Patreon isnt making enough money - When 5% of a billion for being a middle man won't do

https://www.cnbc.com/amp/2019/01/23...lion-dollars-to-content-creators-in-2019.html

Patreon CEO says the company's generous business model is not sustainable as it sees rapid growth
Brandon Gomez | @bgomezreports
Published 3:41 PM ET Wed, 23 Jan 2019 Updated 2 Hours AgoCNBC.com

• “Patreon needs to build new businesses and new services and new revenue lines in order to build a sustainable business,” said Patreon CEO Jack Conte.
• Patreon will send content creators more than half a billion dollars to fund their membership businesses in 2019.
• More than $1 billion will be paid out to creators since the company's inception in 2013.
• There are more than 3 million patrons supporting more than 100,000 creators on Patreon.

Vasily Pindyurin | Getty Images


Crowd-funding service Patreon announced its latest benchmark Wednesday, with more than 3 million patrons supporting content creators each month through the company's platform.

Patreon allows illustrators, authors, podcasters, musicians and other independent creators to receive crowd funding directly from their audience.

The number of active patrons supporting artists on the platform in 2019 has seen significant growth, up 1 million over the last year, the company said. The company is also on track to pay out $500 million to content creators in 2019, pushing the company to surpass $1 billion in payouts since its inception in 2013.
Under the company's current business model, 90 percent of funds are paid directly to content creators. Patreon takes 5 percent, and the remaining 5 percent covers transaction fees.

Patreon
Jack Conte, founder of Patreon
Patreon CEO Jack Conte said in an interview with CNBC that the platform will soon be facing the challenge of maintaining a profitable model as the company continues its growth.

"The reality is Patreon needs to build new businesses and new services and new revenue lines in order to build a sustainable business," Conte said.

The company does not currently provide contracts, which allows users to retain 100 percent ownership of their work and full control of their brand.

The company plans to provide creators with new "value services," like options for merchandising, to generate new revenue. Creators will be given the opportunity to participate in these services, and it could ultimately reduce Patreon's generous 90 percent pay-out model.

"We will have to re-examine how we charge for new services as we put them out," Conte said.

Conte said with added revenue streams the company will continue to redefine the space of creative content creation and aggregation – currently dominated by YouTube, Spotify and other various subscription services.

He said the "feeling of support and connection with artists" along with the "transactional benefit of membership" encourages users to pay for content that they can otherwise receive for free.

Patreon is no stranger to the editorial controversies that plagued other big tech companies in 2018.

Top Patreon creator, author and podcaster Sam Harris deleted his Patreon account in December, and accused the company of political bias after several conservative accounts were removed for being associated with hate groups.

"We don't allow hate speech, which other platforms say they don't as well and Patreon really means it," Conte said. "You can't just say anything you want in the world and we don't want to build that platform."

The company also revised its content policy in 2017 to eliminate the site's use for the exchange of adult-themed photos, videos and content.

Conte said as the company grows it plans to build more enhancements, features and integrations to help every creator easily activate their membership business and focus on creating.


© 2019 CNBC LLC. All Rights Reserved. A Division of NBCUniversal

 

[2 litre soda]

And they're headquartered in San Francisco: isn't that excess? Couldn't they operate for significantly less elsewhere?

Because, for a lot of these people, they fundamentally do not understand what is it that they are doing.

Allow me to unpack that: Spotify is a music service. They play music. It's an MP3 player connected to the cloud, and happens to have just about every song uploaded to it. That's all it is. The only reason anyone has Spotify is because of the music. If Spotify did not provide music, they would be out of business in seconds. No one would subscribe for curated playlists or concert announcements or the green logo or any of that shit.

The people who own Spotify are under the impression, for some reason, that Spotify is the "App", and that it is the app that provides the value, not the access to the music. Having a cell phone app does not change the fundamental underlying business very much.

AirBNB is a hotel service. Slack is just a chat room. Uber is a taxi cab service.

