Critique of Kickstarter as a Scam

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Discussion

Mr. Teacup:

1.

"This new collaborative, cooperative ethic promises to bring social change, and posits itself as a threat to the capitalist status quo. This is based on a naive analysis of the world where greedy, selfish, power-hungry people build institutions that embody their corrupt values. Once we get the right people in charge, things will be different. Only they aren’t. Charging 60 times the actual cost of providing a service by skimming a percentage off financial transactions is the very definition of parasitic capitalism. We’re OK with this, because Kickstarter are Good people. So the logic of conscious capitalism and social enterprises is this: as long as you reject the values of bankers & brokers, you can have their business model." (http://www.mrteacup.org/post/an-ambitious-plan-for-putting-kickstarter-out-of-business.html)


2.

"The reason it ought to be put out of business is that it is overcharging its customers for the value it offers, i.e. it is a scam. A tough message to hear, but there doesn’t seem to be any other possible conclusion. Some people have argued that it is possible to be scammed on Kickstarter, a possibility that Kickstarter itself admits to in its help pages, but few people seem to argue that the service itself is scamming project creators.

To make that case, first we should look at what Kickstarter offers to projects. Here are the list of benefits that are offered:

- A very small website

That’s it - Kickstarter provides you, the creator, with space for 4 public web pages plus an admin interface that is intended to be used for 4-6 weeks. The pricing scheme is unique: if your project reaches its funding goals, Kickstarter takes 5% of what you receive. If not, it’s free.

How much does Kickstarter make off of this arrangement? According to Wikipedia, Kickstarter has raised $125 million for 15,000 successful projects, and with a 5% cut, Kickstarter takes $6.25 million. We can easily calculate revenue per project, including the unsuccessful ones. The success rate is 44%, so the overall number of projects was around 34,000, which is $184 per project website.

A barebones web hosting company like NearlyFreeSpeech.net charges around $30 a year for far more space, including a domain name. Let’s call that $0.60 a week. Assuming an average of 5 weeks per project, Kickstarter earns $37 per week per website, 61× as much.

In other words, Kickstarter is a web hosting company that charges over 6,000% more than a comparable service." (http://www.mrteacup.org/post/an-ambitious-plan-for-putting-kickstarter-out-of-business.html)