from some Magnum Opus
Have you heard of our lord and savior Adam Smith?
The rest of that comment is based on the misunderstanding I pointed out at the top -- all economic theories deal with things like the cost of producing goods and the circulation of goods within the economy. Capitalism is far and away from being "objective" in that regard or the only way to organize activities around that. Capitalism in just as opinionated as Marxism (with just as outspoken of supporters, if not more so), it simply has different opinions.
> when you try to impose laws and regulations that run counter to natural orders and fundamental truths you inevitably run into trouble
Capitalism is none of those things, thankfully.
In many places, you seem to conflate "capitalism" with the notion of economics in general.
A hypothetical object in motion under no external forces will remain in motion until a force acts on it, upon this acting, energy will be transferred, thus a cost.
In our more familiar world, a ball rolling down a trail will continue rolling until the friction of the dirt provides sufficient cost/exchange of energy, or the ball encounters a change in grade on the trail such that a gravitational force extracts enough of a cost on the kinetic energy of the system to cause it to stop. For the ball to regain motion some other force must be applied to the ball at an energetic cost to the entity exerting the force.
We can see these costs/exchanges and any change of state in a system as equivalent because the total energy in the system remains the same. Anytime there is a change, there is a cost.
A "thing" is something that is identifiably different from other things. What causes differences to arise is fluctuation of energy in the system. A thing is a fluctuation, a fluctuation is an exchange, and exchange is a cost, things have/are costs.
At a less cerebral level, anytime you do a "thing" it comes at the cost of other "things" you could do. So whatever thing you're doing has this opportunity cost.
We've mapped the abstraction of money onto many types of costs, but costs can be at a level other than monetary.
"Capital should own things" because capital is the name we've given to the unit of energy in economic systems, and as we've seen above "things have costs," all things have costs. And as we've also seen above, "ownership" is the name given to the new state assumed following an exchange. The ball owns "at rest" after the exchange with the dirt.
It's not really "capital" that owns things, but the spenders/deployers of capital[0]. Just like it's not friction that owns the at rest state, friction was just a name for energy exchanged. The ball and the dirt conducted a transaction in friction, the ball got "at rest" and the dirt got "increased heat."
[0]So I guess at this point you'd say, in Socialism we'd prescribe that you can't spend money on things that confer ownership of future exchanges for money, or things that increase in value. But here is where the nature of reality is critically important, the universe is not perfectly flat, there are always going to be peaks and troughs in the distribution of energy so long as the universe is the one we recognize today. Not every cost will dissipate in it's returns because the total amount of energy in system is conserved. So if there are some costs that are net losses some must be net gains. And there must be variation in results of exchanges because otherwise we wouldn't see anything around us, we see things around us because of fluctuations in energy.
While Piketty's equation might need to be addressed, not understanding the reality from which it arises doesn't help in addressing it.
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II
You may have a broader understanding of this than me, but isn't "capitalism" simply the name we've given to the dominant economic system we've found that came to be through emergent processes of human social interaction stretching back thousands of years? Nobody ever said I'm going to start Capitalism!
Yes, there were some abstraction layers added on with the development of capital/share markets and limited liability corporations around 1400-1500AD, but it seems to me what we call capitalism is simply the name given to the economic system we've deduced to be present wherever we find things like coinage and contracts/exchange agreements in history. Were the ancient Greeks "capitalists"?
Adam Smith was for the most part describing what he saw around him and what already existed, was he not? I don't believe he was prescribing whole new systems of being.
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III
So you're saying Socialism is simply a restricted form of Capitalism?
Because the characteristics you give for Socialism, workers owning what they produce and co-ops, are not only possible in our capitalist system, but they are present in significant number.
In fact, in capitalism everyone owns the fruits of their labor. Were that not true, it would be more appropriately called slavery.
A computer programmer may or may not take home his code at the end of the day, depending on if he is employed by someone else and the agreements made between him and whoever may employ him, but he still owns what he has created even if he doesn't take the bytes home. He has just agreed to exchange it for something else upon creating it, most likely capital/currency.
