Learning from our Crowdfunding experience
Our campaign was to build the next generation of our network rendering software. It would allow combining computer power from the cloud, from friends and from a local network. Something we knew people in the industry wanted.
But, despite a lot of research, networking and careful planning we missed our campaign target by a huge margin, when the campaign finished, we had only 3% of the target. We thought we had a pretty good plan, a great video, great rewards, an engaged user base and campaign page which we tested with some of our users before launch and the response was all good. So what happened?
First, we did our research
When we sat down to work on our crowdfunding campaign, it seemed pretty inevitable that we had a good chance to be successful. We had a growing list of users, support from influencers, a modest budget for spending on paid ads and even data from a survey indicating that about 20-25% of our users were a 'yes' in response to our direct question of "would you support us in a crowdfunding campaign?".
All of this boosted our confidence, so we committed to build and launch the campaign. To hone our strategy further, we spent a lot of time looking at other campaigns on Indiegogo and kickstarter. We made sure we looked at a lot of failed campaigns to get at least an intuitive feeling for why campaigns fail. We knew the dangers of looking at too many successful campaigns. There is a strong temptation to imitate success, but this is a flawed approach because often there are other factors than their campaign page, video and perks that you don't see which ultimately make a campaign successful. More on this later though.
We developed a strategy
With our research done we decided on our strategy, which was fairly straightforward. Realising that we had limited reach on our own, we decided to seek support of key influencers. We were fortunate enough to have already made friends with influencers in the space. This allowed us to reach their much larger audiences on good will alone. They also kindly donated some of their own premium content to package with our campaign rewards (Special thanks to Oliver Villar from Blendtuts and Aidy Burrows and Gleb Alexandrov for their contributions!).
This really helped since our campaign goal was to build software that would be released for free, which meant the main output of the campaign couldn't be a reward for backing our campaign, though we did have a reward giving early access to the software. This was quite unlike other campaigns on Indiegogo in which the project was to build a product that was for sale and the rewards were pretty much to get the product they were raising funds for at a discount or with a package deal that wouldn't be available after the funding campaign.
Our strategy included spending money on advertising the campaign, again we were very targeted. We'd already learned from experimenting with paid advertising on Facebook, twitter and so on; paid ad platforms had always performed worse than content marketing. Simply creating engaging material and then posting that content for free on the forums and websites our users go to was far more effective than any paid advertising we tried.
As an aside, to give you an idea of how much more effective posting our own content on blendernation.com was compared to spending about $200 on facebook advertising. The same content on blendernation.com would on average result in about 100-150 new signups on our website. Facebook produced about 100,000 views....and about 20-30 signups or thereabouts. The majority of the results of our paid ads were driving people from facebook.... to another page on facebook and not to our website. So we stopped doing that pretty quickly.
A Crucial Lesson on Conversion Rates
And this leads nicely into the main point of this article, conversion rates. All of the large platforms, be they social media orientated, resources sharing or, in this case, crowdfunding likely have conversion rates that are small, usually 5% and lower. What I mean by that is this, for every 100 people a facebook add or campaign page is shown to; five will take action, everyone else does nothing.
This is likely the number one reason our campaign failed on Indiegogo. Can I also make it clear, this isn't Indiegogo's fault necessarily. The blame, rests solely with us on this one. It was the one factor that we didn't get a proper understanding on prior to launch. Had we known what our conversion rates would have been prior to launching, we'd have delayed the campaign until we were sure we had enough reach. Its likely we were lacking in reach by a factor of 50. We spent too much time on guessing how the campaign page should look, on the video script, what perks to offer. Though this does matter, not having enough people see it was enough to cause failure and would have been easy enough to factor into our decision making.
So, just know your conversion rate before you start planning, use it to base your figures on how many people you will need to reach in order to reach your goal (oh, you'll need to figure on an average backing level as well, apparently $20 is a good estimate, but be warned, one level does not work for all campaigns!). Then you should be totally good to start your own campaign right?
Figuring out conversion rates can be hard
One thing that really complicates conversion rate tracking is that at each point along the journey - from getting a link in an e-mail or seeing an ad online - if there is any way a user can decide not to continue, some won't, and its usually the majority that won't. For example, our shout out e-mail to our users about the campaign.
