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I've been paying mild attention to Kickstarter for a while now. I still don't get the "it's not a store" argument (well, I understand their positioning on it).

by brk 13y ago

I've been paying mild attention to Kickstarter for a while now. I still don't get the "it's not a store" argument (well, I understand their positioning on it). I figured the SEC would step in by now. You give some money, and you get some (generally speaking) 1-time tangible thing back. You don't get future profits, earnings, votes, etc. in the company that created the project. Sure, you can call the funds a "pledge", a "a donation", whatever. But you're not giving money to non-profit organizations, and you're generally giving the "pledge" expecting a specific thing in return for your pledge. This is very different than dropping $100 in a Salvation Army donation box (at least to me). Kickstarter is not a store the way PayPal is not a bank, it's just that Kickstarter hasn't yet fully caught up to PayPal's level of anti-customer business.

jasonlotito 13y ago
> Sure, you can call the funds a "pledge" It is a pledge. You are pledging to give money, but not actually giving it. If they are successfully pledged enough money at the end of the time, everyone is charged. However, that doesn't mean everyone is successfully charged. It's well established that there are people who pledge but don't pay. You could meet your pledge requirements, but still have less in funding that you needed (discounting the known cut KS and CC companies take). Point is, it's a pledge. > I still don't get the "it's not a store" argument. What don't you get? > You give some money, and you get some (generally speaking) 1-time tangible thing back. Ahh. You are missing some parts. What you really mean to say is this: "You pledge to give them some money in the hopes other people pledge as well so that they meat some minimum requirement. If enough is pledged, the company can then continue working on whatever project they were trying to fund. Things can and will change. You may eventually get something back. You may not. It make take years longer. It may be different from what you originally pledged for. It's not always a 1-time tangible thing back." If that's your idea of a store...
- brk 13y ago
  Yes, I fully realize that Kickstarter is not directly a store. You're not pledging money towards immediately available products. They've added some unique factors to it. Otherwise, we would have never heard of them in the first place. But calling it a pledge just because there are caveats attached still does not (IMO) change what people SEE Kickstarter as... I haven't heard from too many people that "pledged" money into a successfully funded project that never delivered walk away saying "Oh well, no big deal". Kickstarter is basically leading people to believe they are going to get something very specific in return for their money. The projects even list higher-valued items for higher pledge amounts. This is much more "store"-like than it is not.
  - ghaff 13y ago
    It's not really very store-like but you're absolutely correct that a lot of people view it that way. One doesn't have to look very far to find threads filled with all sorts of vitriol and threats over some kickstarter project which, despite what one assumes were the best of intentions, simply wasn't delivered as promised. Of course, the fact that "Kickstarter's Terms of Use require creators to fulfill all rewards of their project or refund any backer whose reward they do not or cannot fulfill" also reinforces the idea that getting what's promised is guaranteed. But that doesn't help if the money is just gone.
  - jasonlotito 13y ago
    > Kickstarter is basically leading people to believe they are going to get something very specific in return for their money. No, they don't. They've done nothing to suggest otherwise, and they continue to try and make it clear that it's not a story, you aren't buying something like in a store. They've been consistent in this manner, and have even taken steps to ensure this point is made, such as making it so you can't pledge for more than one of the items. > But calling it a pledge just because there are caveats attached still does not (IMO) change what people SEE Kickstarter as... If that was all they did, you might have a point. But that's so far from the truth, it's insulting. > I haven't heard from too many people that "pledged" money into a successfully funded project that never delivered walk away saying "Oh well, no big deal". I haven't heard from too many people that "invested" money into a successfully funded startup that never delivered walk away saying "Oh well, no big deal". At the end of the day, the only people thinking they are "buying" something at KS are those people that don't actually read what they are "buying". At some point, you have to put the blame on the user.
    - brk 13y ago
      "No, they don't. They've done nothing to suggest otherwise, and they continue to try and make it clear that it's not a story, you aren't buying something like in a store." So you think this page:https://www.kickstarter.com/projects/253126792/rocktm-first-qi-wifi-lifestyle-smartwatch-wireless/pledge/new?clicked_reward=false https://www.kickstarter.com/projects/253126792/rocktm-first-... which lists "pledge" amounts, and "rewards" does not lead people to think they are getting something in return for their money? It lists descriptions of the products, and also gives indications of limited quantities in some cases. Something that would likely not be a concern if a person had no reason to expect a physical object back from their pledge. If you have no right to expect something, why would available quantities be an issue? "At the end of the day, the only people thinking they are "buying" something at KS are those people that don't actually read what they are "buying"." On this we mostly agree. I just went through the pledge process on KS for this (up to the point of actually pledging). There is a whole lot more text describing the item you receive with a pledge amount than there is warning you about the caveats (one small text box that gives of an ebayish "we're just a middleman" warning), other caveats are behind links, which we all know are rarely clicked. From the perspective of the average consumer, KS looks much more like a store/daily deal/discount style website than anything else.
