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Patreon raises big round at $450M valuation

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Re: Patreon raises big round at $450M valuation

#61

Post by dmix »

buro9 wrote: post #43
IshKebab wrote: post #28

Earlier quoted context omitted.

They have a fee of 5%. Let's assume they have a price/earnings ratio of 20, that means they expect people to spend something like $450m/year on Patreon. According to Wikipedia they are at around $150m/year already. I think it is totally feasible that they could increase that to $450m/year and not have to increase their 5% fee. Seems like a reasonable valuation to me.

It is 5% on top of payment processing, and averages around 10% for content publishers. I keep telling people just to use a PayPal Donate button. Unless you're in the top 1% of people on Patreon, you would do better just ensuring that more of the donations that exist ends up in your pocket. If Patreon isn't delivering more donors than your content and self-marketing can attract... you are losing out.

There's a lot more to Patreon that simply being a payment platform...

Re: Patreon raises big round at $450M valuation

#62

Post by nobodyorother »

pc86 wrote: post #55
TaylorAlexander wrote: post #50

Earlier quoted context omitted.

They should make a profit. What we don't want is to spoil the nice service with desperate attempts to earn enough profit to satisfy investors.

Ah, so they should make a profit but not too much.

It's the Tiger Woods problem, also known as Focus on Your Core: TW gets video game endorsements and makes ungodly piles of money because he's a great golfer. When he focuses on making new games and supermodels instead of golfing, his game suffers and all the perks that came because of the good golf game go away.

...Like how he hasn't had his name on a golf video game in years.

Essentially: pursuit of profit when it undermines your core competency is shortsighted.

Re: Patreon raises big round at $450M valuation

#63

Post by dmix »

ryguytilidie wrote: post #31
jerf wrote: post #15

Earlier quoted context omitted.

I use Patreon on a lot, and I don't have any expectation that they are doing it for free. If they were doing it for free, then that would mean to me that the service would be unstable and would disappear some random month without recourse when its unpaid developer gets a job somewhere else, or someone files some light lawsuit against them and that's enough to take the whole thing down. A bigger problem than that they…

"I use Patreon on a lot, and I don't have any expectation that they are doing it for free." That's not really the criticism you're responding to though. It's not "People will be upset Patreon makes money", it is "people will be upset that Patreon will have to take SO MUCH MONEY from people giving it to others to justify their valuation."

I would only be concerned if Patreon didn't have a business model. But they clearly do. I'm seeing Patreon everywhere and I've seen plenty of people making $50k/month... they have a far better opportunity to generate revenue than the majority of tech startups.

All they have to do is maintain growth. They don't have to make any weird sacrifices for revenue like a lot of social startups that raised billions under the pretext of making money later.

Re: Patreon raises big round at $450M valuation

#64

Post by jerf »

toomuchtodo wrote: post #26
jerf wrote: post #18

Earlier quoted context omitted.

"People are moving all their eggs from Youtube to Patreon." That's less of a concern though, because Patreon is easier to replace than YouTube. The problem with YouTube is that, at least as long as the Internet chatter I hear is still accurate, YouTube itself is still losing money, so replacing YouTube involves being able to immediately hugely subsidize people watching lots of video, and to be willing to do so when i…

> Patreon can't literally be replaced in the legendary "HN denizen claims to be able to replace $X in a weekend", because dealing with taking payments takes longer than that. Stripe literally has an offering just for this use case: https://stripe.com/connect Forum + Stripe Connect + CDN for Video (Cloudfront, Fastly, Whatevs) = Patreon replacement. You could literally replace it with a weekend Hackathon.

I observe that "Stripe Connect" does not have a "click here to purchase" button but a "Contact Sales" button.

I think if you dedicated an entire weekend to the task of being ready to accept credit cards through your website on a subscription basis that you would not be accepting cash on Monday. I seriously doubt that this is just a click-through exercise. I seriously hope this is not just a click-through exercise.

Re: Patreon raises big round at $450M valuation

#65

Post by dmix »

Dirlewanger wrote: post #51
outoftacos wrote: post #35

Oh god, now they're trapped in the endless useless growth demand cycle. Too bad, I enjoy supporting a few artists on there and it's just a matter of time until this hurts them.

Eh, just like Kickstarter, there's Patreon clones for as far as the eye can see.

It's not just like Kickstarter. Patreon has a business model built on recurring monthly revenue stream. Kickstarter makes money off of one-off events. It's a totally different business.

Re: Patreon raises big round at $450M valuation

#66

Post by jerf »

ryguytilidie wrote: post #31
jerf wrote: post #15

Earlier quoted context omitted.

