http://www.thembj.org/2012/07/amanda-palmers-prowess/              

by Megan Dervin-Ackerman : Business, Featured Articles, July 2012

Amanda Palmer’s Prowess

Amanda Palmer, a punk cabaret singer and one of the most productive users of social media today, has set a new record for the highest amount of money that a single musician has raised from Kickstarter. On May 31st, she exceeded her target of one hundred thousand dollars ten times. Nearly twenty five thousand fans pledged towards her new record, the accompanying tour, and an art book. It took as little as thirty days to raise  $1.2 million.
Following the completion of Palmer’s Kickstarter’s campaign, questions arose about how the funds would be put to work. Palmer posted a rendition of sorts online, both to her fans and the public at large –she called it “salty but detailed”.¹ The money, Palmer says, will be used mostly to offset costs of recording and printing (CDs, vinyl records, and a book), to create customized turntables, to fund a six-city tour and an art show, and to pay visual artists on stage. She suggests her net take will be less than one tenth of the funds received, for she has to deduct five percent of the pledges for a Kickstarter’s commission and another five percent for Amazon’s credit card processing.  Palmer also points out that the amount collected is treated as taxable income (fans can write-off their donations).

Expert User
Palmer’s strategy relied heavily on the way that she typically interacted with social media and her fan base. From there, she was able to build her “army of fans” for the project by connecting with them “day after day”.² Her engaging directness and creative flair worked to her advantage, and in the process, confounded the notion that new generations are unwilling to pay for music.
Palmer started her career as part of the Boston-based cabaret duo, The Dresden Dolls. They were picked up by Roadrunner Records and enjoyed some success. However, after a bitter fight with the record company, Palmer pleaded to end her contract early and shortly after became a poster child for independent artists.
The fans that Palmer has acquired over the years are not a passive audience; in fact, they consider themselves to be a part of the so-called  “Amanda Team ”, a large family.  If Palmer is consistently seen as much more than a performing artist on stage, it is in part because she signs autographs and chats after every show, blogs continuously, tweets to over 500,000 followers, and responds to e-mail.³ For instance, using Tweeter, Palmer will search for  “a good vegan joint for dinner [and] get 200 responses”–and still find time to thank her followers. Famously, she has changed the spelling of a word in the title of her new album because her fans asked her to, which cost her three thousand pre-produced watermarked CDs.⁴
Palmer likes to be herself, i.e. “an authentic human being with needs and a life, instead of a picture of a pop star on a billboard.”⁵ In social media, attributes like this can take one far. Familiarity there does not seem to breed contempt, unlike the traditional artist-fan relationship. For instance, when her Kickstarter campaign closed, Palmer invited fans to a complimentary celebration in NYC. Her followers inundated twitter with celebratory tweets of the sort “She/We did it!” One writer penned that as Amanda succeeds so do her fans.⁶

Moreover, Palmer’s online strategy fits well with the novel notion of permission marketing, where intimate knowledge of one’s target audience, including activities in common, enables success in sales. For Palmer, this may be nothing more than an extension of her ebullient persona, but Seth Godin, the American entrepreneur, author, and public speaker that popularized the concept, would concur that her intense artist-to-fan connection is key to her success.⁷

Kickstarter
Palmer seems to show that “[going outside] the label system to fund one’s work” can work well. However, it took Kickstarter to make this happen for her.
Since launching in April 2009, Kickstarter has assisted in funding 20,000 projects. The popular crowd-funding site has arguably become “one of the most disruptive and innovative platforms to emerge for the creative community.”⁸ Many types of creators have used and continue to use it, including musicians, filmmakers, visual artists, novelists, writers, developers, innovators, and even small start ups. It is based on a good-better-best marketing strategy: the more you pay as a backer, the better gift or experience you receive in return. Every person that pledges a certain amount of money to the project receives a gift such as a digital download, limited edition product, or an experience, like a private party.