So you're saying things would be better if such agreements were restricted by law?
It's no more insightful than Christians and Muslims debating if Moses was a Christian or a Muslim, because clearly all historic leaders were members of the one true faith.
> Yes, there were some abstraction layers added on with the development of capital/share markets and limited liability corporations around 1400-1500AD, but it seems to me what we call capitalism is simply the name given to the economic system we've deduced to be present wherever we find things like coinage and contracts/exchange agreements in history. Were the ancient Greeks "capitalists"?
This is a perfect example, because it's not true. The features of a modern system (of which capitalism is one) are very much a modern invention, precisely because they require that modern notion of social structure/corporate ownership.
Those "arbitrary layers" are what defines capitalism as a thing distinct from socialism or mere economics. Conflating capitalism with the "physics" and not the arbitrary layers is precisely the conflation between capitalism and economics I was calling out earlier, and seems to be rooted in capitalism having been the dominant economic model of your society -- you seem to have a hard time delineating and separating that choice from the nature of economics vis-a-vis physical constraints and their impact on all viable models.
> Because the characteristics you give for Socialism, workers owning what they produce and co-ops, are not only possible in our capitalist system, but they are present in significant number.
Our system isn't strictly capitalist.
You can look at, eg taxes to fund social projects as an example of that. The public is the ultimate owner of the nation, and retains a portion of any value created by investments of capital there, which is then used to benefit the public. That this distribution of wealth to the public instead of capitalists tends to create several dollars more wealth from the induced spending is actually a socialist benefit, not a capitalist one.
But also, you're correct that our legal system doesn't mandate capitalist economics for corporations. It's just the dominant model.
> In fact, in capitalism everyone owns the fruits of their labor.
Only the immediate fruits of their labor, that is, what they can charge for that piece of labor.
That's not what we're concerned with here. We're talking about the method by which we allocate the generated value when you scale up via corporations (or other mechanisms). That is, how we handle collective allocation and management.
Socialism is an attempt to allocate those benefits more evenly between capital and labor (or in the more radical cases, entirely to labor) in an effort to combat the social harm from "cogification" of labor, in which a corporation has many laborers perform a basic, easily replaceable task so that most of the value added by the collective labor can be extracted by capital.
> So you're saying things would be better if such agreements were restricted by law?
Such agreements are restricted by law, eg you can't select your programmer based on if they're male or female and you must pay them at least somewhat over $7/hr it takes them to create it, etc.
However, the ultimate argument between the two is this: is it better to aggregate wealth around points so that it can be coherently deployed even if these economic eddies decrease overall economic volume?
In practice, "top-down" control is a failure and capitalism in terms of efficiency of dollar to dollar spending can't compete with market-based socialism, and so (because of the physical demand for efficiency!) we see practically every major economy in the world (including the US) function as a mix of socialism and capitalism.
We would be better off if we stopped listening to greedy people and nudged it more socialist.
Has anyone even formulated and proposed any notionally viable alternatives? Apart from the vastly destructive and murderous attempts of communism in the past century.
Not saying the implementation of the current system is optimal, of course, but I think over time things tend to converge on that which does the most good for the most people.
People are moving all their eggs from Youtube to Patreon.
That's less of a concern though, because Patreon is easier to replace than YouTube. The problem with YouTube is that, at least as long as the Internet chatter I hear is still accurate, YouTube itself is still losing money, so replacing YouTube involves being able to immediately hugely subsidize people watching lots of video, and to be willing to do so when it is demonstrated that even the market leader who gets all the good ad contracts is losing money, so there's no payday if you win. That's a tough sell.
Patreon can't literally be replaced in the legendary "HN denizen claims to be able to replace $X in a weekend", because dealing with taking payments takes longer than that. But it's feasible down in that range, and said replacement at least has a cash flow and a clear path to ramen profitability. It's gonna be a competitive field and Patreon has all the name advantage right now, but it's a feasible plan for a "true startup" of just a few people in a garage in a way that "let's replace YouTube!" isn't.
