eevBLAB #59 - Patreon Is An Unsustainable Business

[Grapsus]

Just watched the video and in my opinion Dave's analysis is 100% correct. Dudes in California had the right idea at the right time. They could absolutely have bootstraped their business, but they took a ton of investor money so that they could "expand", rent overpriced offices in SF, do corporate shit and now the investors need at least a 10x return.

Technically, 10 people working remotely from places where renting a boiler room doesn't cost 4k$ per month could run the website and enjoy the 5% cut for a long time.

Patreon has the same temptation as Internet service providers: they provide a service and it pays, but they see all this money and content passing through them and wonder "how can we get more out of it into my pocket?".

Next logical move from Patreon: the fee increases to 15%, but it's paid for by the patreons and now creators get more value services like advice on how to make polically correct content...

[langwadt]

not matter how you twist it cryptocurrency is a stupid waste,  it is like flushing useful resources down the drain to get internet points

Why bother actually looking into it, when you could just repeat the blanket statement that the banker told the news reporter, right?

look into what? wasting energy to make something that has no useful value?

[Bicurico]

Can someone please explain me why I would want to pay someone via Patreon, AFTER I have seen the videos on Youtube?
I can understand the monetisation through ads on Youtube.
I can understand that there are people in the world willing to fund Youtube channels, because they enjoy the videos and want to keep the creator motivated/funded in order to do more videos. But why not pay directly with Paypal or credit card?

This is a serious question and I might be biased from the cultural background of the region where I live.

I simply don't understand the need for Patreon, especially since they seem to charge/retain as much as any other payment system.

Thanks,
Vitor

[tszaboo]

It is Price's law, that the square root of the number of employees is doing half the work.
So from that 300 employees, 17 programmers are doing 50% of the work, and out of this, 4 people are doing 25% of the work. So the value distribution looks like this:
4 people 25% of the work (6.25% per employee). Imagine the senior developer, who knows everything, he is a genius, knows stuff, the CEO the
13 employees do 25% of the work (1.92% per employee) These are the other senior developers
The remaining 283 employee is responsible for the 50% of the work (0.17% per employee). These are the "Culture, Media, and Arts Specialist" and the bunch of  "Creator Success Lead at Patreon" (WTF is that title even mean???)
So one of those 4 people are doing the same work as 36 other employee. If they leave, well good luck replacing them. Out of 36 you might find someone who is worthy.

I'm seeing the same thing where I work,every single company, the most of the work done comes from a very small group of people.

Being lean means that you have those 17 people who can do 50% of the work. And there are those people, that could be fired on the spot, because they contribute practically nothing to the company. The larger the company it is, the more there are these people. And I actually dont know, how Price's law deals with people who are making negative contribution to the company, but I'm sure there will be many of this. Like a system architect, who decides to implement something stupid, a manager, who agrees to this, and then 30 developers spend a year building something not really working, which has to be constantly maintained by 15 of those 30 employees. So congratulations to the system architect, he just made about 3 million dollars worth of technical debt with some stupid decisions. But this dept is payed at 50% rate unlike regular debt. Or those people who started policing the authors for their content, which lead to people leaving the platform.

[GeorgeOfTheJungle]

I've always wanted to have an "unsustainable business" like that.

[coppice]

It is Price's law, that the square root of the number of employees is doing half the work.

Its kinda depressing how many areas of life where Price's law fits reality really well. You misstated it, though. The square root of the employees achieve half the useful results. The others may be working quite hard, but are not achieving positive results.

[Grapsus]

I've always wanted to have an "unsustainable business" like that.

Depends if you actually own all the shares or if a bunch of sharks are on the board...

[timelessbeing]

I simply don't understand the need for Patreon

Didn't Dave explain it? Patreon provides the means for incentive and rewards. They can schedule payments, convert currencies etc.

[langwadt]

I've always wanted to have an "unsustainable business" like that.

Depends if you actually own all the shares or if a bunch of sharks are on the board...

yeh accept other peoples money to grown and they will want you to grow bigger faster and make more money
so they get get a return now damn the consequences

[NiHaoMike]

not matter how you twist it cryptocurrency is a stupid waste,  it is like flushing useful resources down the drain to get
internet points

If you think supporting independent content and an independent financial system is a waste, then the app is not for you.

look into what? wasting energy to make something that has no useful value?

