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How Does Patreon Make Money?

Patreon is a subscription platform which allows creators to be compensated by their followers on a monthly basis. Patrons are also known as patrons.

Patreon earns revenue through variable as well as processing fee for payments. The fees are paid by the creators and are based on the plan they choose.

Established in 2013, and with its headquarters with its headquarters in San Francisco, California, Patreon has since grown into one of the top crowdfunding platforms. It has raised more than $413 million in capital as of the moment and has a valuation at 4 billion.

How Patreon Functions

Patreon is an online crowdfunding platform that permits creators to receive payments from patrons and others on a subscription basis. The supporters are known by the name of patrons.

Patreon is a partner with a wide range of content creators, such as podcasters YouTubers, non-profits as well as local businesses, musicians and more.

As a reward for being patrons, patrons will enjoy various advantages, such as:

  • Access to content early or exclusively content
  • Shoutouts to all the fans
  • Access to exclusive events
  • Engaging directly with creators

Additionally, Patreon provides a breadth of tools for education (so-called kits) to boost participation and sign-ups for fans.

Additionally, Patreon can be integrated with a range of tools, including Discord and Mailchimp. Wix that allow creators to integrate their current business tools to the platform.

Patreon is accessible via the website of the company and mobile phone apps (available both Android as well as iOS).

A Brief History of Patreon

Patreon has its headquarters at San Francisco, California, was created at the end of 2013 in 2013 by Jack Conte (CEO) and Sam Yam (CTO).

Both founders completed their studies in Stanford (where they shared a room and eventually became friends) However, their paths to the point of the creation of Patreon could not have been more different.

Yam on the other side, continued with his Stanford studies, and enrolled in the Master’s degree in Computer Science (Marc Andreessen actually wrote his recommendation letter).

He later took a short leave of absence and was one of the early developers for the social-mapping company Loopt. The company was acquired in 2012 Loopt was purchased from Green Dot for a combined $43 million, however Yam was already gone.

Three years earlier at the time of 2009, founded AdWhirl the platform for mobile developers that let advertisers to display ads and promote their apps through various channels.

At its height, AdWhirl processed over 3 billion advertisements each month. It was just one year old when it launched in 2010 AdWhirl was bought through AdMob (for an undetermined amount) that Google acquired within a couple of months.

The departure netted Yam an attractive cash cushion that was used to experiment with diverse ideas. For a couple of months working out of his Dogpatch Labs incubator where he was working alongside Kevin Systrom and Mike Krieger who at the time was working on initial Instagram version. Instagram.

Yam finally came up with an idea which he was enthusiastic about the possibility of An market place online for photographers who are freelance, called OurSpot. However, as luck will have it, the business model was never launched to the public.

However, Yam decided to partner together with Conte to develop an idea Conte had presented to him in the past few weeks. However, first we need to reverse the tape.

While Yam took the standard path of entrepreneurship and engineering Conte’s claim to fame is slightly different.

After completing his studies in music at Stanford after which he began to become an active musician full-time. He was in 2008 when he founded the band with his ex-girlfriend (and currently spouse) Nataly Dawn called Pomplamoose.

The duo quickly established their mark by gaining a substantial 6-digit following on different platforms like Spotify. They also received offers from numerous major labels but chose to stay independent.

Unfortunately, being an independent musician isn’t quite as glamorous as it appears. In the early years of their careers in music they became increasingly unhappy with the low amount of ad revenues they could earn through their videos.

This anger reached its highest point when Conte released a music video entitled ‘Pedals’. The video took him $10,000 to create (and the entire credit cards simultaneously) but only received just a few hundred dollars as a reward.https://www.youtube.com/embed/mZ02alEkbLw?feature=oembed

The inability to earn money was what ultimately led him to begin working on the concept of Patreon. He approached his former roommate Yam aware that it would require some technical skills to create his concept.

Patreon was launched for public access on June 13, 2013. The same month, because of Yam’s connections within the Valley the team was successful in raising a $700,000 first-round (valuing Patreon at $5.5 million).