But they don't want to be "just" that. Running a taxi cab company is not glamorous or hip. It's grimy and ugly and makes you think of a young Danny DeVito yelling at Andy Kaufman. Poor people use taxis. There are no tube lights or LCD Soundsystem or brain damaged European models with adjectives for names lining up to hang with a guy who owns a cab company. But if you're the hip tech developer of a disruptive app that's changing the paradigm for how transport occurs? Well, you're still not getting the models, because they're leaving with Detlef and Jürgen from Deutsche Bank, those Aryan gods who look just like the guys that used to beat you up in high school. But you could easily take home Margaret, the blue haired girl in the NASA t-shirt who likes 3D printing a bit too much and her friend Simone, who wants to tell you all about the time she went on a journey of self-discovery and learned how to be more emphatic in South America. Take that, Troy Preston, team quarterback! You might own your own lawn and sod company with your Uncle, but have you had two girls at the same time and created an app that tracks how close your taxi is to arriving to pick you up?

And you need a place to store these women, and your friends, and their girlfriends, and their girlfriend's boyfriends, and their girlfriend's friend's girlfriends... They can't be just stuck in a repurposed supermarket in rural Wyoming because there's nothing to do there. They want to live somewhere fun, where there's easy access to Disneyland, and bring your dog to work day, and new ethnic restaurants opening every week, and a bank of telephones that leads to a secret club house, and a ball pit, and daily catered taco lunches (vegan, gluten free, GMO free, ethically sourced, not appropriated from non-ethnic Mexican cooks), and you, egotist that you are, are too stupid to realize that you could have just bought Alison Rapp or someone just like her outright for less than a tenth of what you're paying to maintain your daycare center/petting zoo and saved yourself all of this headache. Because you don't want to be like your father, or your grandfather, who worked in dull grey offices and cared about "money". No, you're the "fun" boss who has dance parties and wears sneakers every day ("Utilikilt Fridays!"), and calls his employees his friends. You're in business to make people's lives better and to improve the world. Who cares about things like "money" when it comes to running a business? You have prestige and respect and you've won.

Until the bills comes due, or the government tries to regulate you like the business you are, anyways. Then you're just a taxi cab company again, looking at a balance sheet, all your fancy trappings be damned.

 

[Foxxo]

Because, for a lot of these people, they fundamentally do not understand what is it that they are doing.

Allow me to unpack that: Spotify is a music service. They play music. It's an MP3 player connected to the cloud, and happens to have just about every song uploaded to it. That's all it is. The only reason anyone has Spotify is because of the music. If Spotify did not provide music, they would be out of business in seconds. No one would subscribe for curated playlists or concert announcements or the green logo or any of that shit.

The people who own Spotify are under the impression, for some reason, that Spotify is the "App", and that it is the app that provides the value, not the access to the music. Having a cell phone app does not change the fundamental underlying business very much.

AirBNB is a hotel service. Slack is just a chat room. Uber is a taxi cab service.

But they don't want to be "just" that. Running a taxi cab company is not glamorous or hip. It's grimy and ugly and makes you think of a young Danny DeVito yelling at Andy Kaufman. Poor people use taxis. There are no tube lights or LCD Soundsystem or brain damaged European models with adjectives for names lining up to hang with a guy who owns a cab company. But if you're the hip tech developer of a disruptive app that's changing the paradigm for how transport occurs? Well, you're still not getting the models, because they're leaving with Detlef and Jürgen from Deutsche Bank, those Aryan gods who look just like the guys that used to beat you up in high school. But you could easily take home Margaret, the blue haired girl in the NASA t-shirt who likes 3D printing a bit too much and her friend Simone, who wants to tell you all about the time she went on a journey of self-discovery and learned how to be more emphatic in South America. Take that, Troy Preston, team quarterback! You might own your own lawn and sod company with your Uncle, but have you had two girls at the same time and created an app that tracks how close your taxi is to arriving to pick you up?

And you need a place to store these women, and your friends, and their girlfriends, and their girlfriend's boyfriends, and their girlfriend's friend's girlfriends... They can't be just stuck in a repurposed supermarket in rural Wyoming because there's nothing to do there. They want to live somewhere fun, where there's easy access to Disneyland, and bring your dog to work day, and new ethnic restaurants opening every week, and a bank of telephones that leads to a secret club house, and a ball pit, and daily catered taco lunches (vegan, gluten free, GMO free, ethically sourced, not appropriated from non-ethnic Mexican cooks), and you, egotist that you are, are too stupid to realize that you could have just bought Alison Rapp or someone just like her outright for less than a tenth of what you're paying to maintain your daycare center/petting zoo and saved yourself all of this headache. Because you don't want to be like your father, or your grandfather, who worked in dull grey offices and cared about "money". No, you're the "fun" boss who has dance parties and wears sneakers every day ("Utilikilt Fridays!"), and calls his employees his friends. You're in business to make people's lives better and to improve the world. Who cares about things like "money" when it comes to running a business? You have prestige and respect and you've won.

