Sunday, February 10, 2019

Patreon may be in trouble

Apparently Jordan Peterson was keeping Patreon afloat:
Back when Patreon tried to change the way they charged fees for transactions, moving the cost to the supporters of the creators and then doubled down by charging them multiples of the credit card one off processing fee of 30 cents based on the number of creators they supported it set off alarm bells for me.

I called it a cash grab that they hoped would be borne by the patron’s so that they would not lose creators. Trouble is both creators and their supporters were pissed about it. They gave up on that idea.

Then yesterday Patreon’s cashing out system for creators to transfer funds to their bank accounts went down. I cried alarm. Why? The best way to hide a major cashflow crisis is to make it impossible for creators to remove funds but you can only do that for so long before it becomes a crisis of trust in itself.

I advised others that if you are creator you should be making sure that Patreon is not the sole source of income because it may just collapse and take your money with it.

Right now they have about 100,000 creators but their fee structure with that number of creators just cannot sustain the cost of the business.
It will be interesting to learn if Indiegogo is caught up in the same dilemma. Reports that Indiegogo has successfully raised $1.6 billion in funds for creators over 10 years would tend to suggest otherwise, as it would indicate that their annual income is on the order of $12.8 million, but neither their employment pattern nor their behavior is very consistent with a technology company in good order.

UPDATE: A Patreon creator confirms:
Hey creators,

As you might have noticed, payments are processing at a slower rate than normal, which means your patron’s pledges might take longer to process than they usually would. Our team is working around the clock to solve this issue.

This is frustrating, and we want to apologize for the delay in getting you your money. You will receive your anticipated total payout as soon as possible, and please know that we’re working as hard as we can to get our payments processing back to up regular speed.



Blogger Sam Smith February 10, 2019 7:02 AM  

@VD Also we have been looking to get Patreon subject to deserved regulatory scrutiny for a couple of years now. MHN cost them a huge amount of money with this series of articles because we got the card companies to investigate them for money laundering.

Anyone with any concerns about Patreon that might warrant law enforcement or their commercial banking partners looking at, hit me up...

Blogger McChuck February 10, 2019 7:25 AM  

Payment processing time? delays It's an electronic transfer. It's entirely automated.

Let's pretend that they have to wait for daily reconciliation. That means that there should be, at most, a 24 hour delay on any transfer.

Blogger Zerokage February 10, 2019 7:27 AM  

Classic cash flow problems of an insolvent business...

Blogger Gregory the Great February 10, 2019 7:31 AM  

Patreon would not lie to their clients, would they? It is "frustrating" indeed that there is no money left for shateholders and management to spend on escorts, cars and 5 star hotels.

Blogger Dave February 10, 2019 7:34 AM  

Reminds me of a company I used to work for. First the checks arrived at the jobsite a day later than normal, then two days late, then after 5 on Friday... they didnt last much after that.

Blogger Nikephoros II Phokas February 10, 2019 7:43 AM  


- Patreon is failing
- Apple is clashing with Google and Facebook
- Jack is on a impromptu podcast PR tour
- Jeff Bozos is behaving as if he's backed into a corner
- Chinese tech. companies are facing charges

This has been a bad couple of weeks for big tech. Probably a coincidence.

Blogger Pathfinderlight February 10, 2019 8:23 AM  

It would be interesting if VD could have Patreon added to the discovery on the Indigogo lawsuit. Imagine all of the nasty things he could uncover.

Blogger Rick February 10, 2019 8:26 AM  

Part of the storm?
What was that executive order about seizing assets ...

Blogger Dave February 10, 2019 8:48 AM  

Interesting that as of 2017 and possibly 2018, Indiegogo had never operated in the black.

Indiegogo Says It’s Raised Close To $1.5 Billion For Projects, And Will Soon Turn A Profit

Revenue was up 50% in 2017, says the privately held crowdfunding company.

Indiegogo’s narrowing focus on establishing and growing businesses, rather than supporting a broad range of artistic and personal projects, is paying off, CEO David Mandelbrot tells Fast Company. The company expects this month to cross the $1.5 billion mark in funds raised for users since its founding in 2008. Annual revenue jumped 50% from 2016 to 2017, he says, although the privately held company has yet to report a profit.

The slightly younger Kickstarter has raised about $3.2 billion for successful projects since 2009, and it’s been profitable since 2010. Mandelbrot hints that Indiegogo could be in the black as early as 2019, noting that it hasn’t taken any investment in over four years. “We don’t need to raise funds at least through the end of this year, if ever,” he says. “In other words, I anticipate us getting profitable before our current cash expires.”

How close were they to running out of cash at the end of 2018? Not very according to this: Indiegogo claims 2018 was its best year yet with 1,300 success stories

Last year, about 1.4 million people made 2.1 million contributions to projects on Indiegogo. Those backers, the platform says, came from every country and territory around the world. Thirty of the projects on Indiegogo raised more than a $1 million through crowdfunding, while 250 projects exceeded the $100,000 milestone.