- jcromartie 13y ago
  It's a store with an assurance contract model, like Groupon. You wouldn't say that people "pledge" to get their Groupon.
  - jasonlotito 13y ago
    No, because there is a distinct difference in the result of Groupon and KS. KS makes it clear at many, many levels what your pledge means. Groupon makes it clear how your purchase works.
colechristensen 13y ago
I see no reason why backing a project requires any benefits or ownership and why the benefactors cannot turn a profit with that project. If you don't like it, don't back it. Federal regulation isn't at all necessary because the deal is clearly spelled out. You aren't buying a product, you're backing a project which you may be rewarded for.
- lanaius 13y ago
  Except in the case where the Kickstart is funded, the money is taken, and then the project never delivers. That's of course the risk, but if the project never really intended to deliver (i.e. a scam or fraud) Kickstarter can potentially lean back and say that it's not a store so you can't reasonably expect any return. The problem with that position is that CHARITY fraud is also a real thing and there's a whole host of agencies that care about it (FTC, FBI, IRS). I guess my point is that whether or not you expect a tangible reward, the outcome of a Kickstart is unchanged: your contribution is expected to create something new in the world. If Kickstarter systematically ignores fraudulent projects and "inventors" then the problem is deeper than simply not supporting what you don't like, inasmuch as saying "if a Ponzi scheme doesn't sound good, then don't invest in it" doesn't actually make Ponzi schemes legal.
- brk 13y ago
  Sorry, maybe my post wasn't clear. In the sense of giving money over to someone else for the achievement of a goal, I would see 3 basic categories: 1) A donation, however phrased. In this sense, you are effectively giving money away with no expectations of any future returns of any sort. It would be for the most part "anonymous", or at the very least trackable only for the purpose of eventually allowing the recipient to say "thanks". 2) A pre-paid product purchase. In this case you're effectively combining the elements of the "group buy" concept that at least at one time was semi-popular on Internet forums (8 years ago a group of F-150 enthusiasts all got together to purchase Gaylord brand fiberglass bed covers. Standard price was $1600, IIRC, but by committing to purchase 25 units all at once, we were able to purchase them for $1200 shipped). In this case you realize that the product delivery will occur at some future date, and that you get your money back/don't have to pay if the goal is not reached. If this goal IS reached, you fully expect to receive the advertised product within a reasonable timeframe. 3) An investment. In this case you are not looking for a product, per se, but you believe the corporation has the potential to make money. Your investment buys you a share of the company, and therefore a share of future value as well. Investments carry risk, and your investment could also become worthless, or worth less than the investment amount. Kickstarter seems to mostly attract people looking for #2 above, and most projects have some very low tier to accommodate people who only want #1 above. I'm not saying the project owner can't or shouldn't turn a profit, I was just saying that the project backers don't ever receive any part of that profit, so they are not "investors" (a term which Kickstarter seems to purposefully avoid".
hrktb 13y ago
> you get some _(generally speaking)_ 1-time tangible thing back. I think this is the part where it is not a store. A store brings you something for you money. Kickstarter can cover the non "generally speaking" part where you can pledge money for nothing (you just want to push the project. i.e. $1 pledges are usually without any tangible return). I remember the Penny Arcade kickstater, where a lot of people pledge below the first tangible return, just because they liked the idea. That's also what happens if you back an open source project, the tangible return might be highly subjective.
JackC 13y ago
Legally and practically speaking, it's not a store because it is instead a marketplace. If we were talking about a flea market, Kickstarter would be the company that rents out spots, not the guy selling you a shady DVD. It might be possible to set up something like a store using Kickstarter, and then to defraud people who participate. If I promise to try to build you a smartwatch and I was always planning to send you a brick wrapped in tinfoil, I've probably committed civil and criminal fraud. The court won't much care whether it's a "store," only whether I lied to get the money. But that's on me, not on Kickstarter -- federal law says that online marketplaces aren't (necessarily) liable for fraud. See the unsuccessful lawsuits against eBay, Google AdSense, and Orbitz: https://en.wikipedia.org/wiki/Section_230_of_the_Communications_Decency_Act#False_information https://en.wikipedia.org/wiki/Section_230_of_the_Communicati... It's certainly possible for an online marketplace to become party to fraud if it's sufficiently involved, and I have no idea where that line is drawn. I am not your lawyer and this is not legal advice. That citation above could be totally wrong and those cases were probably made up by rogue Wikipedia editors. Your intuitions will be closer, though, if you think of Kickstarter as the marketplace rather than the store. (As a side note, let me repeat that the law doesn't care whether it's a "store"; the question is whether people are being misled about the relevant facts when they decide to put money down. When people say "Kickstarter is a store," the legal argument would probably be "projects hosted on Kickstarter tend to mislead people who contribute money about the nature of the transaction, and the website's design encourages that." I know legal definitions aren't everything, but good ones tend to be handy even in non-legal settings, because they strip away hard-to-define words like "store" and replace them with easy-to-define words like "transaction" and "website".)

