A crowdfunding platform, such as Kickstarter, offers an online listing of available projects for backers to view and to decide if they want to pledge for the project’s rewards. The service includes vetting projects and providing the infrastructure necessary for pledging and payment.
Kickstarter service offering to backers outranks similar services offered by other platforms. And I think this is part of the reason of Kickstarter’s success.
The service that Kickstarter provides is very profitable. As at 3 March 2014, Kickstarter advertised that a total of $1 billion of pledges were received since it started on 28 April 2009. Of this $1 billion, $867m were pledged against successfully funded projects. Kickstarter takes 5% of any project that successfully funded. This amounts to approximately $43m in revenue over 5 years of operations.
Let’s start by reviewing the existing services and the benefits that Kickstarter realises from these. Based on the service offering, as a backer, I also have a wish list for Kickstarter.
Existing services – Project vetting
Once a project creator submits a project to Kickstarter, Kickstarter reviews the project and vets it against the project guidelines and ensures that the project description and project creator information is supplied. Kickstarter describes the process as:
“To review a project, a member of the team will watch the project video, read the description, and take a look at the rewards.”
The review turnaround period is set at 48 to 72 hours.
This process is relatively straightforward, and from Kickstarter’s perspective, this vetting process ensures a quick turnaround for reviewing submitted projects to actually listing the projects.
Keep in mind that Kickstarter’s services fees of 5% is earned from successfully funded projects; accordingly, listing as many projects as quickly as possible has three direct benefits for Kickstarter:
1) Revenue: At any time, approximately half the projects on Kickstarter would be successfully funded (the overall statistic is 44% of projects since 2009 successfully funded). By increasing the number of projects available, the potential revenue earned by Kickstarter increases multiple times, especially if projects are overfunded by 200% or more. Given how projects are reviewed and the fact that Kickstarter has a small team, the cost expensed by Kickstarter to review any number of projects is the same.
2) Catalogue of projects: Kickstarter creates a deeper catalogue of projects in multiple categories for backers to review. This increases the number of backers that would be attracted to Kickstarter. The more backers attracted to projects, the higher the revenue for Kickstarter.
3) Data mining and listing preferred projects: As from Kickstarter’s stats page, it is easy to determine which categories are more popular with backers, in terms of number of backers and funds raised. There are more successfully funded projects in Games, Film, and Design; accordingly, Kickstarter may have a bias towards getting these types of projects listed on the online platform faster.
Kickstarter also relies on crowd-policing of projects. Crowd-policing is done via the “Report this project” option at the bottom of every project page. Any projects that passed the vetting process but should not have theoretically been listed, could be caught by crowd-policing. But even with the crowd-policing in place, there are instances when backers have reported projects but Kickstarter had a delayed reaction, with the result that backers lost their money.
Existing services – Backer’s accounts and profiles
Kickstarter provides a sufficient and user-friendly infrastructure to backers to manage their accounts and profiles.
The backers’ accounts and profiles provides Kickstarter with three interesting options:
1) Recommendations: Backers’ accounts can be used for data mining into creating the project catalogue. Currently, Kickstarter lists recommended projects once a pledge is successfully completed. I assume that it is only a matter of time before Kickstarter actively provides a list of recommended projects to me via my profile.
2) Delivery of rewards: A backer can record in their Kickstarter profile whether they have received the rewards. In addition, Kickstarter has recently refurbished the project creators’ account to include the option of tracking whether rewards have been sent. This means that Kickstarter has two data sources that can be used to track delivery of rewards to backers, and Kickstarter could publish this data in aggregate in theirs stats.
3) Cancelling pledges: All pledges that a backer makes are stored on their profile, including cancelled pledges. Even through Kickstarter prompts the backer to provide a reason why they are cancelling a pledge during the cancellation process, this information is not mandatory. Kickstarter could send mini surveys to backers asking them for more details about why they cancelled. This information can then be fed directly into the project vetting process. After all, if Kickstarter lists more projects that backers are more likely to back and not cancel, there is a win-win situation for both Kickstarter and backers.
By giving Kickstarter my details, I trust it to look after the details appropriately, even though no card details are stored in my profile. In February 2014, backers accounts were hacked, and I learned about this in the news, several days post the event. Kickstarter, although it has backer email addresses, did not contact the backers about the security breach and necessary next steps, and, disappointingly, only provided a blog on the issue.
Overall, Kickstarter provides a sufficient service to backers, and compared to other platforms, it offers more peace of mind in the crowdfunding transaction. I still have my wish list on incremental changes made to help backers in the crowdfunding process!