We sent out about 2000 e-mails, about 600 were opened, meaning we'd lost nearly two thirds of our users already from them not opening the e-mail. The diagram above shows the drop off graphically from 100% (all the people that received the e-mail) to 30% who opened the e-mail, right on down to just 5% who took action by clicking on the e-mail. This makes you really appreciate the art of persuading subject lines and good e-mail content and why its important! Don't write rubbish e-mail shoutouts!
Of the 2000 who got the e-mail then, only 100/2000 or about 5% took action. These rates also change over time and with the subject matter of each e-mail, which makes forecasting a little difficult. Its trivial to state what the conversion rate is after the fact, but we needed to know what it would be before we launched, which is another matter entirely.
So we had 100 people that clicked on something in the e-mail. How many actually backed? We figured that 12 people total from the e-mails we sent might have backed. I say might because our analytics on Indiegogo only allowed us to setup tracking for users reaching the payment page, not actually backing us. They still could decide to opt out at this point; and they did, we had 90 apparent conversions and only 29 actual backers. So now our conversion rate is roughly 0.6% of the total list of 2000 users. But we have to reduce it further to account for the fact that 90 goals were recorded in our analytics.
This is an important lesson in that even once a user is looking at the payment page, you're not guaranteed they'll actually complete the payment. This will be something familiar to anyone who's run an e-commerce site, abandoned carts are a real thing! Some people just either change their mind or we're only curious about what they'd see on the next page, once asked for their credit card details, they left.
So what's a good conversion rate anyways?
After about a couple of weeks into the campaign I was convinced our conversion rates were the primary issue, successful campaigns must have higher conversion rates than us and thats why we're not doing well. Turns out I was wrong again. We did some research to see what the average conversion rates are for crowfunding campaigns.
The results were that conversion rates are typically between 1-5%. However, it seems that these rates apply to the traffic that has already arrived on the campaign page. For example if 100 people make it to your campaign site and 5 back the campaign, the conversion rate is 5/100 or 5%. Our campaign page was converting much higher than this for our users responding to the e-mail, but only if we measured the conversion rate as 12/100 not 12/2000 or in other words if we measured the conversion rate of users who were already on the campaign page.
So which is the rate that should be used? How did those sources on the internet measure their rates? We don't know, it seems that the details that are most needed are obscure at best. We assumed that the rates we researched were measured as 'users on campaign page' divided by 'backers'.
Indiegogo recommends using a 5% conversion rate as a rule of thumb, and we figure that this likely means users already on the campaign page. That seems logical because Indigogo can measure the conversion rate of any campaign on their site easily this way, but they can't measure the conversion rates from my e-mail shoutouts because they don't have access to my system.
While the 5% figure is somewhat helpful. It entirely misses the much larger dropoffs that happen before any users even get as far as the campaign page. By the time any of our users had gotten to Indiegogo, more than 90% of the original e-mail recipients had already tuned out. This makes the conversion rate from the first contact, in this case the e-mail, the most important.
Contrast this with where we spent most of our attention during the campaign planning. We exhausted ourselves with effort on our video; making the campaign page appealing; testing with friendly early adopters to make sure it excited them about backing; and working out what perks to offer. If we'd split the focus evenly on calculating the reach we'd need and how we'd achieve that, we'd have been in a far better position.
Are your own contacts more likely to back than others?
What dragged the conversion rates down on our campaign further, was that a lot of other channels we thought would make up for our small database of users had smaller conversion rates than our own e-mails. This ended up reducing the benefits we imagined they'd bring. Though they did bring a lot more traffic to the campaign page than we could have hoped to muster, the conversion rates were much lower which we didn't expect.
The conversion rates for these channels were consistently between 2-4%, which was far below where they needed to be. Furthermore the numbers of users coming from these channels was also smaller than we'd hoped for, indicating that the conversion on their sites where they placed our link was likely to be small. Like with our e-mail shout outs, it appeared that the biggest drop off was the first one.