by brk 13y ago

jasonlotito 13y ago

> Sure, you can call the funds a "pledge" It is a pledge. You are pledging to give money, but not actually giving it. If they are successfully pledged enough money at the end of the time, everyone is charged. However, that doesn't mean everyone is successfully charged. It's well established that there are people who pledge but don't pay. You could meet your pledge requirements, but still have less in funding that you needed (discounting the known cut KS and CC companies take). Point is, it's a pledge. > I still don't get the "it's not a store" argument. What don't you get? > You give some money, and you get some (generally speaking) 1-time tangible thing back. Ahh. You are missing some parts. What you really mean to say is this: "You pledge to give them some money in the hopes other people pledge as well so that they meat some minimum requirement. If enough is pledged, the company can then continue working on whatever project they were trying to fund. Things can and will change. You may eventually get something back. You may not. It make take years longer. It may be different from what you originally pledged for. It's not always a 1-time tangible thing back." If that's your idea of a store...

brk 13y ago
Yes, I fully realize that Kickstarter is not directly a store. You're not pledging money towards immediately available products. They've added some unique factors to it. Otherwise, we would have never heard of them in the first place. But calling it a pledge just because there are caveats attached still does not (IMO) change what people SEE Kickstarter as... I haven't heard from too many people that "pledged" money into a successfully funded project that never delivered walk away saying "Oh well, no big deal". Kickstarter is basically leading people to believe they are going to get something very specific in return for their money. The projects even list higher-valued items for higher pledge amounts. This is much more "store"-like than it is not.
- ghaff 13y ago
  It's not really very store-like but you're absolutely correct that a lot of people view it that way. One doesn't have to look very far to find threads filled with all sorts of vitriol and threats over some kickstarter project which, despite what one assumes were the best of intentions, simply wasn't delivered as promised. Of course, the fact that "Kickstarter's Terms of Use require creators to fulfill all rewards of their project or refund any backer whose reward they do not or cannot fulfill" also reinforces the idea that getting what's promised is guaranteed. But that doesn't help if the money is just gone.
- jasonlotito 13y ago
  > Kickstarter is basically leading people to believe they are going to get something very specific in return for their money. No, they don't. They've done nothing to suggest otherwise, and they continue to try and make it clear that it's not a story, you aren't buying something like in a store. They've been consistent in this manner, and have even taken steps to ensure this point is made, such as making it so you can't pledge for more than one of the items. > But calling it a pledge just because there are caveats attached still does not (IMO) change what people SEE Kickstarter as... If that was all they did, you might have a point. But that's so far from the truth, it's insulting. > I haven't heard from too many people that "pledged" money into a successfully funded project that never delivered walk away saying "Oh well, no big deal". I haven't heard from too many people that "invested" money into a successfully funded startup that never delivered walk away saying "Oh well, no big deal". At the end of the day, the only people thinking they are "buying" something at KS are those people that don't actually read what they are "buying". At some point, you have to put the blame on the user.
  - brk 13y ago
    "No, they don't. They've done nothing to suggest otherwise, and they continue to try and make it clear that it's not a story, you aren't buying something like in a store." So you think this page:https://www.kickstarter.com/projects/253126792/rocktm-first-qi-wifi-lifestyle-smartwatch-wireless/pledge/new?clicked_reward=false https://www.kickstarter.com/projects/253126792/rocktm-first-... which lists "pledge" amounts, and "rewards" does not lead people to think they are getting something in return for their money? It lists descriptions of the products, and also gives indications of limited quantities in some cases. Something that would likely not be a concern if a person had no reason to expect a physical object back from their pledge. If you have no right to expect something, why would available quantities be an issue? "At the end of the day, the only people thinking they are "buying" something at KS are those people that don't actually read what they are "buying"." On this we mostly agree. I just went through the pledge process on KS for this (up to the point of actually pledging). There is a whole lot more text describing the item you receive with a pledge amount than there is warning you about the caveats (one small text box that gives of an ebayish "we're just a middleman" warning), other caveats are behind links, which we all know are rarely clicked. From the perspective of the average consumer, KS looks much more like a store/daily deal/discount style website than anything else.
jcromartie 13y ago
It's a store with an assurance contract model, like Groupon. You wouldn't say that people "pledge" to get their Groupon.
- jasonlotito 13y ago
  No, because there is a distinct difference in the result of Groupon and KS. KS makes it clear at many, many levels what your pledge means. Groupon makes it clear how your purchase works.

