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The single biggest factor is that credit card processors charge flat fees per transaction, which makes donating $1 to a creator in isolation unreasonable - the

The single biggest factor is that credit card processors charge flat fees per transaction, which makes donating $1 to a creator in isolation unreasonable - the entire donation will be eaten by processing fees. Patreon allows you to support 20 creators at $1 each, and only make a single transaction of $20. Not to mention ease of use - it's a lot easier to click "pledge $1" for someone whose content you're enjoying than it is to go sign up for some new service or enter your credit card info. Paypal could offer something similar but they don't. Effectively, the value add is network effects. As for the flat fee vs % cut, you're probably right - in terms of costs to the business, transaction costs are a flat fee. That said, a crucial part of their model is making it easy to sign up and get a couple of people backing you for a few dollars each. And it therefore makes sense to effectively subsidise your small users by charging more to your large users who can most afford it (and who are getting the most value out of your service).

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Deimorz 8y ago
They're going to stop doing that. From the FAQ at the bottom of their page about the new plans: > Is Patreon still using shared patronage between creators to combine transactions and give creators a break on transaction fees? > Founding creators will still experience the same reduction in payment processing fees from shared patronage. For future creators we will no longer offer savings for shared patronage because it lacks transparency and it’s not equitable. Some creators save money and some don't, depending on a number of factors including how many patrons you share with others. As a new way to create savings for creators that is more fair and transparent, we are introducing the new low micro-transaction rate for pledges under $3.
- ekimekim 8y ago
  Well, shit. I don't understand why they're so bullish on this. They've tried to get rid of the single-transaction model before. I just don't get it. All they're going to do is give more money to paypal, at the expense of the creators and themselves.
  - kbenson 8y ago
    I always assumed they pocketed that extra revenue themselves (why not, it's the advantage of their platform and how I assumed they made money). I'm a little surprised to hear they handed it back, but I also thought they subsumed that cost within their own fees (like I assume the App/Play stores do). I imagine they probably spend a lot of time explaining why the fees don't line up exactly month to month because if this, since it can lead to different numbers month to month even if your patrons and what they've pledged to you doesn't change. How many support requests about this, and arguments that have to get into very specific details on accounts which bring in $40 a month in donations does it take before any gains are lost? Or if not lost, highly variable and cause support personnel staff needs to fluctuate (which I imagine is harder to plan for and scale quickly than hardware/servers)?
    - Dylan16807 8y ago
      It's really easy to explain, though. Especially when they can do a trivial calculation to show how much less money a creator would get with predictable non-shared fees. It's one of the less confusing parts about the site, really. And it's one of the biggest reasons people choose patreon, which they keep trying to forget.
  - bsder 8y ago
    I suspect but do not know, that there is something in the credit card or FinCen regulations opposing this. The ability to make a single large charge, and then dole out that charge with only your own recordkeeping to track how it got spent seems like it would be ripe for money laundering.
    - kbenson 8y ago
      You know, from a careful reading of the statement, it occurs to me that the way they worded the statement doesn't mean they have to stop benefitting from the economies of scale, just that they're not "offering savings" to future creators, so they could be keeping it for themselves (unless some other statements make that unlikely, which is possible).
- deleted 8y ago
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Svoka 8y ago
I do not understand why talking about processing fees, if Patreon doesn't pay processing fees, it takes 5% on top of processing fees: https://techcrunch.com/wp-content/uploads/2019/03/Patreon-Compare-Plans.png https://techcrunch.com/wp-content/uploads/2019/03/Patreon-Co...

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Deimorz 8y ago

They're going to stop doing that. From the FAQ at the bottom of their page about the new plans: > Is Patreon still using shared patronage between creators to combine transactions and give creators a break on transaction fees? > Founding creators will still experience the same reduction in payment processing fees from shared patronage. For future creators we will no longer offer savings for shared patronage because it lacks transparency and it’s not equitable. Some creators save money and some don't, depending on a number of factors including how many patrons you share with others. As a new way to create savings for creators that is more fair and transparent, we are introducing the new low micro-transaction rate for pledges under $3.

ekimekim 8y ago
Well, shit. I don't understand why they're so bullish on this. They've tried to get rid of the single-transaction model before. I just don't get it. All they're going to do is give more money to paypal, at the expense of the creators and themselves.
- kbenson 8y ago
  I always assumed they pocketed that extra revenue themselves (why not, it's the advantage of their platform and how I assumed they made money). I'm a little surprised to hear they handed it back, but I also thought they subsumed that cost within their own fees (like I assume the App/Play stores do). I imagine they probably spend a lot of time explaining why the fees don't line up exactly month to month because if this, since it can lead to different numbers month to month even if your patrons and what they've pledged to you doesn't change. How many support requests about this, and arguments that have to get into very specific details on accounts which bring in $40 a month in donations does it take before any gains are lost? Or if not lost, highly variable and cause support personnel staff needs to fluctuate (which I imagine is harder to plan for and scale quickly than hardware/servers)?
  - Dylan16807 8y ago
    It's really easy to explain, though. Especially when they can do a trivial calculation to show how much less money a creator would get with predictable non-shared fees. It's one of the less confusing parts about the site, really. And it's one of the biggest reasons people choose patreon, which they keep trying to forget.
- bsder 8y ago
  I suspect but do not know, that there is something in the credit card or FinCen regulations opposing this. The ability to make a single large charge, and then dole out that charge with only your own recordkeeping to track how it got spent seems like it would be ripe for money laundering.
  - kbenson 8y ago
    You know, from a careful reading of the statement, it occurs to me that the way they worded the statement doesn't mean they have to stop benefitting from the economies of scale, just that they're not "offering savings" to future creators, so they could be keeping it for themselves (unless some other statements make that unlikely, which is possible).
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Svoka 8y ago

I do not understand why talking about processing fees, if Patreon doesn't pay processing fees, it takes 5% on top of processing fees: https://techcrunch.com/wp-content/uploads/2019/03/Patreon-Compare-Plans.png https://techcrunch.com/wp-content/uploads/2019/03/Patreon-Co...