Crowdfunding Becomes Crowdbuying: Why Kickstarter Will Power the Maker Economy

You probably know Kickstarter as a crowdfunding tool built by a New York-based startup. Members can list creative projects in areas such as publishing, technology, film, and then gather funding from the masses, in amounts as small a dollar up to commitments of thousands. Last year the Kickstarter community pledged $150 million, which makes them a considerable tool to bring your idea to life. I’ve sponsored several myself, for example, one focused on photographic Mexican Lucha Libre wrestlers.

However to see Kickstarter as “just” a funding platform is actually too narrow. It’s a system based on (a) being able to give money directly to a creator, not a corporation or middleman and (b) becoming part of the creator’s community in the process. Tapping into the powerful collaborative action of “we’re making this happen together,” no way limits their ability to expand into content that’s already been created, manufactured, or distributed. And as you consider the technology and economy changes occurring at a macro level – creators being able to go directly to consumers – Kickstarter has a chance to be something unique. Not just a payment system (today they just sit on top of Amazon Payments), but by tapping into data, emotion and community.

Four Reasons Kickstarter Will Power the Maker Economy

1) Crowdfunding Grows Because Corporations Cease Being a Primary Source of Capital for Creatives: We’ve entered an astounding period for creatives and entrepreneurial individuals. Never has it been easier to bring your writing, music, video, product, app to market. And the necessity to become an economic actor is driven partially by the decline of establishment – traditional employers of creatives are suffering (publishing, media, record labels). What does this mean? Few upfront dollars for creatives, especially if they are unproven or want to try something “risky.”

Fortunately for many types of creation, the costs of production have decreased even faster. Predominantly due to technology advances (bandwidth, prosumer tools, shift from atoms to bits) and the creation of global marketplaces, it’s never been easier to try and develop an audience or customer base. Whereas niche businesses were once dependent upon the density of cities or domestic mailorder, now you can find your community from across the world. Crowdfunding is simply asking these people to pay upfront. And when you’re of a niche, your desires are usually undermet by traditional production, which means you are more likely to commit dollars in advance. Hence, the rise of crowdfunding.

2) Unbundling of Creators & Rise of the “Businesses of One:”

While disruptive to many, we’re discovering that this unbundling has real financial benefits for makers who can cultivate a following. Consumers are more willing to pay when their money is going directly to a person. We hate paying corporations but we like paying creators. And of course when there’s no middleman, the creator can yield higher profit even if they sell fewer or at a lower price. And when you pay a creator it’s not a single one-off exchange of dollars for a good or service, it’s a relationship. It’s more like patronage – you are a supporter of a person’s work and voting with your dollars.

Kickstarter has nailed the feeling that you are paying a person to work on a project of mutual passion, not just transacting. The story behind the item, the updates from the creators, the selection of what level you want to pay along with rewards — these are all queues that you are sending your money to an actual human being who has worked hard on something.

I see no reason why this model can’t evolve to be a front-end for selling what’s already been created, not just raising money. It’s the evolution of the tip jar, the subscription model, etc. I can read a post from a blogger I like and support her in a way that brings me closer. That makes me a supporter who starts interacting with her and other supporters. Not just a passive reader. I can buy a live concert recording from a band I like and it feels much more vibrant than just clicking a PayPal link. It’s an emotional wrapper to what’s otherwise a very mechanical interaction. And it forces creators to improve the way they interact with their purchasers.

Kickstarter can be the point of sale for the creative economy and increase sales conversion rates compared to simple checkout buttons.

3) True Social Commerce Means You Don’t Have to Pay Me to Share: I don’t need “$10 credit” promotions to share Kickstarter projects with my friends. “Three friends buy and yours is free” means nothing to me in the context of projects and creators care about. Kickstarter’s language personifies the transaction – I’m “funding” a “project” and becoming a “backer” who will receive “updates” from the creator. Contrast this with pre-ordering a CD and becoming a customer who will receive emails from the store. Feels different, right? If above I argue that Kickstarter will increase conversions/donations, I believe they also will increase passalong, potentially with a system that shows how many “backers” you attracted. And in this case the compensation won’t be an affiliate fee, but rather just access to, and thanks from, the project creator.

Increased conversion rate + increased sharing

4) Yielding a Purchase Graph to Improve Discovery: Social graph, interest graph, location graph, graph paper, no wait, not that last one. These are all just fancy ways of saying “data on something and its relationship to other things.” Kickstarter’s purchase graph means they know what you have supported or bought in the past. And we know that “bought” beats “liked” in terms of true intent. With enough transaction volume Kickstarter should be able to cross-market effectively, which again leads to an ability to drive demand. You sell more when you sell via Kickstarter.

Why do you think eBay bought Hunch? Because Paypal data + Hunch = better product recommendations. Same with Amazon Payments + Amazon. Owning transaction platform providers gives you tremendous insight into individual purchases and preferences. And Kickstarter data is already public (“Backers”) since the social recognition is part of the experience.

Plus unlike eBay and Amazon, Kickstarter has the chance to also be a content destination for its community. “Updates” and “Comments” already provide a basic discussion and marketing framework for an item’s creator and their fans. While Amazon allows, for example, author’s to talk about their product and interact with reviewers, it’s just another small item on their overcrowded product page. It’s not a loving and warm space owned by the creator. Kickstarter is.

Beyond the on-site experience, I could choose to share my purchase data by authing my Kickstarter account to other products. Personalization gets better because what I bought is a strong signal. People discovery gets better because the fact you and I both bought London Calling by the Clash is now known. And oh look, they already provide simple profile based summaries of what I care about:

Increased item conversion rate + increased sharing + increased discovery = the Kickstarter advantage for the creative economy.

If you believe in the unbundling of creatives from corporations. If you believe that consumers will seek out relationships with creators and vote with your wallets. And if you believe communities will form around creators, goods and content, well, then it’s not a stretch to believe that Kickstarter will be one of the most important platforms for commerce, and a fundamental catalyst of the ideas economy.

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