Excerpts from an article by Erin Griffith in Wired
Scroll, a subscription-based startup, that plans to launch early next year is part of a growing class of venture-backed companies that see subscriptions as a way to absolve the internet of its original sin, advertising. Many are aimed at smaller publishers. But these newcomers arrive as major media brands, including Spotify, The New York Times, and The Washington Post report growing revenue streams from subscriptions.
The newcomers include Patreon, whose software platform allows bloggers, YouTubers, and podcasters to collect pledges directly from their fans. The site now has more than 50,000 creators, some of whom earn six figures a year. (Patreon takes a 5 percent commission.) “If you’re an aggregator like Google or Facebook, then ads are a great way to make money, but if you are a person who has a blog with 20,000 readers every month and you monetize it with ads, you make maybe $150 a month,” says CEO Jack Conte. “That’s a basketball stadium full of people waiting to read your next thing, and you only get $150. It’s been clear that doesn’t work.”
In September, Patreon raised $60 million in new venture funding from Thrive Capital, valuing the company, founded in 2013, at a reported $450 million. Conte says investors are excited about subscription businesses because the revenue is predictable, and companies like his have shown that the model can work. “The idea that people want to pay for content is no longer a question. It’s a proven theory,” he says.
Thrive Capital partner Chris Paik says Patreon’s pledges work better than paywalls for sites with small but passionate audiences. Patreon subscribers don’t gain access to exclusive content—they subscribe because they want to support the creator. Twitch, another Thrive Capital investment that sold to Amazon for almost $1 billion in 2014, used a similar model.
Read the full article on Wired