Can we fix it?

In Emerging Leaders Week, there were many discussions on storytelling. Industry professionals placed good storytelling above good design, advertising, and marketing. This made me think about the donor-based business models. As the content creation industry develops, creators feel the need to come up with new and intriguing serialized content. To support on-time delivery of the content, creators have given consumers the opportunity to help by setting up accounts on Patreon and the like. The key to creating a revenue stream from being creative is to build an audience. Storytelling of any sort needs to find its audience and when it does, things do take off as Kurtis Baute’s YouTube channel did.

Patreon is a crowdfunding site for ongoing content creation, not single projects of the type Kickstarter is targeted at. Patreon helps build a community around an artist and gives them the opportunity to try out crowdfunding and see if it works for them.

Lupa, a nature enthusiast and a costume creator from Oregon, Portland, speaks about her Patreon experience. She likes the fact that she has a bunch of people interested in what she creates and are willing to help her out financially; she feels that it boosts her creative abilities. Lupa explains that Patreon takes a sizeable cut (from $531 in pledges at the beginning of the month to $463 in her bank account) which is more than the 5% cut Patreon talks about in their FAQ.

Like with Facebook, Instagram, and Google, the challenges of a business model rising to be the best in its category is the amount of care given to the actual consumer. The people who pledge donations on Patreon are doing it purely out of goodwill to the artist(s). The challenge with one dominant business model is when it fails to evolve. The sign of growth is constant change and evolution. With business models of today, successful evolution becomes a difficult beast to slay. Patreon had been going at it with 85% of all pledges going to the creators until 2017 when they announced the change: creators were now going to get 90% of all pledges. This sounds great, right?! But this change was at the expense of the pledgers having to pay extra to cover up for that 5% gap. In other words, this made it more expensive to support multiple creators, to support creators who made more than one thing per month, or to support creators with a small donation.

The biggest challenge is trying to figure out a way to monetize the value and hard work that goes into creating content; then trying to charge the creator and the donator a fair amount for an exchange. It will be a happy day if someone can figure out an honest way to do so on the “Internet of Things”.

 

 

Tailoring the internet business model

Internet business models come in many different forms and styles. However, over the years there have been some business models for businesses and creators producing content that has seen undeniable success. The traditional model used to be ad-based revenue. This was based on print magazine and newspaper publishing which is dependent on ads. However, with the rise of ad-blockers and inefficient online ad campaigns, we have been forced to come up with some other means of basing our online businesses. There has been the rise of subscription-based business models such as Netflix and Medium. With the rise in Kickstarter and Patreon, donor-based business models have also been trending.

When business models become dominant, it’s tempting for many businesses and creators to join the bandwagon and make it work for themselves. Sometimes this does not work. For example, many creators have been lamenting about the pitfalls of creators and businesses using a donor-based business model.  Within the publishing industry, people have been wondering if there can be a publishing version of Netflix and Spotify. Though some publishers such as Kindle Unlimited is making it work, the kinks of subscription services for ebooks and audiobooks are still being worked out. Using a dominant business model doesn’t always work and I think it’s important to really tailor these business models to suit your consumers and your own business. I’d like to point out some examples.

Scribd and its attempt to use the subscription model

Scribd, an online publishing platform that includes ebooks and audiobooks, tried to be the “Netflix” of books a few years back in 2013. It followed the subscription model, however, they discontinued it in 2016 because it wasn’t working financially. They found that a small portion of their readers (primarily romance readers) were reading too many books a month (sometimes a hundred books a month). This was costing them too much. Unlike Netflix where Netflix licenses the rights to stream a movie for an unlimited number of times, Scribd pays publishers every time a book is read (a ‘per-read basis’). The subscription model just didn’t make sense for their ebook business.

Scribd switched to a credit-based model similar to Audible where with a monthly fee, you get 1 credit which gets you 1 free audiobook and then member discounts for books you have to purchase. This model helped them get back on track financially, however, in early 2018,  Scribd announced it was going back to a subscription-based model but this time with some limitations. It wasn’t going to be truly unlimited reading…they would cap certain readers every month if they saw they were accessing material at a very fast pace. Though I scoffed at this when I first learned about it, I now see that Scribd learned from its mistakes and tailored a popular business model – the subscription service – to work with the underlying publishing industry and consumer demand. It’s not perfect, but it’s working for them.