In 2014, the Patreon team added $2.1 millions and 15 million dollars to the company’s balance and balance sheet in 2014 and 2015, respectively. The funds were raised on the backbone of over 100,000 customers who signed up for the Patreon service during the initial year.

What enabled Patreon to expand in the manner they did is (and continues to be) its relentless focus on helping their creators. For example Patreon launched a CRM-like tool similar to Salesforce for creators that allows them to gauge how they are (and discover ways to improve).

It can also be integrated with other tools, such as Zendesk as well as Slack which lets its creators use the tools they use for their businesses.

The steady growth of the company placed the company on the map of startups and was susceptible to imitation. Particularly, in 2019, Facebook introduced its own fan-support service. The service was integrated into the posts and allowed page administrators to request their fans for assistance.

In the end, Patreon experienced some major issues on the way to its success. In 2015, their website was breached. Some of their user’s personal information, including registered names and email addresses, was retrieved by a group of hackers named #SuperExtremeShitpostingTeam. Their motivation? Nothing else but “doing it to get the pleasure”.

A year after that, in 2017, Patreon angered many of its creators due to the introduction of a new fee structure which the CEO of the company Conte announced in an article on the blog. The new structure of fees would have allowed for less contributions, ranging from $1-$2 and was significantly more costly.

In the end it is likely that patrons have cut their contributions off which will have a devastating negative effect on numerous creators. Since it is a platform for creators, Patreon immediately dropped its proposition and promised to communicate more closely with its creators in deciding on the next products.

Additionally, Patreon started to immerse itself in the realm of politics as a result of its growing influence on the world of creators. In the past the company’s content moderation team blocked several accounts connected to hate speech propaganda and conspiracy theories. For instance, in 2020 it banned several accounts belonging to an extreme right-wing organization QAnon.

Despite these obstacles however, Patreon’s popularity will with all likelihood will continue to rise. Its platform is currently home to over 200,000 creators. They are supported by more than 6 million active monthly patrons. Patreon has paid more than 2 billion dollars to creators in the time since its founding.

In addition, over 300 people are working for the firm that operates through four offices around the world.

How Does Patreon Earn Profit?

Patreon earns money through the variable fee it charges creators. The company offers an unstructured fee structure that is divided into 3 distinct packages: Lite, Pro,and Premium.patreon.com

Creators pay either five percent, eight percent or 12 percent commission on the monthly earnings they earn through Patreon according to their selected plan. Patrons, on the other hand, pay an annual subscription fee to help their preferred creators.

Each plan includes each plan’s own set of features including analytics reports workshops, priority support and dedicated account managers or unlimitless third-party app integrations.

Particularly, the Premium tier permits creators to explore other avenues to monetize their content. For example, they could begin selling merchandise branded by the creator (an offer that was made possible by the acquisition by Patreon Kit in June 2018). Kit in June of 2018) and fulfillment will be taken care of through Patreon’s backend.

In addition to the subscription fee, Patreon also collects payment processing charges each when a patron makes a contribution. For micropayments (< $3), it charges 5 percent plus $0.10. If you make a payment greater than $3, the company charges 2.9 percent, plus $0.30.

Payment processing providers include Mastercard, Visa, American Express as well as PayPal. The charges are paid at cost, which means Patreon doesn’t make money from these fees.

In recent times several different platforms have adopted a subscription model that is led by the creator, like such platforms as Medium Substack, Medium, and Quora..

Patreon Funding and Valuation, as well as Revenue

Based on the Crunchbase, Patreon has raised the sum of $413.3 million in seven rounds of Venture Capital financing.

Some of the most prominent investors are New Enterprise Associates, Index Ventures, Wellington Management, Thrive Capital and many more.

The valuation of Patreon rocketed to $4 billion following the company’s Series-F raise on April 20, 2021. This makes Patreon into the unicorn club.

In the fiscal year 2019 Patreon processed more than $500 million worth of payments. With fees that range between 5-12 percent, this puts Patreon’s revenue per year somewhere between $25 million to $60 million.

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