In fact there's at least three competing services I've heard of that already exist, and I have no reason to believe I've heard of them all.
Stripe literally has an offering just for this use case: https://stripe.com/connect
Forum + Stripe Connect + CDN for Video (Cloudfront, Fastly, Whatevs) = Patreon replacement.
You could literally replace it with a weekend Hackathon.
It's like anyone could write a Facebook clone, the hard part is cloning the community.
I think if you dedicated an entire weekend to the task of being ready to accept credit cards through your website on a subscription basis that you would not be accepting cash on Monday. I seriously doubt that this is just a click-through exercise. I seriously hope this is not just a click-through exercise.
After approval a skilled developer could absolutely bang out the core functionality in a weekend.
Using regular stripe for direct payments is even easier and you can have a fully functional payment system / shopping cart in a few hours.
My above statements though in no way reduces what Patreon has done, they excelled at execution and driving traffic to their service as well as excellent usability. No small feat and not easily reproducible. Much the same as the way Facebook succeeded and myspace and friendster failed. Vision and incredible execution.
Youtube is still secondary to Twitch when it comes to serious online gaming streams. I guess Youtube has a big "Lets play" audience, but that hasn't really eaten into Twitch's core audience.
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The thing about Patreon is that its multi-medium. I've seen good video games, webcomics, books, AND yes, Youtube Channels, which are funded through Patreon.
Unless people start selling their Art, Video Games, Books, Webcomics and so forth on Youtube, I think Patreon will be fine.
Even though Google could recreate the whole Patreon system, they'd be forced to start with a customer base of zero and risk pissing off Patreon's customers and creators by trying to get in between them.
Also, as others have pointed out, Patreon is not just Youtube. Google tried to clone a product and a network before, with Google+, so they know how difficult that can be.
https://graphtreon.com/top-patreon-creators
(AvE is #9? Wow.. also lots of NSFW..)
In both cases I only see Patreon having additional cost with little to no upside by ditching Youtube (especially since Youtube policies are already very lenient on non-monetized non-public videos).
Maybe I'm missing something obvious?
Private video hosting for supporters that isn't rigged to youtube settings is something that could actually be a boon. Just because youtube is easier doesn't mean delivering on a non-youtube service couldn't help delivering the rewards.
I can see how they can upsell a lot of other services though around delivering rewards. If I have 10000 people who need stickers for that 5$ support level is it worth the time to hand-stuff all those envelopes? Or is it worth an extra 20c a letter to have someone else stuff it for you?
The more I think about it the more I think that they can actually provide legitimate services in the same frames as vistaprint, teespring and others for these physical deliverables and just providing that fulfillment. Videos that I can schedule to release on patreon might just be worth it to some people.
>Deeper pockets could also allow Patreon to build out its suite of bonus tools for creators, some of which it could charge extra for. “There’s going to be new opportunities to build revenue streams into the product” Conte has promised me. He suggested that could include selling event tickets or merchandise, or better helping creators understand and communicate with fans.
With them having a partnership with a livestreaming platform, I wouldn't put it past them to do something to replace private YouTube videos. But I think shipping postcards or stickers or art prints is a much more direct way to more revenue, and could be relatively cheap to set up with the right partnerships.
Patreon is purely for gathering a fanbase with open communication between fans and creators and the ability to share content in exchange for support of the creators.
So a musician might link to private music videos on youtube with the financial supporters on Patreon first. Or they might provide a special .mp3 that is only available there.
As far as I know, Patreon doesn't actually have the capability to host videos itself (I could be wrong since I haven't looked at it in a while).
...Like how he hasn't had his name on a golf video game in years.
Essentially: pursuit of profit when it undermines your core competency is shortsighted.
Furthermore, he played his best golf when he was out whoring around.
