suibhne
Watchdog
All that info was unnecessary, because really the bottom line is this… Kickstarter is giving away 5% of its profits to charity and essentially bragging about it. The reality is that Kickstarter users would be better off if the 5% went to the guys they're actually backing, ie: the whole reason they visited the site. So it seems like a dumb thing to brag about.
Not at all. There are two very good reasons to make this announcement: Kickstarter is looking for additional investment, and Kickstarter intends to go public within the next few years. I'd be surprised if both of these things aren't true.
Overall, your post suggests you're not all that familiar with the crowdfunding scene or any of the economics here. Kickstarter's backer-facing infrastructure (and third-party ecosystem) and user-facing portals are more mature than most other platforms out there, and Kickstarter's fees to backers are roughly equal to those of other platforms (higher than IndieGoGo's basic campaign structure, but the same as others like Fundly and Crowdrise). And not only is Kickstarter's fee structure competitive with other crowdfunding platforms (despite offering much greater reach) - it's also vastly lower than the margin taken by other internet-enabled service connectors.
But hey, for the sake of argument, let's dig into the economics of the rest of your argument.
Even if you assume that the 5% is pure margin - which is ridiculous - that amounts to less than 40 bps (0.40%) taken from projector creators. Since the 5% we're discussing is a fraction of Kickstarter's bottom-line profit rather than its percentage take from each project, let's assume an 80% net margin - which is insanely high even for a platform like this, but fine. That gives us a decrease of about 30 bps from the actual project.
In other words, even with aggressive assumptions about Kickstarter's margin from each project, donating 5% in company profits means a 0.32% reduction in the funding received by each project creator.
Nobody questioned that they can charge whatever cut they want and are free to spend their money however they like.
Except that you just questioned that. You're apparently not doing the math, but you seem to believe you have a better solution for Kickstarter's business model that involves taking lower margin from project creators.
That said, their website is pretty basic and bad and the only reason anyone goes there is because the name is well-known. (Which is why stuff like fig.co is coming into being, I guess)
The primary motivations for Fig seem to be "active curation by a central committee of learned citizens" and "equity investment via crowdfunding". The US now allows the latter, but Kickstarter has announced that it won't be supporting this (for arguably good reasons, since equity investment in an information-poor environment is a terrible, terrible idea). Fwiw, of course, Fig won't allow it either…except for wealthy individuals with net worth > $1M.