The Patreon Fiasco: Jack Conte tells creators “We ****ed up.”

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The creative community is still waiting on Patreon to officially address the new policy of passing transaction fees on to the patrons (backers), but it appears that co-founder and figurehead Jack Conte has been calling some of creators to discuss the situation with them.  Jeph Jacques, the cartoonist behind Questionable Content (over 5,300 patrons as of this typing. though the number of patrons as been… fluid… for many Patreon creators in the last few days) tweeted about his conversation with Conte:

 

Patreon is going to have a tough time selling both their base of creators AND their patrons on keeping those new fees.  And let’s be clear, there is no Patreon without backers.  The tone of their rollout wasn’t exactly reverential to their patrons.  One might almost say somebody on one of their product teams thought patrons should be obligated to pay those fees.  Not a good look.

Speaking of “not a good look,” one of Patreon’s Growth PMs wrote a piece about the thinking behind their efforts to recruit new creators.  The link has been circulating and the phrase “pouring gasoline on a fire” doesn’t begin to do it justice.

In a sense, the piece is written from the perspective of an engineering culture that’s looking to maximize returns.  The trouble is, maximizing returns might not be consistent with Patreon’s stated mission of getting artists paid and a lot of people are reading some scorn into some of the passages.  Nothing there is necessarily incorrect from a business process standpoint, but… well, let’s hit the highlights and you’ll see for yourself.

We have very clear, rigorous internal criteria for what we consider financially successful — there is a specific threshold that we’ve found to be “life-changing” for our Creators.

It’s a number where we believe the platform has meaningfully changed a creator’s life and ability to create more, focus more on their craft, and in many cases go full time.”

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2. A meaningful life change for a financially successful Creator –> more Creators

The second reason why active FSCs works as a north star metric is because the designation indicates that Patreon has effected a meaningful life change for a Creator.

Raviv explains, “We’d rather have our GMV be made up of fewer, but truly life-changed creators rather than a lot of creators making a few dollars.”

This is because while active FSCs do bring on significantly more Patrons (the fans who support them), they also bring on more Creators. The bigger their success, the greater the aspirational value it carries.

For the company, Patron growth is a linear lever, while Creator growth is an exponential lever. Patron growth is a given as long as there is Creator growth. At Patreon, Creator growth is key not because it triggers more Patrons (it does that as well), but because it seeds more Creator growth.

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This posed a conundrum for the growth team. For example, an 80% drop-off at a given onboarding step would typically be alarming to any other growth team working on user activation.

But at Patreon, a big drop-off could actually mean something good is happening — unqualified leads are getting weeded out.

By the same token, a high-converting step could actually result in turning away the right Creators, because suddenly there would be lots of live Patreon pages with uninspiring revenue results (Creator earnings are publicly visible on each Patreon page).

Now… let’s be clear.  What the *ahem* extremely sensitive fellow writing this is talking about is his concern that Patreon doesn’t scare off any high rollers as they’re attempting to set up their account.  It’s not bad if they loose some potential tiny players as long as they keep the big ones coming.  Again, from a pure business standpoint, that makes perfect sense.

On the other hand, the whole passage lets you inside of some of the things Patreon users — and the folks who’ve shied away from Patreon — have been complaining about.  It talks about how “a financially successful Creator is not only more likely to have a pre-existing audience that they — and Patreon — can monetize,” which is hitting the discovery nail on the head.  Patreon has always appeared to be reliant on pre-existing audience.  Discovery is a huge problem there and it’s questionable how much effort has been put into addressing that problem.

 

Now… it should be emphasized, this is all coming from the user acquisition standpoint.  Not the head of the company.  Growth will have their own specific needs and yes, there’s going to be an emphasis on landing Creators with large following who can effectively blunt force hammer that pre-existing audience with emails and tweets about their Patreon page.  But it sure doesn’t sound very good to anyone looking to grow an artistic career from an earlier stage.  In fact, you can see where people are taking these comments as hostile, especially when the smaller players appear to be getting hit worse by the new fees.

Let’s just say Patreon didn’t make any friends in the creative community discussing all that so publicly.  The Patreon community on Twitter sure is taking it as an educational document, though.  We’ll see if that’s addressed along with the new fees when Patreon breaks their silence on the matter.  It does sound like we should expect some new announcements on Monday.  It isn’t clear how much anyone is going to like them, though.

If these new fees really are “just to keep the lights on” so soon after an investment round, that’s a pretty interesting topic all by itself.

Want to learn more about how comics publishing and digital comics work?  Try Todd’s book, Economics of Digital Comics

12 COMMENTS

  1. Coming from someone with a more nonprofit focused business education, this approach just looks horrifyingly bad.

  2. Are there alternatives to Patreon? For now I’m still giving my comic away for free and trying to build an audience, but I’ve been thinking about setting up some kind of crowdfunding account next year.