The Guardian and a blend of donors, ads, and sponsored content 

The Guardian online was working on a ad-based revenue system. But with the rise in adblockers they switched to a donor-based model as well. After many of the articles, there’s a call to make a one-time payment or becoming a monthly donor. Switching to a donor-based model worked for them and now they have over 500,000 regularly paying readers. They didn’t put their entire website behind a paywall or get rid of all ads but they blended in some other business models to work for their readers. There’s also promoted stories at the bottom of each article that also helps their profits. The Guardian can still keep providing quality for free with just a slight change in their business model. Their call to donate is also friendly and honest in my opinion.

 

I think the biggest challenge of dominant business models is looking at them and seeing if they can work for you or tailoring these new ideas to make it work. This can be tricky but some pretty creative solutions can come out from it. As Stephanie mentioned in her blog post this week, diversity in business models is very important. Just doing a quick Google search of “Internet Business Models” I am reminded that there are so many out there! We don’t have to just look at the dominant ones and make it fit our business.  there are so many different types of business models to choose from, mix and match from, and build off of.

From boardofinnovation.com, here’s 23 different kinds!:

Specifically for us, as creators and publishers, I think we have to always be thinking outside the box but also understanding what our readers (or viewers, listeners, users, etc) want. During Emerging Leaders, I was introduced to two more business models I’ve never heard of. One was serialbox.com where you subscribe to a plot that’s worked on by a team of writers (similar to a writers room), and every week you get an episode that you can either read or listen to. Another business I learned about during a mentor meet was Blendl.com, a news platform that charges you very little money (10 cents to 90 cents) per article. If the reader doesn’t like it they can ask for a refund. This promotes quality content and is also not asking too much from a reader. This micropayments model can be alluring for those who don’t want to commit so much money but is willing to give away small change for good reads.

Overall, we just have to keep learning and keep innovating.

None of the Above: Patreon’s darker side and an alternative solution

Patreon appears to have good intentions, claiming that artists who use this crowdfunding service “have a direct relationship with [their] biggest fans, get recurring revenue for [their] work and create on [their] own terms.” Plus, for handling all the nuisances of hunting down declined payments, shielding you from chargebacks, handling patrons’ questions and catching fraud before it hits your balance while also acting as a simple conduit for cash to creator they only take a 5% cut, plus that 5% transactions fees average. As a creator you get to keep 90% of what was given to you by your patrons. It’s not a horrible deal, but it could be better so why don’t the artists take back all the control and get rid of the middle man? Yes, I’m talking about a creative co-op for all these self-starter artists. Plus, that 5% cut for Patreon is only the tip of the iceberg of their not-so transparent ways.

Brent Knepper railed against Patreon in his article on The Outline, and believe me, I can empathize with the pains of being a starving artist. Patreon presented itself as a saviour, and hey, look at all its success stories! Except as Knepper points out, only 2% of creators make the equivalent of federal minimum wage. Knepper claims that Patreon began to consume his downtime, as he tried to attract his followers to his Patreon page. The Economist article about Patreon also criticized it for “not [creating] large new avenues to be discovered by unwitting fans” and that Patreon is the equivalent to the open guitar case buskers use to catch spare change. Yes, Patreon gives the overly-optimistic impression of being able to live off your patrons, and the reality of that only comes true for the top 2%. As creators it is better to just assume Patreon as your second or third revenue stream instead of a primary one.

Except there are more problems than what Knepper and the Economist article point out. Things haven’t always gone smoothly with payments, when they were accidentally flagged as fraud and through a series of banking errors and issues within internal company operations some creators were denied 50% of their earnings and weren’t even able to access the money that did make it through. If a creator depends on this income for their rent or paying out their team this has much larger implications. Plus, it’s not a matter of if Patreon is bought by Facebook or Google but when. While Patreon’s CEO claims the business model isn’t sustainable with the rapid growth its seen in the last six years, this is still a business that has seen investors flock to it like gluttons to a bottomless buffet. Patreon’s popularity and rapid growth make Goliaths like Facebook and Google salivate. This is more of a problem for creators and their patrons as the service distances itself from them and instead gives the product of its bounty to its new owner. And if Patreon goes down then how are you going to get your patrons to follow you to the next medium? It already took so much effort to get them to convert to your Patreon, so you can say bye-bye to revenue and hello to square-one.