I use Patreon on a lot, and I don't have any expectation that they are doing it for free. If they were doing it for free, then that would mean to me that the service would be unstable and would disappear some random month without recourse when its unpaid developer gets a job somewhere else, or someone files some light lawsuit against them and that's enough to take the whole thing down. A bigger problem than that they…

"I use Patreon on a lot, and I don't have any expectation that they are doing it for free." That's not really the criticism you're responding to though. It's not "People will be upset Patreon makes money", it is "people will be upset that Patreon will have to take SO MUCH MONEY from people giving it to others to justify their valuation."

Well, again, I think people get confused between the idea of "rapacious" profits and just profits in general. Contra the general attitude, profits aren't bad; profits are where the strength comes from. Your favorite Mom & Pop coffee shops go under not just because the big bad corporations come in and steal all their customers, but because their model didn't have enough profit built into it to sustain any headwinds. (Though in their defense, there isn't a lot of evidence that such a model exists. But that doesn't mean they still don't suffer the consequences of lack of profitability.)

I think this space is going to be sufficiently competitive over the next few years that I don't expect Patreon to be able to just run away with people's money without consequences. In fact I'm racking my brain here to come up with what Patreon would want to do as a moat and I'm not coming up with anything. (Anything sensible, anyhow. The frequent suggestion that they could do their own YouTube would build a moat, alright, but the evidence is that it would build a moat around a cash flow model in which you guarantee that you'll never make any money, and, well, those don't really need moats very much....)

Re: Patreon raises big round at $450M valuation

#67

Post by Anderkent »

buro9 wrote: post #43
IshKebab wrote: post #28

Earlier quoted context omitted.

They have a fee of 5%. Let's assume they have a price/earnings ratio of 20, that means they expect people to spend something like $450m/year on Patreon. According to Wikipedia they are at around $150m/year already. I think it is totally feasible that they could increase that to $450m/year and not have to increase their 5% fee. Seems like a reasonable valuation to me.

It is 5% on top of payment processing, and averages around 10% for content publishers. I keep telling people just to use a PayPal Donate button. Unless you're in the top 1% of people on Patreon, you would do better just ensuring that more of the donations that exist ends up in your pocket. If Patreon isn't delivering more donors than your content and self-marketing can attract... you are losing out.

However, a paypal donation gets you a one-off payment, whereas a patreon gets you regular money.

Re: Patreon raises big round at $450M valuation

#68

Post by Anderkent »

pc86 wrote: post #55
TaylorAlexander wrote: post #50

Earlier quoted context omitted.

They should make a profit. What we don't want is to spoil the nice service with desperate attempts to earn enough profit to satisfy investors.

Ah, so they should make a profit but not too much.

They should make whatever profit they can; but the concern is that they will be pressured by external investors to make more profit that they can sustain.

Re: Patreon raises big round at $450M valuation

#69

Post by wongarsu »

xemdetia wrote: post #56
wongarsu wrote: post #38

Earlier quoted context omitted.

I fail to see any advantage in ditching YouTube? On private videos for Patreon subscribers Youtube supplies free video hosting with a decent and familiar experience for the content creator. For public videos (or videos that become public after a delay), Youtube offers free hosting and lots of discoverability. In both cases I only see Patreon having additional cost with little to no upside by ditching Youtube (especia…

There are a lot of patreon people that don't have a strong youtube presence, and a lot of that content ends up being cross hosted by youtube. You have people that are working with a pre-payout budget of a few thousand a month- it's possible that they are trying to build out more pay-to-use features that increase the 5% slice they are taking. Private video hosting for supporters that isn't rigged to youtube settings i…

Something with merchandise will likely happen. Quote from the article:

>Deeper pockets could also allow Patreon to build out its suite of bonus tools for creators, some of which it could charge extra for. “There’s going to be new opportunities to build revenue streams into the product” Conte has promised me. He suggested that could include selling event tickets or merchandise, or better helping creators understand and communicate with fans.

With them having a partnership with a livestreaming platform, I wouldn't put it past them to do something to replace private YouTube videos. But I think shipping postcards or stickers or art prints is a much more direct way to more revenue, and could be relatively cheap to set up with the right partnerships.

Re: Patreon raises big round at $450M valuation

#70

Post by Xixi »

pc86 wrote: post #55
TaylorAlexander wrote: post #50

Earlier quoted context omitted.

They should make a profit. What we don't want is to spoil the nice service with desperate attempts to earn enough profit to satisfy investors.

Ah, so they should make a profit but not too much.

The problem is not if Patreon is making enough profit to satisfy investors. The problem is if they don't. The reasoning goes as follows: VCs are chasing the next Google, and if Patreon cannot grow enough there is a real risk that it will die/resort to shady business practices by trying too desperately to achieve this growth. Without VCs it could remain a healthy, profitable, medium-sized company...
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