  3. If Patreon had this “transaction fee” set up closer to the way LibraPay does theirs, I think it would be far more functional and not be making people so angry.
    LibraPay gives users a “wallet” – you deposit money in this holding account and are charged one transaction fee per deposit. After that you can distribute the money from the wallet across as many creator accounts as you want and you are charged no additional fees.
    In fact, people have noted that Patreon only charges your card once at the end of the month for the sum total of the donations you’ve signed up for – so going back and charging a per-donation transaction fee seems really weird and dishonest given that there appears to be only one credit card transaction.

  4. I work as a software developer for a university with an online school. Most of my work is involved with the records for applicants and the interactions with current students. It’s not a perfect analogy to the Patreon model, but the article put out by the Growth PM has a lot of language that I’ve seen in my time.

    From a purely business perspective, Patreon itself survives by getting “successful” creators and “worthwhile” patrons. Universities continue as a business by processing “worthwhile” applicants and keeping “successful” students. (Quotes are not from the article, but to emphasize the arguable definition of those words.) When viewed as a process, subject to efficiency analysis, you start having to define those terms…

    And that’s where the problem comes up (and the current controversy). It’s like the old adage about “no one wants to see how the sausage is made”: The sausage-production team has come up with a great idea for improving the process, but their language is horrific, as well as the side effects of the announced change.

    In Patreon’s case, the issue isn’t the sausage-making, but that Patreon is not a sausage factory. Their public mission is to match up artists and supporters, and the money-processing aspect is a required, but not the primary, factor in supporting that mission. People come to Patreon to give a little back to the artists who inspire, entertain, and comfort them. I’m a supporter on the site, and I believe that most supporters and artists feel generally the same.

    But when the public mission appears to be undercut or overridden by a required-but-not-nice process, then it feels like the supporters and artists are being taken advantage of. Members of a feel-good community do not like to be discussed in terms associated with business models and efficiency experts. It makes everyone feel like the whole thing was a scam.

    I don’t believe Patreon is or was ever a scam. But I do believe that they’ve hurt their reputation and good will. I also believe that it was a mistake a lot of businesses and organizations can fall into if they are not careful. Regardless of how this shakes out in the end, I hope that Patreon or other endeavors learn the correct lesson.

  5. Shannon,

    That is one thing that is changing. Right now, patron are charged one time, but after this change, each pledge will be processed individually on the anniversary date you started with that creator. That is one misconception that I believe is adding to the unhappiness people are feeling towards this.

    I don’t like the change, or how Patreon is going about it, but once I realized that this is part of the change, it made a little more sense… Still don’t like it.

  6. I work for an engineering company managing exactly this sort of thing. (Me team qualifies new leads, brings big ones on, and turns ones away that would cost more than our profit threshold.)

    Paetron is doing it the wrong way. You can’t look at your customer’s revenue and then try figuring out a way of funneling more of their revenue to you.

    This is so bone-headed.

  7. What I simply don’t unrestand is why they thought that de-bundling transactions is a good idea at all. It doesn’t make sense to me. If a patron has 100 different pledges they should make a single transaction, and they split the money. Then the creator should receive a single transaction with all the pledges included. The patron should make only one transaction (one processing fee) every month, and the creator should only receive one transaction (one processing fee) every month. A system where they make one transaction per patron per pledge is just nonsensical. It’s just the model that maximizes fees. It is the antithesis of efficiency.

  8. It all just seems like they should have had this fee structure in place from the beginning if the old way has become unsustainable. Otherwise it does just come off as Patreon saying they want more money from the patrons and artists. Does the new structure work as a better incentive to elevate the art of artists or instead the giving from generous patrons? If not, then it runs counter to the whole notion of their business model.

  9. The sad thing is, within ten minutes of bouncing ideas around with some co-workers, we had come up with multiple approaches to solve the issues Patreon described in their blog (creators wanting “monthly and charge up front”, the desire to bill on pledge anniversary instead of 1st of the month, the problem of “pledge and cancel before month end”) WITHOUT boning everyone with fee increases to cover the cost of far more actual financial transactions.

    It boggles belief that they have “spent nearly a year reviewing the numbers and running experiments” and not come up with a better solution.

  10. Patreon’s reasoning reminds me of when the comic shop I once worked at started selling Lotto tickets. I asked the State rep why so much hoopla went into promoting only the big eight and nine-digit winners and not the seven-digit winners whose lives were “changed” by the money. I mean just one million dollars would have changed MY life back then (and still would). I didn’t have to make a hundred times that amount to see some notable transformation to my lifestyle.

    This rep told me that seeing someone win more money than Midas increased the excitement around the Lottery and thus increased sales. Sounds like Patreon’s taking a page from that playbook.

    Don’t they realize that to an indie publisher, a few hundred dollars a month WILL change their lives? Also, I’ve talked to a couple of Patreon buddies who use the platform to connect with the people who GENUINELY appreciate their work and support it. Those people will then tell their pals to hop aboard the pledge train to support their fave creator(s). This approach seems to work best for them, as far as supporter contact goes, than Facebook or Twitter with their “shotgun” approach.

    Now, if Patreon wants to attract bigger names so they can brag about bigger payouts to them … um, why would “bigger” creators want to come to Patreon if they aren’t there already?

    And like with YouTube’s current monetization issues that favor only the wildly successful, Patron make take more PR hits before this gets straightened out.

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