There has to be another option for artists to be supported by their fans, and one that doesn’t take the same amount of effort as the Memberful plugin (it’s like Patreon except the creator does all the work, from customer service with your patrons to cases of fraud or bounced payments). So what’s the solution? Take out the middleman. Patreon “extract[s] value and distribute[s] it to shareholding owners who seek a return on investment,” but if artists band together to create a platform co-op where ownership and management of the enterprise would be distributed to those using the service. With this model the artists would actually be prioritized and wouldn’t have to rely on another benevolent overlord. This could also be a solution for creating a real community of artists and a network of discoverability for the patrons who fund their favourite creators. What it’s going to take is a small group of determined artists who are willing to put in the elbow grease to make a co-op happen. Take that energy you put into Patreon and really invest it back into yourself and your fellow creators.

Sources

Patreon, Kickstarter and the new patrons of the arts

No one makes a living on Patreon

Patreon

Patreon creators scramble as payments are mistakenly flagged as fraud

Patreon CEO says the company’s generous business model is not sustainable as it sees rapid growth

Comparing Patreon and Memberful

A Shareable Explainer: What is a Platform Co-op?

A Look at the Patreon Model

The fact nobody supposedly makes a living on Patreon has never been an issue to me. It is a supplementary form of income that allows artists, cosplayers, writers, podcasters, and more, to put their work behind a paywall or to receive donations from fans. Unlike how Patreon advertises itself, it is not the ideal model for creators to survive off of freelancing. Still, it serves its purpose and enables creators with a platform to have a little bit of extra money each month. The problem that I’m seeing more and more of is the gigantic gap between Patreon’s profits and priorities versus that of the Patreon artists.

In Keith Parkin’s Medium article in 2017, he asked, “Is Patreon a Scam?” In the article, Parkins highlights the platform’s controversy where it was proposed that patrons pay an extra 0.37 cents per pledge, thus hurting less popular creators who rely on their accumulation of 1 USD subscriptions. In the quoted twitter thread, Julie Dillon argued that even those few extra dollars a month can be life changing, and that it hurts to have the platform dismiss this. Of course, the changes were rolled back and Patreon apologized, but the change ultimately revealed the core philosophy and priority behind the platform. The change would have been devastating for small creators (who make up the majority of Patreon), somewhat profitable for larger creators, and incredibly profitable for Patreon. Twitter user @Burrito_Tim calculated that with his pledges, the platform would receive 118% more after the change. Again, even though this new policy was rectified, Patreon is in a position to decide that the demands of investors and their own pursuit of profit outweighs the bad PR of small creators’ outcries. After all, according to Patreon, they only value the “truly life-changing creators.”

In 2017, Patreon received around 60 million in investment capital from Thrive Capital after already having received 30 million from them in 2016, and 17 million in 2014. According to Dan Olsen, Patreon has only actually earned 55 million in revenue since 2013, which makes it highly unprofitable expense right now for those who have invested in it, thus placing further pressure on the platform to generate revenue streams that serve neither the consumer nor the creators.

After the Patreon CEO’s recent announcement that the platform’s current model is “unsustainable,” twitter user Dan Olsen predicts, “series of ill-advised feature rollouts, like they’ll probably go gonzo and build a livestreaming platform or pivot to Fortnite or buy Teespring or something equally confusing, with a slow degradation of the core user experience. Like you’ll sign in and there’ll be six popups asking if you’ve tried Patreon Mega and extolling how it can help you mega-engage with your audience, while you’re just like “can I have a commission button so people can make one-time payments?” and they’re like “no.” Unfortunately, the increasing demand for Patreon to focus only on trying to draw more Hank Green-type clients and profit off of them means the site is often neglecting its primary user base.