Until the bills comes due, or the government tries to regulate you like the business you are, anyways. Then you're just a taxi cab company again, looking at a balance sheet, all your fancy trappings be damned.

The absolute state of millennials.

 

[shartshooter]

This is great timing if Patreon gets a notion to fuck itself the moment alternate platforms start going online. The scarier concern is still credit companies stepping in to moderate content. Getting subscribers to switch websites is a smaller mountain than getting people paying in crypto.

 

[Tealeaf]

I've heard about that. Can Dick really throw together an alternative for nothing?

Nope, but he could bill payment processor fees separately. That’s a big cost center to provide for free.

Just hosting the service can reasonably be charity, unless it also dips into content hosting business which again starts to cost.

 

[TowinKarz]

The absolute state of millennials.

It's the .com boom all over, except they think phone apps are different, somehow...... hasn't Uber still failed to make a single buck of profit?

 

[Foxxo]

It's the .com boom all over, except they think phone apps are different, somehow...... hasn't Uber still failed to make a single buck of profit?

If it's providing a service that people use, then investors will keep it afloat. Uber (and YouTube and Patreon) are far different from the likes of Pets.com.

 

[Cosmug]

There are people in business to make money and then there are people in business to get ass-kissing interviews about being business owners. Hair gel and fung shuei matter more to them then making sure the lights stay on.

 

[TowinKarz]

Venture capital isn't going to keep coming in for Uber if they don't show signs that profitability is possible at some point next decade...... just like the .com era, at some point, you have to be profitable and off the investor's teat... they may have more patience in the woke era if you say the right words to them, but investors at some point want their money back.

The fact they threw in the towel on clickbait media tells me a lot of these "hip app" operations are next.

 

[AssRapistDude1488]

As fun as it is to shit on hipsters, there are business reasons why these bullshit companies operate out of San Francisco and NYC. Most importantly, venture capitalists live there, and the venture capitalists want to exert as much control over their investments as possible.

The way the VCs market themselves, a good venture capital firm will help you run your startup - they'll help you navigate business issues that a programmer might not be aware of, and they'll put you in touch with vendors, clients, and their networks of professionals so you can hire the best for your company. They aim at investing in firms where the founders are younger and more naive, so they don't have their own networks to draw upon, don't have any money themselves, are less experienced in how business works, and won't play hardball with the VCs themselves at the negotiating table. The sort of founders they target either a) don't know any better and/or b) can't get investment capital from more traditional sources (commerce banks, etc) because the business model they're aiming for is unproven, risky, and often times straight up stupid.

As nutty as it sounds, the venture capitalists often demand that the companies get headquartered within driving distance of their own offices so they can quickly do in-person meetings. They handwave away the increased costs of doing business in these places by saying that the company will make so much money that the office and HR costs will amount to a rounding error. That's rarely the case, but that's what they say. For example, reddit (IIRC) was originally started in Virginia, and opened an office in Salt Lake City. When the company got bought out, the offices got moved to SF - Conde Nast wanted reddit near other companies in its portfolio.

VCs are why patreon's having this "sustainability" issue, apart from the costs imposed by being headquartered in SF. The VCs make investments on the idea that they'll get a 1000% ROI on ten investments out of 100 and lose money on the rest. As patreon is now, they are not going to be a billion dollar (in profit) company any time soon, and aren't on track for a massive IPO, even if patreon has a sustainable business model (IMO it does). The VCs are pressuring the shit out of Conte to increase profits.

Often times tech companies that get started by older people don't end up being located in SF/NYC, because the founders have their own networks and are less naive about how the world works.

 

[Grotesque Bushes]

Then I learned they had like 50 staff. WTF.

Why does Patreon need a staff? It needs one person to manage the technical end and one person to keep the financial side sweet. That's the whole business.

Fuck no. For the sheer amount of data they're storing & processing they need a bunch of IT professionals. The fact that some of that is financial data [i don't have a Patreon account and can't be fucked to create one, so I assume they're using a third party processor that stores the actual sensitive stuff, but that still leaves Patreon with names, addresses, amounts and dates on their end - that's a juicy target in and of itself] also raise the stakes. They'd need a datacenter team, a database analyst or two, a dev in charge of that website of theirs, a network team and a dedicated infosec person - all in all roughly a dozen people for a lean structure that allows the company to make money. You could double that if you want a stress free environment with 24/7 coverage.