Any guesses as to one of those 250 projects that exceeded $100,000? Perhaps that one wasn't included in the 250.

Blogger Glaivester February 10, 2019 9:01 AM  

The Patreon transaction fee change always struck me as being bad because (a) it was presented dishonestly, and (b) it was done in a way as to take away one of the reasons people used Patreon.

It was dishonest because it was presented as "more of your pledge will reach the creator," when in reality it meant that they would you would be pledging more than your official pledge; actually less of what you would pay would go to the creator. It hurt the rationale for Patreon because it took away the benefit of being able to do microtransactions more cheaply.

Blogger Sam Smith February 10, 2019 9:12 AM  

@Pathfinderlight Imagine all of the nasty things he could uncover.
… Patreon knowingly monetised the distribution of child exploitation material, failing to take action even when the CEO was repeatedly told. Check out my linked article in my comment at the top of this thread. Again - Patreon Banned Sargon Yet CEO Jack Conte Allowed Distribution of Illegal Child Pornography and Laundering of the Proceeds

They only removed it when PayPal and the card companies got involved and investigated them even though the 'creator' had an open profile which said he was using Patreon because his product was illegal in his country!

@Glaivester The Patreon transaction fee change always struck me as being bad because ...
To be fair, it is not an unreasonable business model to setup a site like Patreon and take 5% for ease of use and an accessible paywall system. A lot of their content creators do not have the technical skills to make their own and would have to pay some third part provider one way or another. A roll-your-own done by some freelance might be very, very expensive.

The problem is Patreon have really got above themselves. They are an ease of use facilitator. A cheap McSubscribe button for those whose income does not warrant a bespoke deal. They are now seeing themselves as a boss - expecting people to tow their political line and engage in weird, extremely creepy, Orwellian apologies if Patreon deems them out of line.

Blogger J Van Stry February 10, 2019 9:53 AM  

Maybe if they got rid of all those people working there whose sole job is to censor creators for 'badthink' or porn, they'd have less overhead?
As well as more money coming in?

Blogger Sam Smith February 10, 2019 10:07 AM  

Based of my experience and that of others they only censor porn if someone powerful makes them, no matter how depraved. They actively resist censoring advocates of political violence if those advocates are left wing.

Blogger Warunicorn February 10, 2019 10:19 AM  

SJWs/NPCs running a business into the ground with gross mismanagement. Who woulda thunk it?

I wouldn't shed a tear if they disappeared off the face of the earth tomorrow. I'm sure something would fill its void in the process, hopefully one that wasn't converged.

Blogger sammibandit February 10, 2019 10:43 AM  

"Islamic banking could solve this".

Blogger Johnny February 10, 2019 10:43 AM  

Correct me if I am wrong, but I assume these are not public companies and thus no audited accounts for the public to look at?

Blogger Tars Tarkusz February 10, 2019 10:46 AM  

Given the regular security breaches that occur in banks and other supposedly secure businesses, the risk of using patreon is high. Any SJW who either works there or otherwise has access, patreon conveniently collates its users by who they are supporting. So if you support someone who regularly spouts wrong-think, the SJW need only look at the names of the people supporting that wrong-thinker.
I have a couple of people I support with postal money orders. It's pretty much as good as cash, only secure while allowing anonymity.

But even if it were completely secure, I simply don't want to pay for a company like Patreon. We must stop financing these people!

Blogger pyrrhus February 10, 2019 10:47 AM  

O/T Santa Salvini strikes again...

Blogger Vessimede Barstool February 10, 2019 10:53 AM  

They're in SF, I assume, because they want to attract VC capital. Which is fine if they have a growth story to sell to investors. But a small web site scalping pennies on the dollar as a payment service for low to mid tier creators is never going to be the next Google. They should be operating somewhere in the mid west from a suburban office building. A few coders to keep the site running, a small marketing and customer service team, and that's all she wrote.

Instead they're stuck in the most expensive labor and real estate market on the planet, and checking their website they're stuffed full of blue hairs and hipsters posing next to iMac Pros in open plan office spaces masquerading as Soho lofts. All this screams splurging the original VC money to look the part in the hope of selling the business off so the founders can get out before the whole thing comes crashing down. In other words they're operating the same scam that 90% of Silicon Valley tech companies are running.

Blogger doug whiddon February 10, 2019 11:12 AM  

Patreon needs a Patreon to support them.

Blogger Crew February 10, 2019 11:23 AM  

@20: Well, the whole fraudulent financial system may soon have bigger problems. Salvini is saying some interesting things!

Even if he can't follow through it puts ideas in people's heads.

Blogger Dave February 10, 2019 11:37 AM  

@Crew hey man, same link was just posted by pyrrhus

Blogger tz February 10, 2019 11:41 AM  

Sometimes it dies of some other fatal aspect of obesity before it dies of cancer.