There will also likely be a big push to find ways to further monetize creators and have them pay for a better experience. So what is the solution then? I definitely think there needs to be a cooperative platform version made for and by creators. The cooperative version ideally would respect both the small tier and top tier creators, have more payment options that would allow for grouping together as channels and one-time commission payments, and it would have a model that does not overcharge for payment transfer fees. It would serve the creators, rather than treating them like serfs. Until then, creators using Patreon at the mercy of a platform that is at the mercy of venture capitalists. We need more platforms for creators that will put proportionally put money into the hands of workers rather than the pockets of corporations that are looking to just expand the value of the platform so they can sell it for a profit. When the latter happens, the “target audience” of the platform becomes its venture capitalist investors, and what follows is censorship, and a website that ultimately does not prioritize its users.

Citations:

https://twitter.com/FoldableHuman/status/1092870599985123329

https://theoutline.com/post/2571/no-one-makes-a-living-on-patreon?zd=1&zi=pmnmzelf

https://medium.com/dark-mountain/is-patreon-a-scam-a9d0e38bd69e

So Much Depends/ Upon/ So Many/ Business Models

In any ecosystem, heterogeneity is a healthy thing. We love flowers and they’re beautiful, but if Vancouver *only* had flowers—no trees, no grasses, no vines or bushes, the ecosystem would collapse. Likewise, if we only had, say, Maple trees and violets and no other trees or flowers, we would have an impoverished ecosystem because only a select few other plants and limited animals would be able to survive here.

The same is true of any market. The danger of any business model—Patreon, Kickstarter, or ad-generated revenue—becoming dominant is that each of these models allows for a certain type of content to survive. Patreon works ideally for artists who have grown a platform elsewhere and have an ongoing artistic practice that would exist with or without patrons—that is, it works best when the income earned is supplemental as opposed to substantial. Of course some people do survive off of their Patreon income, but as we’ve seen, that’s an incredibly small percentage of people using the platform, and I think putting this expectation on the platform is unreasonable.

Kickstarter, on the other hand, works best when it’s enabling a project to move forward. As opposed to Patreon, which has little-to-no community or tools for discovery, it is possible to find projects on Kickstarter without knowing *exactly* who—or what—you’re looking for. For this reason, having a following is definitely beneficial but not absolutely necessary in the same way it is with Patreon. Where Kickstarter (and other crowdfunding) platforms excel is actually in building awareness and support for projects—monetary and otherwise. For this reason, it’s best suited for large, one-off projects that exist outside of an artist’s regular practice.

The existence of ad-generated revenue is also essential because it allows for “free” content, or at least content that is widely and openly accessible without the user having to pay money. Because the Internet is so ubiquitous in, and in many ways, essential to modern life, it’s important that there are services, communities, and content that are accessible without a fee. This is, of course, outside of the conversation about privacy and the politics of collecting information in lieu of a fee, which isn’t necessarily an ideal substitute for a fee. That being said, however, while I use Facebook (for communicating with fellow cohort members and for finding out about/RSVPing to events,) I’m not sure that I would pay for it. Personally, I’m okay with the exchange of some online privacy for a service that I feel is useful but not absolutely essential.

Part of what makes the Internet as great and useful (and at times scary) is that it allows for so many different types of content and creators to flourish. As with almost anything, however, one size does not fit all, and too much of a good thing is not a good thing. In my opinion, the Internet benefits from creators with an ongoing artistic practice, creators with big ambitious ideas, and free services, and for all of these to survive, there needs to be a variety different business/funding models to properly support them.

Patreon and the Business Model Question

I think that the biggest challenge and consequence of particular business models becoming dominant is that they are seen as the only options, in the same way that we talked about how capitalism is seen as the only option by many Westerners because it is the most prominent and visible choice.

Many times, lack of diversity leads to abuses of the system at the top, which limits the ability of the creators and the consumers. We can see that in instances like Facebook or Tumblr, where there is a complete disconnect between the admin and the users, but there isn’t really anywhere else that users can go to access the same content.

