06/27/2014 08:19 pm ET Updated Aug 27, 2014

Is YouTube's Fan Funding a Threat to Crowdfunding Services?

By Noah J. Nelson (@noahjnelson)

YouTube CEO Susan Wojcicki told the crowd at the annual VidCon gathering of online video fans and creators something they wanted to hear yesterday: that the 800-pound gorilla of video was getting into the crowdfunding business.

Wojcicki announced Fan Funding, a pilot program now being used by a few YouTube creators that will allow viewers to tip the makers directly in any amount up to $500. This puts the video service in a similar, if not the same, business as crowdfunding sites like Kickstarter, IndieGoGo and Patreon. Actually YouTube name checks all three of those services in the short graph it put up on the Creator blog the site uses to communicate with its cadre of creators.

So here's the question: is this an existential threat to any of the crowdfunding sites? Let's go through them, as a group and case by case, after the jump.

For starters let's look at what YouTube is offering.

Fans will be able to make one-off payments to a creator via their channel. According to reporting by Tubefilter, the channel support page will be customizable by creators. At the moment, however, the pages I've looked at are uniform: pop-up overlays that allow for pledges in the amount of $1, $5 and "Other."

Tubefilter also reports that "(for) each transaction, YouTube will take a 5% cut, plus 21 cents." This will put the YouTube cut of direct support at the low end of the crowdfunding spectrum.


Let's kick off the compare and contrast with the king of crowdfunding, Kickstarter. From a pure numbers stand-point the YouTube offer is better: Kickstarter takes 5% for itself and Amazon payments slices off another 3-5% in processing fees.

Kickstarter doesn't need to worry too much, however, as the framing between Fan Funding and what they offer could barely be more different. The all-or-nothing nature of Kickstarter makes it clear that the service is reserved for getting something specific--if not necessarily big--done. The structure of campaigns can be used to build excitement around a project in a way that a tip jar just doesn't do. It would be hard to imagine Seth MacFarlane offering to match funds for Reading Rainbow to the tune of a million dollars outside a campaign structure.

Moreover, Kickstarter isn't all that closely tied to YouTube as a platform. There are other verticals on Kickstarter that make up a large bulk of their traffic.


Much of what is true for Kickstarter goes for IndieGoGo, whose financial terms are a little better for all our nothing campaigns: 4% plus similar car processing fees. The sticker point comes with IndieGoGo's flexible funding rules. Under those terms creators get to keep whatever they get, but are penalized an additional 5%. Video creators who are not confident they will raise all that they need may find themselves better served by directing attention to a lower-risk tip jar.

Still, IndieGoGo is playing a larger game than YouTube videos.


Here is the first service that might be adversely affected by YouTube's entry into Crowdfunding. The processing fees hover at around 4%, and Patreon takes an additional 5% as their cut. One economic advantage that can play into Patreon's hands will be scale: the service processes just one payment a month from patrons, and the credit card fees are split amongst all the creators who are pledged to.

Patreon also casts a wider net than YouTube, but it is undeniable that creators on the video service are a big part of their community of users. This means that the influx of Series-A capital which was announced earlier this week is well timed. Patreon is going to have to compete by providing a better service for their users than YouTube is able to supply. Part of that means customer service, something that YouTube has never had a good reputation for.

The other advantage over what's been done so far with YouTube Fan Funding (and we're talking 24 hours here, so let's not read too much into what has been done) that Patreon has is the campaign language they've been able adopt. Patreon doesn't frame the service they provide as just a tip jar, but as a tool for communities of fans to help creators work towards specific goals.

The Others

Subbable and Seed & Spark come to mind as other platforms that may be caught in the "splash zone" of YouTube's maneuver.

Seed & Spark has little skin in this game at the moment, as ongoing web series have not been a major part of their focus. On top of  that the super-transparent structure of Seed & Spark is light-years beyond the "give me money" button Google has built for YouTub creators.

Subbable, on the other hand, is one of the rare projects that the VlogBrothers Hank & John Green create that hasn't turned to gold. The very event where YouTube made the Fan Funding announcement, VidCon, is their creation. Perhaps Subbable hasn't been that much of a focus for the duo, who have found wild success in other endeavors. If it were to fold, would the brother's Green even miss it?

A Quick & Dirty Final Analysis

What I love most about crowdfunding as a beat is that despite the existence of self-proclaimed experts and some insane success stories we're still at the beginning of this model. Unless you count NPR and PBS, in which case we've had this model forever and now it's just "regular folks" who are taking advantage of the idea.

Fan Funding only adds to the options that digital creatives have for financing their work. I can see it benefiting established "brands" like The Young Turks and Soul Pancake a lot more than it does up and comers. A tip jar being less of a falling cry than a targeted campaign is. For creators who want to grow their audience along with their financial resources a considered strategy that deploys a higher-cost, but potentially higher impact service like Kickstarter or Patreon is going to be the way to go. One for jumpstarting a project or reaching behind current capacity, and the other for keeping a regular tide of cash coming in.

The current iteration of Fan Funding is low hanging fruit, but it's also a dessert course: the service just isn't structured to provide steady income or a big payday. Tuber's looking to sing for their actual supper are going to want to keep their options open.

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