Money talks: Has Kickstarter changed the Return On Investment?

BY VINCENT VARNEY

I’m a firm believer that people should talk with their wallets. If you’re concerned by Nestle’s treatment of workers, buy a different brand. If you’re not happy with Vodafone’s erratic service, find another provider. It’s the basis of consumerism, and by thoughtfully choosing where your money goes, you’ll help shape the market.

Crowd-funding services – the most popular of which is Kickstarter – are built on this exact ideal, allowing the average credit card holder to help fund a project, eliminating the need for corporate dealings. Essentially, a creator pitches their project (whether a film, stage production, comic, etc.) to the masses, who then decide if they want to back the project, and if so, with how much money. The concept is fantastic: Taking power away from marketers and Venture Capitalists, allowing consumers to decide ‘what people want.’ But is it also taking advantage of project backers?

Without Kickstarter, funding a project works this: You pitch your product to an investor, and if they decide to give you money, they’ll expect an agreed upon share of your profit, also known as their Return On Investment (or ROI). Kickstarter doesn’t offer the same mechanism. Instead, backers get the warm and fuzzy feeling of knowing they helped bring a product into the world, and in most cases, backers who contribut a large amount of money get gifts, such a posters and or even the product itself. Considering over 32,000 projects have been funded in the past three years, clearly people don’t mind the warped ROI.

There instances where I find Kickstarter’s approach to ROI (or lack thereof) entirely reasonable. One such example is Retronauts, a podcast that has existed since 2006, free of charge. Earlier this year, the Retronauts host Bob Mackey lost his job, along with the equipment needed to record the podcast, much to the disappointment of the listener base. Mackey decided to create a Kickstarter fund to revive the podcast, asking for US $12,000 – enough money for the recording equipment he needed to keep making the programme, again free of charge. With Retronauts, there’s no profit and there never will be. ROI isn’t an issue here.

But what about Zach Braff’s upcoming film being funded through Kickstarter, or more concerning, the Veronica Mars film? These movies will turn a profit without a doubt, considering the publicity they have received through the unusual use of crowd-funding and, in the case of Veronica Mars, the fact that fans have been asking for the movie for seven years. Yet, for the thousands or millions who backed the projects, they won’t see a cent of the money. Instead, backers who contributed a large amount get a digital copy of the film on release, limited edition posters and may visit the film set.

Marketers and Venture Capitalists will call a limited edition poster a sorry excuse for ROI, but does it matter? This is Kickstarter’s service – if you don’t like it, don’t hand over your money. Ultimately, while backers aren’t sharing in the potential riches, they like the freebies. They’re thrilled to visit the Veronica Mars set, and if they’re happy, is there even a problem? When you give money over the Internet, you click “Yes, I have read the Terms & Conditions” (whether or not you actually read it). People know what they’re buying into and they’ve spoken with their wallets, so even if you think the model takes advantage of consumers, the consumers are agreeing to being taken advantage of.

Kickstarter’s idea of ROI might be a bit unusual, and in the case of profitable projects, imbalanced, but the consumers have spoken. They don’t mind if they help someone become rich and can’t reap the benefits, because they got a cool sticker album for their efforts. Maybe these consumers are naïve to the business world, but maybe their values are simply different. As long as you’re putting your money where you think it belongs and you’re happy with the result, you’ve done your job as a consumer.

Vincent Varney is a Sydney-based writer who only places money with what he deems ‘worthy’ initiatives, and when someone pitches a working portal gun, he will be there. In the meantime, follow him on Twitter @VincentVarney

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5 thoughts on “Money talks: Has Kickstarter changed the Return On Investment?

  1. I’ve only ever considered funding one Kickstarter campaign: to bring my favourite TV show (Young Justice) back. But they need $10 million! WHAT. That’s a ridiculously high sum of money and we only have 76 more days left to hit that goal. A total of $23.8 thousand has been raised. UGH. Bloody Warner Bros. Anyways, I agree, if you don’t like it, don’t waste your money on it and if you do like it, feel free to toss $100 dollar notes at it!

  2. I definitely believe that it’s a difference in values rather naive, from a financial standpoint you can possibly make the implication of naivete but even then the vast majority of people aren’t contributing large sums never to see a return. If someone is only contributing $20 or $50 or whatever then a digital or hard copy of a movie/album/DVD/whatever is definitely a commensurate ROI seeing they’d likely spend that amount on whatever it is if it were released anyway but this way they get the additional kick out of contributing towards something they love.

    Even for people who do contribute larger sums, I don’t necessarily see it as naive, I just think they’re measuring their ROI in means other than financial. Getting, say, a limited edition still frame from a movie or a shoutout from a recording artist or something may be worth more to them from a personal viewpoint than a couple of hundred dollars is.

    • Hi Matt,

      Some great points you have there! It definitely does come down to the individual’s perception of what they ‘get back.’ Despite my comments, I wouldn’t be closed to contributing to a Kickstarter fund in the future, but more than anything, I want people to consider where what they get in ROI and decide for themselves if it’s worthwhile.

      You know all the stories about geniuses selling their ideas to a corporation for $100,000, and then the corporation makes millions and millions off their idea? My primary fear is that the opposite occurs, with the consumer getting screwed over this time. But again, it’s about perception and an individual decision of how one will spend their money and how they will be content with their reward. As long as people think twice, contributing to a Kickstarter it’s a good thing (IMO).

  3. Pingback: Money talks: Has Kickstarter changed the Return On Investment? | Twenty-Something

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