colechristensen 13y ago

I see no reason why backing a project requires any benefits or ownership and why the benefactors cannot turn a profit with that project. If you don't like it, don't back it. Federal regulation isn't at all necessary because the deal is clearly spelled out. You aren't buying a product, you're backing a project which you may be rewarded for.

lanaius 13y ago
Except in the case where the Kickstart is funded, the money is taken, and then the project never delivers. That's of course the risk, but if the project never really intended to deliver (i.e. a scam or fraud) Kickstarter can potentially lean back and say that it's not a store so you can't reasonably expect any return. The problem with that position is that CHARITY fraud is also a real thing and there's a whole host of agencies that care about it (FTC, FBI, IRS). I guess my point is that whether or not you expect a tangible reward, the outcome of a Kickstart is unchanged: your contribution is expected to create something new in the world. If Kickstarter systematically ignores fraudulent projects and "inventors" then the problem is deeper than simply not supporting what you don't like, inasmuch as saying "if a Ponzi scheme doesn't sound good, then don't invest in it" doesn't actually make Ponzi schemes legal.
brk 13y ago
Sorry, maybe my post wasn't clear. In the sense of giving money over to someone else for the achievement of a goal, I would see 3 basic categories: 1) A donation, however phrased. In this sense, you are effectively giving money away with no expectations of any future returns of any sort. It would be for the most part "anonymous", or at the very least trackable only for the purpose of eventually allowing the recipient to say "thanks". 2) A pre-paid product purchase. In this case you're effectively combining the elements of the "group buy" concept that at least at one time was semi-popular on Internet forums (8 years ago a group of F-150 enthusiasts all got together to purchase Gaylord brand fiberglass bed covers. Standard price was $1600, IIRC, but by committing to purchase 25 units all at once, we were able to purchase them for $1200 shipped). In this case you realize that the product delivery will occur at some future date, and that you get your money back/don't have to pay if the goal is not reached. If this goal IS reached, you fully expect to receive the advertised product within a reasonable timeframe. 3) An investment. In this case you are not looking for a product, per se, but you believe the corporation has the potential to make money. Your investment buys you a share of the company, and therefore a share of future value as well. Investments carry risk, and your investment could also become worthless, or worth less than the investment amount. Kickstarter seems to mostly attract people looking for #2 above, and most projects have some very low tier to accommodate people who only want #1 above. I'm not saying the project owner can't or shouldn't turn a profit, I was just saying that the project backers don't ever receive any part of that profit, so they are not "investors" (a term which Kickstarter seems to purposefully avoid".

hrktb 13y ago

> you get some _(generally speaking)_ 1-time tangible thing back. I think this is the part where it is not a store. A store brings you something for you money. Kickstarter can cover the non "generally speaking" part where you can pledge money for nothing (you just want to push the project. i.e. $1 pledges are usually without any tangible return). I remember the Penny Arcade kickstater, where a lot of people pledge below the first tangible return, just because they liked the idea. That's also what happens if you back an open source project, the tangible return might be highly subjective.

JackC 13y ago

Legally and practically speaking, it's not a store because it is instead a marketplace. If we were talking about a flea market, Kickstarter would be the company that rents out spots, not the guy selling you a shady DVD. It might be possible to set up something like a store using Kickstarter, and then to defraud people who participate. If I promise to try to build you a smartwatch and I was always planning to send you a brick wrapped in tinfoil, I've probably committed civil and criminal fraud. The court won't much care whether it's a "store," only whether I lied to get the money. But that's on me, not on Kickstarter -- federal law says that online marketplaces aren't (necessarily) liable for fraud. See the unsuccessful lawsuits against eBay, Google AdSense, and Orbitz: https://en.wikipedia.org/wiki/Section_230_of_the_Communications_Decency_Act#False_information https://en.wikipedia.org/wiki/Section_230_of_the_Communicati... It's certainly possible for an online marketplace to become party to fraud if it's sufficiently involved, and I have no idea where that line is drawn. I am not your lawyer and this is not legal advice. That citation above could be totally wrong and those cases were probably made up by rogue Wikipedia editors. Your intuitions will be closer, though, if you think of Kickstarter as the marketplace rather than the store. (As a side note, let me repeat that the law doesn't care whether it's a "store"; the question is whether people are being misled about the relevant facts when they decide to put money down. When people say "Kickstarter is a store," the legal argument would probably be "projects hosted on Kickstarter tend to mislead people who contribute money about the nature of the transaction, and the website's design encourages that." I know legal definitions aren't everything, but good ones tend to be handy even in non-legal settings, because they strip away hard-to-define words like "store" and replace them with easy-to-define words like "transaction" and "website".)