At this point in time, my Swagbucks mining setup is "wasting" 8W or so to make $16/month or so. A far cry from the days it was making $150/month, but still zero carbon since it's solar powered. (Side note: I achieved a bit of fame with that solar powered mining setup and got a lot of "likes" from my friends.)

[EEVblog]

I can understand that there are people in the world willing to fund Youtube channels, because they enjoy the videos and want to keep the creator motivated/funded in order to do more videos. But why not pay directly with Paypal or credit card?

Because then you have to give your credit card to a dozen different creators websites, or set up recurring Paypal for each one. When everyone is in Patreon it's much easier.
It's always been a very precarious position for Patreon, but now they want to rock the boat, and they'll sink in the process.

[EEVblog]

They have plenty of bog jobs open:
https://www.patreon.com/jobs

https://boards.greenhouse.io/patreon

Jobs available on the Trust & Safety team!
https://boards.greenhouse.io/patreon/jobs/1444567

[coppice]

I can understand that there are people in the world willing to fund Youtube channels, because they enjoy the videos and want to keep the creator motivated/funded in order to do more videos. But why not pay directly with Paypal or credit card?

Because then you have to give your credit card to a dozen different creators websites, or set up recurring Paypal for each one. When everyone is in Patreon it's much easier.
It's always been a very precarious position for Patreon, but now they want to rock the boat, and they'll sink in the process.

Isn't the key advantage of Patreon that it is geared towards the simple setup and control of regular monthly payments?

[EEVblog]

EEVBlog presumeably in the NSFW category 

I'm just waiting for some Patreon fan to find something I said that's "harmful" and report me to the Trust'n'Safety team 

[EEVblog]

I can understand that there are people in the world willing to fund Youtube channels, because they enjoy the videos and want to keep the creator motivated/funded in order to do more videos. But why not pay directly with Paypal or credit card?

Because then you have to give your credit card to a dozen different creators websites, or set up recurring Paypal for each one. When everyone is in Patreon it's much easier.
It's always been a very precarious position for Patreon, but now they want to rock the boat, and they'll sink in the process.

Isn't the key advantage of Patreon that it is geared towards the simple setup and control of regular monthly payments?

Yes. You can say "I'm going to give $50 a month to creators I like and then spread out the money under the one umbrella were you an see and account for it all.

[Grapsus]

Wow that jobs page is hipster fest 

[EEVblog]

Wow that jobs page is hipster fest 

Did you catch mention of diversity? it was real easy to miss 

I wouldn't be betting on that equity thing. The odds of Patreon imploding before going public (the only sensible way equity will be worth anything) would have to be almost even money surely?

[langwadt]

Wow that jobs page is hipster fest 

Did you catch mention of diversity? it was real easy to miss 

I wouldn't be betting on that equity thing. The odds of Patreon imploding before going public (the only sensible way equity will be worth anything) would have to be almost even money surely?

a book every quarter and standing desks, that is some odd stuff to brag about

[LapTop006]

It isn't all that hard to come up with a need for a bunch of people.

Say:
- 20 developers for the site / features
- 10 senior management / exec
- 5 lead finance people (they do payments globally, this is going to always be a pain point)
- 10 tech operations people (they'll have internal IT needs as well as the site)
- 20 support people

That's 65, with most probably in HQ, and most of the rest in a secondary office location.

Then add one biz-dev / point-of-contact, and one finance person per major market; the former more for support than growth, the latter since tax is different enough to likely justify roughly this; at which point 200 seems high but plausible.

[EEVblog]

It isn't all that hard to come up with a need for a bunch of people.

Say:
- 20 developers for the site / features
- 10 senior management / exec
- 5 lead finance people (they do payments globally, this is going to always be a pain point)
- 10 tech operations people (they'll have internal IT needs as well as the site)
- 20 support people

That's 65, with most probably in HQ, and most of the rest in a secondary office location.

Then add one biz-dev / point-of-contact, and one finance person per major market; the former more for support than growth, the latter since tax is different enough to likely justify roughly this; at which point 200 seems high but plausible.

They had 80 people when they got the $60M funding in Sept 2017.

[LapTop006]

They had 80 people when they got the $60M funding in Sept 2017.