In general, Kickstarter offers “pre-orders” of a product or service. Buyers become investors placing a bet on a project that they believe has a future. These “backers”, however, are not buying business equity; rather, they pledge money against a return in kind.  Ultimately, they pay for a product or experience and support a limited goal that they understand well.
One of the most notable examples of a Kickstarter product is the Pebble watch. Pebble is a wrist controller for a smartphone. It displays information such as speed and distance for bikers and runners, as well as text messages and caller-IDs—and it plays music in mobile devices, communicating with iPhone and Android via Bluetooth 4.0.  The Pebble watch reached the all time record for Kickstarter last week: a whopping $10 million that easily compares to a typical first round of venture capital financing.
Adventures in Crowdfunding
Like the Pebble watch founders, Palmer was able to raise the amount that she did for music because fans understood her vision, got something in exchange, and believed they were part of a larger ‘tribe’ with a similar outlook (Pebble supporters may have the common identifier of being technology nerds). As Slava Rubin, the founder of Indiegogo, another crowdfunding platform, has said: “caring about the person or company; wanting the product; or being part of a community ” are the three big reasons underlying fan pledges.⁹

While Kickstarter can be a helpful tool for some, it is not necessarily for everyone. “First-time users”, Godin writes,  “believe that [crowdfunding] will magically help them find new followers, new customers and new friends…Alas, with the rare and celebrated individual exceptions, none of these platforms magically and regularly turn the unknown author into a sensation.”¹⁰ Kickstarter can have advantages for artists and innovators who already have an audience. If backers are familiar with the creator and already like them, they will be more inclined to support their projects. On the other hand, a band or company that is just starting out does not have that base, and, with the possible exception of the Pebble watch, is unlikely to succeed.

Still, Hal Varian, Google’s chief economist said that, “crowd-funding is well suited to industries that create intellectual property.”¹¹ Small tech startups have historically gathered funding from sources like venture capitalists. But venture capital may not be the fundraising method of choice for other startups, and even for tech startups there now may be an alternative (although this still seems somewhat far away).

Duncan Niederauer, the boss of NYSE Euronext, claims that properly done, crowdfunding “will become the future of how most small businesses are going to be financed.”¹²  Fred Wilson, the prominent New York financier and venture capitalist, said, “if Americans used just 1% of their investable assets to crowdfund business they would release a $300 billion surge of capital.”¹³

Some Lessons
So be it. But an artist, brand, or company cannot make a product without the support of someone who believes in it or a community that is well informed about the maker’s history. In this regard, the work that Palmer has done to obtain and sustain the community that surrounds her is proof that artists and musicians should be interacting and communicating with their fan base. Palmer has marketed her brand and her persona successfully by building credible and lasting relationships with her consumers. She has proven that fans make success possible.
There is, of course, a question about the time that one can earnestly spend with one’s customers or fans without impairing productivity. Amanda Palmer wisely engaged the services of new media, marketing, and management company Girlie Action to run her Kickstarter campaign. To build a semblance of a genuine human-to-human connection between a producer and a consumer more effort is needed than ever before, and not just in the music industry but also in other trades.  A team approach still seems de rigueur.
 By Megan Dervin-Ackerman

¹ Crowdfunding Music: Busking For Millions, The Economist, http://www.economist.com/blogs/babbage/2012/06/crowdfunding-music (June 5 2012)
² Masnick, M., Amanda Palmer Raises $1.2 Million On Kickstarter http://www.techdirt.com/blog/casestudies/articles/20120601/01173819160/amanda-palmer-raises-12-million-kickstarter-crowd-goes-wild.shtml (June 1, 2012)
³ Crowdfunding Music, loc.cit.
⁴ Peoples, G.; Crowd Control: How Amanda Palmer’s $1 Million Kickstarter Campaign Changes the Music Industry, Billboard Magazine June 23^rd: 14-17.
⁵ Sisario, B.; Amanda Palmer Takes Connecting With Her Fans to a New Level http://www.nytimes.com/2012/06/06/arts/music/amanda-palmer-takes-connecting-with-her-fans-to-a-new-level.html?pagewanted=all (June 5, 2012)
⁶ Masnick, M., loc.cit.
⁷ Seth, G., Reflections on Today’s Kickstarter http://sethgodin.typepad.com/seths_blog/2012/06/reflections-on-todays-kickstarter.html
⁸ Malik, O.; Why Kickstarter Works, http://gigaom.com/2011/05/25/why-kickstarter-works/ (May 2011).
⁹ The New Thundering Herd, The Economist, http://www.economist.com/node/21556973 (June 16 2012)
¹⁰ Godin, S.; Kickstarter, Strangers and Friends http://www.thedominoproject.com/2012/06/kickstarter-strangers-and-friends.html (June 18)
¹¹ The New Thundering Herd, loc.cit.
¹² Ibid.
¹³ Ibid.