The Economics of Crowdfunding
Crowdfunding (aka Cyberfunded Creativity) is a new and growing business model that allows creative people to market their work directly to fans online. Here we discuss the financial details: how people make and collect payments, how creative work can keep earning money over time, and how a crowd of fans can collectively support a favorite entertainer.
Because crowdfunding is a relatively new way of doing business, it doesn't have a lot of rules or data yet. People are still discovering how to make it work. This is especially true in the cyberfunded creativity branch, as creators are trying out new methods of presentation, payment models, and perks. These aspects evolve in response to the needs of a particular creator and their project(s). Also, patrons have different tastes in how they prefer to make payments, and they are trying to figure out the best ways of finding projects worthy of their support.
Since the field is still so fluid, there are few firm conclusions; most of what you'll find on crowdfunding economics is discussion rather than analysis or advice based on proven tactics. A few of the busiest hub sites are beginning to post data pooled from their members' activities, things like the most common donation size or fundraising period, how many projects are successfully funded, etc. Those differ across services so what applies to one may not generalize to others. Read widely.
Since the field is still so fluid, there are few firm conclusions; most of what you'll find on crowdfunding economics is discussion rather than analysis or advice based on proven tactics. A few of the busiest hub sites are beginning to post data pooled from their members' activities, things like the most common donation size or fundraising period, how many projects are successfully funded, etc. Those differ across services so what applies to one may not generalize to others. Read widely.
1000 True Fans
A cluster of articles centers around some issues relevant to crowdfunding, the famous "1000 True Fans" discussion. It concerns devoted fans who spend $100/year or more on a creative person's products, and whether or not it is feasible for a creator to amass enough such fans to make a decent living. The original article called for 1000; plenty of people feel they could live comfortably on rather less than $100,000/year.
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The Long Tail Theory
The "long tail" is a theory of marketing, promotion, and economics. It deals with the impact created by a very large amount of very small contributions or actions, especially over an extended time period. This tends to work well for creative people who amass a great deal of material over time. Articles discuss how it applies to crowdfunding and other alternative businesses.
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Money Handling
Cyberfunded creativity requires some method of collecting money. This usually involves an online money service, although creative people often accept checks or other forms of payment in addition. The easier it is for patrons to give you their money, the better. If giving you money requires a lot of fiddling around, then you will lose potential patrons due to the hassle factor. Fortunately, there are many online money services to choose from, so you can find one that meets your needs and appeals to your audience. PayPal is probably the most popular for cyberfunded creativity, but you should still explore your options carefully before deciding.
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Websites for Crowdfunding Projects
Crowdfunding websites offer a place for creators and sponsors to find each other. You can now choose from many different hub sites, each with its own business model and theme. Some are global, while others have smaller scope. A website typically offers a place to describe the project, a link to its homepage or blog, some kind of goal (which may involve a money threshold and/or a deadline), and one or more payment options. Some also provide interaction methods such as a forum, comments, private messages, etc.
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