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Comment by unawz | Hacker News Reader

There are over 300 sites similar to kickstarter now. Competition will drive down the 5% fee kickstarter gets, and sites will start competing by providing api's for managing multiple campaigns, as well as differentiating on providing marketing support.

This is a great opporunity for startups - both getting funded on crowdfunded sites and launching crowdfunded sites, because unlike the usual ad-supported business model or saas offering, serious money changes hands and every sector of the economy can be flowing through this.

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In 2 sided markets network effects can keep margins high since going to one of the 300 kick starter competitors may mean not getting your project funded.

I doubt their fee will go down ever.

There isn't a network effect in kickstarter. Whether you get funded is basically up to your social media campaign. Unlike ebay, you cannot be anonymously selling your wares with your seller score being your reputation. In crowdfunding you have to go all out - you already need a solid track record that is publicly visible. Funders are basically doing a due diligence check on you. You need a profile on many different sites and email newsletters etc. Crowdfunding sites are basically an reverse bounty system - a kind of api for gathering and dispensing money. The only differentiation between indiegogo and kickstarter at this point is the percentage they keep.

As regards ebay, their network effect hasn't worked out - amazon has taken their business. In the future Amazon or Google might come in take out all the crowdfunding sites by offering a reverse bounty api. At that point, the crowdfunding sites should move in to the function of providing marketing services for creators seeking funding.

I don't agree with you for many reasons:

1) Creating an account and entering banking numbers etc. is a real friction which is not easy to overcome.

2) People can go on Kickstarter and see a number of projects which they can fund without any prior knowledge of the person they are funding.

3) eBay is a $45B business which almost all of the value comes from network effects. Sure, Amazon is doing great (80B+) and is taking some of their business, but eBay is still a cash machine.

4) Looking at Indigogo it says that if you raise the money the fee is 4%. If you don't raise your goal the fee is 9%. While the 4% is better than 5%, my guess is that the total expected fee is actually above 5%.

6) Crowdfunding is not as simplistic as it appears on the surface. While not having the funding as an investment gets around many of the issues associated with the Securities and Exchange Commission, making a mistake could land an owner in jail or with substantial fines. Even if the owner did not mean to make something sound like an investment, if they do, it is a huge penalty. A simply API to create many more reverse crowd funded sites would not work out well on the average.

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