Thread by @FoldableHuman

I don't want to be doom and gloom, but Patreon is about to eat itself. Or, more specifically, the investors who demand geometric growth are about to demand Patreon eat itself.
cnbc.com/2019/01/23/cro…

These paragraphs are separated by only a photo of Jack Conte's face.

"We've kept 5% of almost a billion dollars to run a website that's mostly text and shuffling money around" followed by "we need to tack more junk on to be sustainable"

This is the bizarro upsidedown that capital lives in. Their existing model, handle the logistics of subscription service for businesses too small to handle them directly, is the definition of sustainable. It scales up ridiculously well.

The basic operation doesn't change whether you have 10,000 users or 10,000,000. You don't need to scale up your staff by 1000x to handle 1000x the users.

One of YouTube's biggest operational problems is that "low engagement" users are really expensive. You don't need to go far to find a channel uploading hours of 1080p video *per day* and getting tens of hits total. But all those hours of video still need storage and processing.

But Patreon doesn't have the equivalent problem. They host very little media themselves, mostly limited to photos. The vast majority of it is just text. A user with 0 patrons costs Patreon functionally nothing even if they post a blog every single day.

Oh, it's also worth noting that the numbers are all deliberately obfuscated. "Patreon will pay out X" bypasses the actual input number. I was brief for the sake of space earlier.

So Patreon has made around $55m in revenue since 2013. If their startup money had been a loan they'd have probably paid it back by now and would be operating a pretty sustainable service.

But it's not a loan.

It's ~InveStMeNt CaPitAL~

Here's the September 2017 blog post where Jack talks about the $60m Thrive Capital gave them and a rough sketch of the forward business plan.
patreonhq.com/new-round-fund…

This was in addition to the two other rounds of VC (both also coming from Thrive Capital) of $30m in early 2016 and $17m in 2014.

So Patreon has made around $55m in direct revenue, but they're in hock to Thrive Capital for ~$107m, and Thrive doesn't just want their money back with interest.

Thrive wants all the money.

(Also it's just cute to point out that if they hadn't taken the additional $60m in funding 16 months ago, 2018's growth would have probably looked the same and revenue would have now surpassed investment.)

Oh, BEE TEE DUBS, this is Thrive Capital:

So what to expect?

I predict a series of ill-advised feature rollouts, like they'll probably go gonzo and build a livstreaming platform or pivot to Fortnite or buy Teespring or something equally confusing, with a slow degradation of the core user experience.

Like you'll sign in and there'll be six popups asking if you've tried Patreon Mega and extolling how it can help you mega-engage with your audience, while you're just like "can I have a commission button so people can make one-time payments?" and they're like "no."

It's not going to die overnight, Patreon will still be here in 2020, it'll just be, you know, worse to actually use.

Whenever these threads go big I always start to worry that I've, like, accidentally convinced a bunch of people that Patreon is going to light on fire and burn down next week, so for my own anxiety I'm going to go on for another few tweets.

Jack's language in the CNBC interview belies a change in priorities. The core business is framed as "unsustainable" and the proposed solution is a myriad of additional products, features, and revenue streams.

Not just ways for creators to monetize their audience, but ways for Patreon to monetize creators.

At best he's proposing bloat, a dilution of the service into a ~platform~ of a bunch of different competing tiers.

This isn't entirely out of left field, I've talked before about how Patreon's seeming end goal was to supplant the personal website (already supplanted by YouTube and Facebook) and become the place people *find* content.

The core concern is that Patreon the corporate entity has come to see its core product as a burden, a loss-leader that they've used to get you into the store, and now they need to figure out how to get you to open your wallet for something with better margins.

The fact that this interview is landing after a weekend of tweets like this is bitterly comical

https://twitter.com/PatreonSupport/status/1091552852714053632

It doesn't engender confidence. If anything it says "brace for more junk like that while they build some shiny new features that will make for a big IPO."

It says your concerns, your needs as creators and patrons, are only relevant to the degree they overlap with the interests of Thrive Capital.

Also, since I haven't put it in the thread directly, while this is potentially CNBC's framing and language, this wouldn't be complete without the vomit-inducing framing of Patreon "generously" passing along 90% of what patrons pay to creators.