Like, okay, Patreon has a staff of so many people for development, so many people for admin/moderation, and they have offices, and hosting, and whatever other costs I'm not thinking of. And all of those things need to be paid. I'm quite happy to give them a few bucks for every page of comics I draw in exchange for them making this lovely system to funnel money to myself and other creators, and keeping it running.
But the core mission of Patreon is "nothing short of helping every creator in the world achieve sustainable income. We’re making this happen by building the best platform for creators to make money, run their creative businesses, and connect with the fans who matter most." (Taken from their careers page, https://www.patreon.com/careers)
Once all those above costs are met by skimming off a small percentage of the money going through their setup, what do they do with that money? Do they start lowering their cut? Do they start donating it to charities? Fund other weird business ideas? Or just pay back the people they've borrowed money from, who won't be satisfied by anything but huge returns?
I know Kickstarter's built itself into a "public benefit corporation", which makes it explicitly bound to consider things aside from "how much money will this make regardless of other costs"; Patreon makes similar noises but I don't believe they've taken the step of formalizing this yet. And I would be delighted to find out I'm wrong on that.
A large portion of Patreon is artists asking for support for content they offer for free, with only token benefits for the supporters. Making the act of giving money as simple and convenient as possible is key in that scenario. Using a crypto-currency is pretty much the opposite.
Instead of paying Patreon with a credit card, you'd pay to buy this crypto currency. And then distribute it micropayment-style to all kinds of things.
Isn't anyone doing that? IMHO the hardest part is the Coinbase thing - collecting credit cards and dealing with chargebacks etc. in a compliant way in many countries.
The other stuff is easy - such as localization in many languages.
You know who does this also? Kickstarter. They just launched in Japan!
But aren't you then stuck with either one platform which does that, offering you no advantage over what Patreon offers today, or loosing a lot of the miscellaneous Patreon features for keeping Patreons and creators in touch in exchange for gaining censorship resistance?
It's certainly doable, but I think it would be a hard sell compared to Patreon or any regular centralized Patreon alternative.
If you're talking about something that's only usable on Patreon, then why a crypto-currency? It could much easier just be like gems in a clicker game. But then, they'd get some bad press for basically making people use casino chips.
> In exchange, Patreon takes only a tiny 5% cut.
I hope this is sarcasm, because if I had to pay 5% to make any other transaction I'd be fuming. With a marginal cost of facilitating a new patron near zero, I don't think creators or patrons will suffer this as Patreon grows.
Fyi... for comparison, Kickstarter fee is also 5% of funds raised. https://www.google.com/search?q=kickstarter+fee
[0] Holy shit is Pay Pal the most dysfunctional organization I've ever dealt with. Just verifying my identity as a business owner has meant weeks of me sending countless copies of my bank statements, phone bills and photo ID to Pay Pal staff because apparently comparing the address on the submitted documents with the one on file is too difficult a task. In the end it was easier to change my address on file so it matches the one of the submitted documents character by character (yay security theater). Of course when they finally verified my address I got an email that the copy of the photo ID I submitted suddenly was "too pale and is illegible as a result" and now I can't even access the verification process page...
Given that the basic cost for processing credit cards and other such minutia is already around 2%, the benefit of not having to worry about chargebacks, fraud, or PCI compliance... worth that extra 3% IMO.
At least in Google's case, antitrust-lawsuits in Europe and Russia are slowly working on making it possible to create viable competition to Google's Play Store. Maybe we'll see prices fall in the next decade or so.
Yes, you could technically use Patreon as nothing more than a payment processor by hosting all your stuff elsewhere and just linking to it from Patreon. But you still have to pay for that hosting, either directly or indirectly via ads. And part of the point of Patreon is to move away from ad-supported funding models. Of course, you currently have no choice but to use external hosting for some types of content, like videos, that Patreon can't host directly. But even then you still get all the community-building benefits of Patreon (and with YouTube comments being notoriously bad, providing a separate comment section might be a significant value-add). I wouldn't be surprised if Patreon added video hosting in some form in the future, probably via a partnership as they have done with streaming video.