Yeah, and I could perhaps see doubling that, but at 300 *shrug*

[Marco]

not matter how you twist it cryptocurrency is a stupid waste,  it is like flushing useful resources down the drain to get
internet points

Cryptocurrency as a concept is silly, cryptocurrency as it exists is in a very weird regulatory framework where it can be a convenient way to do international money transfer. How long that regulatory framework will keep existing is anyone's guess ...

If I was to setup a Patreon/PayPal like service with cryptocurrency I'd want to design my own hardware for it, with display and buttons, so you can see to which website you are making a payment before signing off on it. You need to make it cheap too, because you would have to send it out for free with the first deposit and make the money back on your cuts.

This hardware is needed for security, people's computers simply aren't reliable. It's not a small amount of money either. Patreon works because it's so easy to fire off a subscription and forget about it, which works with credit cards because they have access to your bank account. It wouldn't work with a cryptocurrency address with a small amount of money on it. Stability wise you could protect that deposit for people with Gemini (full reserve dollar pegged cryptocurrency which just uses Ethereum as an exchange platform to piggy back on the aforementioned regulatory framework).

If you could make cryptocurrency really user friendly and secure, you might be able to make it work ... hope you aren't squeamish about porn, because that's the kind of market you need to get the ball rolling. All in all though, a hell of a gamble. Needs substantial amount of initial investment and you're relying on the regulatory framework to not shift out from under you and the Gemini to keep existing.

[rrinker]

It isn't all that hard to come up with a need for a bunch of people.

Say:
- 20 developers for the site / features
- 10 senior management / exec
- 5 lead finance people (they do payments globally, this is going to always be a pain point)
- 10 tech operations people (they'll have internal IT needs as well as the site)
- 20 support people

That's 65, with most probably in HQ, and most of the rest in a secondary office location.

Then add one biz-dev / point-of-contact, and one finance person per major market; the former more for support than growth, the latter since tax is different enough to likely justify roughly this; at which point 200 seems high but plausible.

 If you need 10 tech support people for in-house support of the other 55 employees, or even 290, you're hiring the wrong tech support people.

[Howardlong]

10 tech support people for a business of 290 people in finance is not at all uncommon, in fact I'd say it was quite low especially to support 24x7 operations where you need at least four FTEs for each role to cover all shifts, and allow for vacation and sickness.

In finance, Sarbanes Oxley dictates segregation of duties, so you can't (or shouldn't) have a single individual able to, say, insert some fake transactions and be in a position to be able to cover that up, for example by having both database and system administration access to production systems.

[NiHaoMike]

Cryptocurrency as a concept is silly, cryptocurrency as it exists is in a very weird regulatory framework where it can be a convenient way to do international money transfer. How long that regulatory framework will keep existing is anyone's guess ...

If I was to setup a Patreon/PayPal like service with cryptocurrency I'd want to design my own hardware for it, with display and buttons, so you can see to which website you are making a payment before signing off on it. You need to make it cheap too, because you would have to send it out for free with the first deposit and make the money back on your cuts.

This hardware is needed for security, people's computers simply aren't reliable. It's not a small amount of money either. Patreon works because it's so easy to fire off a subscription and forget about it, which works with credit cards because they have access to your bank account. It wouldn't work with a cryptocurrency address with a small amount of money on it. Stability wise you could protect that deposit for people with Gemini (full reserve dollar pegged cryptocurrency which just uses Ethereum as an exchange platform to piggy back on the aforementioned regulatory framework).

If you could make cryptocurrency really user friendly and secure, you might be able to make it work ... hope you aren't squeamish about porn, because that's the kind of market you need to get the ball rolling. All in all though, a hell of a gamble. Needs substantial amount of initial investment and you're relying on the regulatory framework to not shift out from under you and the Gemini to keep existing.

Some alternatives like Subscribestar are already offering the option of using cryptocurrency, so the biggest problem (going from cryptocurrency to whatever the creator uses) arguably has a solution.

A problem cryptocurrency solves is to make it possible to support your favorite creator(s) by running a program on your computer. The energy use is something to consider, but besides energy efficient cryptocurrencies, there are some cases where the generated heat is useful such as during the winter. Maybe someone will eventually figure out how to make an energy efficient cryptocurrency that's actually good in general.

I recall there actually was an idea to use porn itself as part of altcoin mining (as in the mining references data from porn videos), in order to add another barrier to IT managers deploying miners across hundreds of office PCs.