I suspect SubscribeStar is doing fine - you need seed capital to set up the infrastructure, and security (both DDoS as well as keeping security patches up), but this isn't a huge bandwidth model. The fixed costs are small, the continuing costs aren't very high, you are getting 5% off the top (or more if transaction costs are lower) if the transactions are instantaneous, and you aren't getting any interest on the float.

The payment engine, the payees infrastructure the premium content paywall, and the backend. A few customer service chat or contacts that can respond to oopses, or something which isn't clear in the instructions, and some way to handle abuse.

Not even physical shipping fulfillment. The Arkhaven store already is doing harder things though with fewer creators to pay.

It doesn't need a "Trust and Safety" tumor, but not only does HR start the convergence, it always insists it needs the Chief Diversity Officer, the Anti Harassment Czar, piles of scrap metal and paint splatters called "art", the $2k super chairs with the $3k super desks to make the offices "more productive".

Banks make money on the difference between the loan and deposit interest rate and that is thinner, and they still limit the opulence.

The thing about SJW CEOs is they believe the socialist magic, "because I'm doing the right thing and burning the heretics at the stake, the universe will bless me and make everything work out with wealth for all".

The Natural Law includes simple math. But SJWs really believe they can sell at a loss and make it up by increasing the volume of the shrieking when they point.

"We banned Sargon, so why are we in trouble, particularly when we got our SJW friends PayPal and Stripe to deplatform our non-SJW competitor?"

Blogger tz February 10, 2019 11:48 AM  

@19 - exactly. But that is part of the Obesity - the extremely high expenses, and thus what you have to pay for engineers in Sanfranshithole.

You could reconstruct Silicon Valley for 10th the cost in the Central and Mountain time zones, much less telecommute - the internet reaches the small towns and there's even satellite.

Blogger Purge187 February 10, 2019 11:49 AM  

Slightly related, Proud Boy gets his bank account suspended:

Blogger Tars Tarkusz February 10, 2019 11:58 AM  

How many of these things are viable when there is no longer a money bubble and interest rates are normalized? Other than a brief period of the mid aughts, the 21st century has been a low interest environment. Many of these companies have only existed in the ZIRP era.

Blogger Daniel February 10, 2019 12:04 PM  

Pyramid scheme.

Blogger Damelon Brinn February 10, 2019 12:08 PM  

A company that operates as a bank and payment processor, but without the regulations that normally apply to those things, and without any real way for its users to audit it or judge its health, is on weak financial footing and there may be shenanigans? I'm shocked!

Blogger Brett baker February 10, 2019 12:41 PM  

Satellite internet can be unreliable. But there are a lot of places with fiber optic cable in the Midwest and South.

Blogger Crew February 10, 2019 12:45 PM  

@22, yeah, I see that now.

Strange, however, how so many good ideas are coming out of Italy. Have you seen the God Emperor float at the Carnivale?

Are the Italians getting their ideas directly from Vox?

Blogger Lance E February 10, 2019 12:45 PM  

Tars Tarkusz wrote:But even if it were completely secure, I simply don't want to pay for a company like Patreon. We must stop financing these people!

Most of the people who matter are at PayPal or the banks themselves.

Patreon, IGG etc. are not innocent, of course, but they are the symptoms, not the disease.

Blogger Doktor Jeep February 10, 2019 1:58 PM  

We should start our own and call it "Patrician".

Blogger Servant February 10, 2019 3:26 PM  

Having worked a number of sketchy jobs in my lifetime i have never stuck around for payroll problems. Not worth it.

I thought it worked as like aten percent skim how hard is that. How many employees do we need? Do we really need offices in silicon valley? No bigger scam than these tech companies.

Blogger Damelon Brinn February 10, 2019 3:57 PM  

One reason I like DuckDuckGo is that they're based in Pennsylvania. That's where the founder started it -- a literal started-in-the-basement success story rather than the usual CIA/VC-funded kind, as far as I can tell -- and they still have more employees in that area than anywhere else. Don't trust any business that started in Silicon Valley or felt the need to move there, because there's a good chance the founders are chasing investor money with an eye to getting big quick and selling out.

Blogger bodenlose Schweinerei February 10, 2019 6:17 PM  

Annual revenue jumped 50% from 2016 to 2017, he says, although the privately held company has yet to report a profit.

Color me shocked, an internet "success story" that burns through millions as quickly as they get their grimy little hands on it. So many of these companies have a bottom line that is actually just a bottomless pit.

Blogger Haxo Angmark February 10, 2019 6:20 PM  

as soon as you encounter the words "please know"

in any communication,

hit the kill switch.

Blogger Steve Samson February 11, 2019 2:21 AM  


Blogger Damaris Tighe February 11, 2019 3:15 AM  

Great work Sam Smith.Thank you.

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