Patreon Business Model – How does Patreon Make Money

Sometimes the time, effort and money you invest to create content doesn’t pay you back. This is what most creators on digital platforms such as YouTube, Facebook, Instagram etc come across. Isn’t it?

While the content creators put a lot of effort into their content creation, the income they earn per post may not be worth it. Especially for creators who only rely on ad revenue, it should be daunting, right? The only people earning a good amount of money on ad-supported platforms are the ones who take up brand promotions, affiliate marketing, and sponsored posts. Don’t you agree?

However, making money when you have skills and abilities to influence people in a good way shouldn’t be that hard. Exactly, this is why Patreon, the perfect platform for creators saw the light. Patreon is a huge creative space for creators to connect with their fans or patrons truly. In fact, one of the podcast creators on the platform says “I’d rather have 300 patrons than 3 million Instagram followers”. 

Yes, Patreon truly connects creators with their patrons. It lets the patrons pledge certain sums of money for their favorite creators and helps creators grow as their relationship with fans grows. No algorithms, no high commission, nothing, literally. It’s a clear win-win platform for both creators and fans as in exchange for penny, creators need to offer exclusive and early content for their beloved fans. Of course, that is why the fans pledge.

Patreon is a leading funding platform for creators that helps creators earn monthly income that most people dream for. Okay, but have you ever wondered how the platform makes money? Well, this article walks you through its business model and how does it make money. However, let’s first see what Patreon is and how it started quickly.

What is Patreon?

Patreon is a powerful platform helping over 200,000+ creators to develop a recurring income stream with the help of monthly subscription plans for their fans. The platform is not just a means to connect creators with their fans closer but help creators to generate more income to make their living and come up with new quality content always.

Patreon is an earning platform for writers, musicians, podcasters, artists, gamers and many other professionals. As creators could not monetize their skills or arts much on platforms that run ads, Patreon has become a savior for them to earn monthly income.

Patreon creators can make money by –

  1. Offering their fans monthly memberships to get early access to the content
  2. Creators can produce exclusive content in exchange for their love
  3. Ask fans to pledge the amount of their choice to encourage you to deliver more content.
  4. Shout out names of fans’ who pledged more or reward the patrons with gifts.

Creators can choose any of the ways or even blend multiple ways to make the most out of the platform. However, it is wise to choose one or two strategies that suit the scenario rather than going for all at once. Despite what you choose, Patreon offers you required tools and guides to help you gain benefits.

So, the fans or patrons can show their love to their favorite creators by subscribing for their exclusive content, donating money for them etc. This way the creators get a boost to serve their fans much better. Till date, Patreon has given over $1B to creators with its services.

History of Patreon

Going back to the history of Patreon, in 2013 a music creator known as Jack Conte, was upset with the income their troop earns for videos they release through YouTube. Despite nearly 1 lakh subscribers and millions of views, what they earned was dissatisfying. Hence, Conte came up with the idea of Patreon and started it with the help of his college roommate, Sam Yam. And that is how Patreon was started.

The platform reached 1 million patrons from May 2013 to May 2017 which was encouraging. It then took a year to have 2 million patrons on the platform. By August 2020, Patreon has over 5 million patrons which is not something that easy.

Patreon Business Model

Now let’s see how Patreon, and how its business model works to make money.

Patreon makes money only if the creators make money. Initially, Patreon followed a business model of offering a flat 90% of earnings to creators. It used to take 5% as flat platform fees and 5% as payment processing fees.

In order to make the business model more sustainable in the long term, it made slight changes to the business model. It introduced three different membership plans for creators with different services and tools.

So, the present membership plans are named as Lite, Pro and Premium plans where Patreon charges 5%, 8% and 12% commission from creators choosing respective plans.

It is completely free to get started with Patreon. Creators need to pay a commission fee as stated above plus payment processing fees only after they start earning. However, the charges are much more reasonable and convincing compared to ad-supported platforms. In fact, this is why Patreon has become a known name for creators.

The best part is Patreon is not just a platform to connect with fans and make money but a tool to grow your income. As you see above, each membership plan offers different features to help creators grow the skills into business and get successful. Moreover, you can choose a plan based on the fan base.

For example,

  • Patreon Lite offers simple tools to set up recurring support from your fans.
  • Patreon Pro offers everything you need to build your membership business that generates great income for your and rewarding experience for your patrons.
  • Patreon Premium offers coaching and support for creators and creative businesses that are well established. It also offers premium features that save your time, reward your fans.

Patreon still makes attempts to make profits to pay creators by providing them with the right tools to grow their business. This is why Patreon has changed its business model from paying 90% to creators to charging upto 12% plus payment processing. Not just that this amazing funding platform tests different tools to help beginner creators out. One such tool is Starter Kits for starters. You will have complete control of membership tiers and benefits to offer for your fans.

As everything has good and bad, there are instances where some of the creators stopped using the platform as they were unable to generate income. However, it all depends on the creator’s skills and fan base for determining how much they could earn or at least how they could earn on the platform. That is why, it is always a good idea to explore Patreon after you are an established creator on some other platform. This way you could easily bring your fans to Patreon and deliver more content to them while also earning.

In contrast, if one is consistent one can start their creator journey within the platform with the features and tools Patreon offers. After all, creators need more patrons to make more money. In the same way, the more the creators and fans, the more Patreon earns.

Is Patreon’s Business Model Sustainable?

There is no doubt that there is hectic competition everywhere. As popular and populous digital platforms such as YouTube introduced Membership option for users to get exclusive and early access to their favorite creator’s content, it is clear that Patreon is facing a tough competition. However, the best part is the commission charged by those platforms is higher than what Patreon charges. There are even other nearly-competitors that offer services for particular niches. Even though, due to the business model, services and insights Patreon offers made it the leading funding platform for creators. Moreover, it constantly strives for improving its business model for boosting the profits of creators. Of course, the more creators earn, the better for Patreon. However, monthly income and around 10% commission is not a big deal when it is the only best option.

Read: Business model of leading crowdfunding platform, GoFundMe.

Besides all, finally as long as Patreon tests new features and helps creators earn more its business model is sustainable. Not to mention, it is equally important for it to verify creators accounts and content constantly as the patrons should never get disappointed or feel the platform unworthy. Of course, Patreon is even making such efforts to monitor content created by creators and check if everything is abiding by law.

Wrapping Up

As you see Patreon was started with the mission to value creators and their work. The only way is to connect them with their genuine fans who are always up to supporting them to make new content. Fortunately, the platform is doing well till date. Though, the team of Patreon rarely reveal their numbers, the company officials recently said that they raised $90 million from investors and its value is over $1.2 billion. This clearly says that Patreon is able to make well even during these days, (despite pandemic). Moreover, with their regular experiments, testing new features to help creators reach their patrons closer, the platform is doing its best.

Hope this article helped you learn more about Patreon and its business model. 

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