“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.”
Excerpted from a longer critique by Mr. Teacup:
(but be sure to read the defenses in the comments as well)
“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.”
Kickstarter is a scam, but for entirely different reasons to what you describe. I’ve been involved in the funding of over 30 projects, over the past two years. All have promised tangible rewards (merchandise, program licences, etc), many of the deadlines for delivery have come and gone without acknowledgement from the project initiators. A number of them refuse to respond to communications, others keep pushing the deadline for delivery out by “a few months” or “a year”. Kickstarter themselves refuse to answer questions relating to this, and CC companies refuse to reimburse because of the time between transaction and realization that you’ve been defrauded. These aren’t small projects either – many of them were in the $10k-$1m funding range.
Obviously, once I realized the site was a scam, I stopped backing projects – that doesn’t help me recover the $3k-odd that I’ve already flushed supporting these con artists. I doubt that anyone who uses the site is actually legit, and neither Kickstarter nor Amazon gaf as they take their 5% off the top, so it’s just a cash cow for them. I’ve reported the site to the ACCC, but they have no power to investigate/help as the companies are American.