We can also see it in the case where decisions made on the corporate side of Patreon could affect the way that users could monetize, sending them scurrying to find a new way to collect money from people online but there was nowhere for them to go. Ko-fi is not as widely used as Patreon and it is difficult to set up their own secure methods of monetization on websites.

Many creators rely on Patreon for a significant portion of their annual income in order to continue making their art. When Patreon announced that it was changing its fee structure there was general outcry from creators. Natalie Luhrs scathingly wrote, “The solution, however, seems to be one which is designed to put significantly more cash into Patreon’s pockets as well as the creators’.”

If Patreon had decided to go through with their change, Luhrs states that it would pretty much make any contributions under $5 obsolete. She attaches the graph below with numbers she ran to contrast the proposed fees from Patreon with the current system and states that ” The difference is glaringly obvious” (Luhrs).

If these changes had gone through the users of Patreon would be given a hard choice– either abandon the platform for something else (something unknown, as there are no players in the market currently who seem to be able to compete with Patreon) or accept a big cut to their monthly income.

Luckily Patreon backed out of their decision because of the outcry from creators. They posted a stumbling statement with a title that reads more like a desperate boyfriend trying to get their girl back after they fought than a company apologizing to their users, “We messed up. We’re sorry, and we’re not rolling out the fees change.

This is clearly a choice they made because they knew that their business would collapse if their creators abandoned the platform. In the article, Jack Conte lists all the problems that the fee created for Patreon users as though they didn’t know about them beforehand and it was only brought to Patreon’s attention because of the outcry, but I find that difficult to believe. This is another instance where the disconnect between admin and users can lead to abuses in the system.

Until more models with different services arise I believe there will be a power imbalance between those who run websites and those who use them/ create content.

Work Cited

Conte, Jack. “We Messed Up. We’re Sorry, and We’re Not Rolling out the Fees Change.” Patreon Blog. December 13, 2017. Accessed February 17, 2019. https://blog.patreon.com/not-rolling-out-fees-change.

Luhrs, Natalie. “Funny Money, Patreon Style.” Pretty Terrible. December 12, 2017. Accessed February 17, 2019. https://www.pretty-terrible.com/funny-money-patreon-style/.

Something’s Gotta Give: The Perils of Dominant Business Models in Online Environments

The general consensus seems to be that the current online advertising system is broken. People don’t like online ads (based on views and/or clicks), so AdBlock Plus is extorting publishers and content creators like some kind of digital mafia boss, with those who rely on ad revenue helpless to stop it. This makes actually making any money very difficult, especially when we tend to pass on the responsibility of dealing with the current broken advertising model, and then use the excuse of “neutral” platforms, software and extensions to explain why it is not our job to fix them/why they cannot be fixed. Of course, no platform, software, or extension is neutral. At some point in the process, a biased human being is on the other side of the screen making very biased human decisions about how things are designed, and how they operate. If we want to fix the system, we shouldn’t “[…] build systems that let us pass the buck to someone else, in exchange for passing them a few bucks”; we should demand and take responsibility for the things that affect us. Or, at least, that’s Anil Dash’s argument.

I think this is easier said than done.

The problem with a single business model becoming dominant in an online environment, and in fact in any environment, is that no one model is infallible. Being completely reliant on a single revenue stream makes you vulnerable should that stream dry up. Furthermore, when a business model becomes dominant, it limits the incentive for business owners to create or build new models or go looking for other revenue streams—if it ain’t broke, don’t fix it! This stagnancy and lack of creativity makes the model vulnerable as the market evolves, until everyone is in crisis because, say, traditional online advertising no longer works as effectively (if at all) in a digital environment. This “panic mode” either forces creativity and an evolution of the model, or demands its replacement with something more sustainable—and the cycle continues. This loop can be seen in the evolution of TV and radio advertising: forced to compete with Netflix and rapidly changing social climate, TV advertisers have been forced to become clever in their ads.

With the rise of ad blockers, it looks like we’ll soon be seeing the same shift in online advertising—though if advertising will change, or if business models will shift to remove it from their revenue streams completely still remains to be seen. Either way, something’s gotta give.