 

[QI 541]

So I'm curious if anyone in this thread actually understands how business and corporations work.

 

[Haramburger]

So I'm curious if anyone in this thread actually understands how business and corporations work.

Patreon account owners don't know how it works. tumblrcow Jessica Udischas' hot take on it:

"I stopped doing the comic my Patreon is for, to do commission artwork to bank up for a winter trip to Hawaii."

 

[Coccxys]

Dear patreon e-beggars you can't escape the meritocracy of the job market. You can avoid it for a while but you going to be paying that Piper.

Just move the whole operation to a warehouse in Detroit and put out a press release about how you're doing so to help underprivileged poc into tech jobs by giving them experience and helping to rebuild communities. Tell your current employees they're welcome to keep their position in the company at the new location no redundancy payouts because they quit (despite what they say they don't want to live among hoodtrash). The media jerking them off would drown out the complaining exemplyees.

 

[Sam Losco]

View attachment 658497
Something something sex work is real work and western women are actually more oppressed than ones living under Sharia
(The average patron is paying $775 a year and she makes $1.85M before taxes, an arbitrary amount of which is likely written off as expenses)

Holy shit, that bitch is getting over 100k a month?! Have you ever heard her talk? She's as dumb as dirt. Makes me sick.

As for Patreon, what a completely fucking loser to be failing at this. Maybe when they fail, I'll take the suggestion of someone else here and start a new one based in Nebraska and use a lot of remote workers. Just hire a few accountants to manage all the tax shit, couple lawyers, and just sit back and get rich.

 

[Sissy Galvez]

If they are projected to pay out $500 million this year alone that means they're anticipating processing nearly $550 million in pledges. If they take just 5% for operating costs that means they stand to rake in about $27.5 million over the course of the year. If they hike that percentage just one point higher that would mean Patreon's "cut" would increase to $33 million, a difference of $5.5 million.

I highly doubt most people would feel slighted with a fee increase of one percent, and if Patreon can't figure out how to fix their shit with a magic surplus of five million dollars then I guess the company imploding on itself was inevitable.

You would think that but many of these ebeggars are scraping by because getting a 9-5 job would crush their spirit. They’re just all completely worthless and incapable of functioning in normal society.

Here’s an idiot whining about Patreon paying for her rent and whining about how she loses patrons at the start of every month yet getting a steady job is not even considered/out of the picture. They want to succeed and be successful at their chosen profession.

Maybe don’t choose ebegging as your sole source of income or a way of life????

 

[Coccxys]

You would think that but many of these ebeggars are scraping by because getting a 9-5 job would crush their spirit. They’re just all completely worthless and incapable of functioning in normal society.

Here’s an idiot whining about Patreon paying for her rent and whining about how she loses patrons at the start of every month yet getting a steady job is not even considered/out of the picture. They want to succeed and be successful at their chosen profession.

View attachment 658603 View attachment 658604 View attachment 658605 View attachment 658606

Maybe don’t choose ebegging as your sole source of income or a way of life????

"I should be able to live comfortably doing whatever I want."
"Why aren't they happy just breaking even?"

 

[Sissy Galvez]

Her art is terrible, completely dog shit. It’s all anime, lesbian, shota garbage.

Something else I’ve noticed with the ebeggars is they also have a very inflated sense of self worth.

 

[TowinKarz]

Maybe don’t choose ebegging as your sole source of income or a way of life????

It's like eBay, but instead of bidding on old toy trains and sports cards, you're bidding on the ego of a total stranger.... now that I think about it.

 

[Coccxys]

Something else I’ve noticed with the ebeggars is they also have a very inflated sense of self worth.

It's the millennial way, their contribution to society is vital, far more important than those blue collar pesants with their plumbing and electrician jobs. See also millennial "journalists". In reality society wouldn't notice if they all disappeared but we'd sure as hell notice of the plumbers all go but they don't understand that for some reason.

 

[Kosher Dill]

The fact that some of that is financial data [i don't have a Patreon account and can't be fucked to create one, so I assume they're using a third party processor that stores the actual sensitive stuff,

Not to mention they probably need a whole department of full-time compliance guys just to deal with all the government regulations and payment processor rules.