Kickstarter: How does the company make money?
How does Kickstarter make money?
Kickstarter has revolutionized the way entrepreneurs and creative individuals bring their ideas to life. Crowdfunding platforms like Kickstarter allow creators to access a large pool of potential backers and investors. These backers pledge money towards a project, and if the project reaches its funding goal, the creator receives the money to turn their idea into reality. In this blog post, we will take a deeper dive into how Kickstarter makes money.
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Platform Fee:
Kickstarter charges a platform fee on each project that is successfully funded. The platform fee is 5% of the total funds raised. This fee is used to cover the costs of running the platform, including salaries for employees, server and hosting costs, and other expenses. Kickstarter takes the fee before the creator receives the money.
Kickstarter's platform fee is relatively low compared to other crowdfunding platforms, which can charge up to 10% of the total funds raised. However, some critics argue that the platform fee is still too high, considering the relatively low cost of running an online platform.
Payment Processing Fees:
In addition to the platform fee, Kickstarter also charges payment processing fees. These fees are charged by the payment processor, not Kickstarter. Kickstarter uses a third-party payment processor, which charges a fee of 3-5% of the total transaction amount, plus a fixed fee per transaction. The exact fee depends on the country of the project creator and the currency used.
These payment processing fees are necessary to cover the costs of processing payments, including fees charged by credit card companies and other financial institutions. Kickstarter does not profit from payment processing fees; the fees are simply passed on to the payment processor.
Late Pledge Fees:
Kickstarter allows backers to make pledges after a project has ended. These late pledges are allowed for up to one week after the project has ended, but a fee of 10% is added to the pledge amount. The late pledge fee is intended to encourage backers to pledge during the funding period, rather than waiting until after the project has ended.
Late pledges can be a significant source of revenue for Kickstarter, as some backers wait until after a project has ended to pledge. However, some critics argue that the late pledge fee is unfair to backers, as it effectively penalizes them for supporting a project.
Premium Services:
Kickstarter offers premium services to project creators for an additional fee. These services include promotional opportunities, custom branding, and personalized support. The cost of these services varies depending on the level of service and the project's funding goal.
Premium services can be a significant source of revenue for Kickstarter, as some project creators are willing to pay extra for additional support and promotion. However, some critics argue that premium services can give some projects an unfair advantage over others, as not all project creators can afford to pay for them.
Affiliate Marketing:
Finally, Kickstarter also makes money through affiliate marketing. This means that Kickstarter earns a commission on sales made through links to products or services on their website. For example, if a project creator links to a product on Amazon, and a backer purchases that product through the link, Kickstarter earns a commission on the sale.
Affiliate marketing is a relatively small source of revenue for Kickstarter, but it can still be significant. Some project creators include links to products or services related to their project, which can generate additional revenue for Kickstarter.
Conclusion:
Kickstarter is a valuable platform for entrepreneurs, inventors, and artists. It allows them to access a large pool of potential backers and investors to bring their ideas to life. Kickstarter makes money through a variety of sources, including platform fees, payment processing fees, late pledge fees, premium services, and affiliate marketing. These fees are necessary to cover the costs of running the platform and providing support to project creators. While some critics argue that the fees are too high, Kickstarter's success is a testament to the power of crowdfunding and the value that it provides to creative individuals around the world.
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