Its reasonable to assume that our campaign wasn't the primary reason people were visiting our influencer's websites and so the number of their users that followed the campaign link was a small fraction of their total audience. We learned an important lesson here, access to a large network from an influencer doesn't mean you'll convert a large portion of their network. They may not be interested in your campaign and you need to account for only a fraction of the network tacking an active interest.
In fact on this particular topic, Indiegogo did have useful data, according to their guide on e-mail strategies, conversion from e-mails sent to your own users/subscribers is 34% higher than other forms of outreach such as social media, press and so on. In our case the conversion rate was a lot higher, 23% vs 3-4% for on e-mail and about 6% vs 3-4% for another.
Had we known these numbers, we would have done things differently. It would likely have forced us to conclude that we needed either a lot more exposure from these other channels or a lot more users on our database, most likely both.
Was the campaign page to blame?
One explanation for a failed campaign can be that the campaign its self just wasn't compelling (there are tons of examples of such campaigns on indiegogo and kickstarter, you can filter their website for the projects that weren't funded). However this was at odds with reality. In fact we raised about US$1500 from just 29 backers which is an average of $52 a backer (most literature on average backing levels suggest $20-$25 as an average). The maximum level we received backing at was $200. So the evidence is against the proposition that the campaign page was the problem. I'll be clear, there were a handful of friendlies that backed our campaign, but their contributions were not in the majority. Most of the backers were people we'd had little to no prior contact with.
It also happened that our conversion rates on our campaign page were not all that different to the majority of campaigns, including successful ones. The main cause of failure stills appears to be not having enough reach to cope with the severe drop off rate (the opposite of conversion rate) at each step along the journey to backing the campaign.
Should you use a crowdfunding platform or your own website?
This is the last revelation I'll share with you in this article, but its one you should put some decent thought into. I'll phrase it as a question, should you use a crowdfunding site like indiegogo or kickstarter; or should you use your own website?
The answer I believe depends, if you know where all your likely customers/users/backers are and can reach them directly, I'd strongly recommend you use your own website, even more so if you are operating in a niche market. If, on the other hand you're making something that could have mass appeal to a very large number of people all over the world and its not clear there is a single gathering point, like a website, forum or platform where those users gather, then kickstarter or indiegogo or similar platforms are a good match.
To put it plainly, if you're making a cool new watch for hip youngsters, use a crowdfunding platform. There's likely little you can do to best the networks of the likes of kickstarter and indiegogo for reaching that kind of demographic. They spend a lot of time making sure they have vast networks to tap. If on the other hand you're making an art project for your local community to enjoy, you're better off hitting up the local newspapers, using facebook to get the word out to people near you, putting up posters and finding noticeboards around the place. Crowdfunding platforms deal with the large scale much better than very specific cases.
As for crowdrender, we are somewhere in between. In our case the problem was more to do with our project didn't demonstrate significant traction, so Indigogo didn't notice it and didn't promote it.
This is the risk with choosing crowdfunding platforms, they don't guarantee they'll promote you to their networks, so if the only reason you are going with them is their large networks, hoping you'll get lots of backing, forget it. You'll only get promoted if you're already pulling lots of money to their platform, then they'll promote you.
Notes for next time
Now that we're no longer highly emotional about the result of the crowdfunding, I'm actually quite happy we had the campaign experience we did. We learned so much about marketing and fund raising that we're feeling prepared and ready for next time.
And, if you're contemplating doing this and its your first time, I hope that this story will help you find success.
Summing up our experience I have some pointers for you if you're keen to try crowdfunding your project;
Know the likely conversion rates of each outreach you're doing to get users to the campaign page, so be able to calculate the following with some certainly;
backers / No. emails you send (in our case 5%, you may use social media, in this case change the formula to backers / impressions for platforms like facebook or twitter)
Do some experimental marketing campaigns before your campaign to understand what your reach and conversion rates are roughly. If you're going to get influencers involved, ask them what the conversion rates for their campaigns/publications are.
Test conversion with your site or campaign page early, we did do this and it actually helped. You will be guessing most of the time when it comes to the video, how to make your page look, what content to put on it, and what perks to offer. You'll likely get tons of offers to help you figure this out from 'experts', BUT, if you're product or idea is new, they likely know less than you do about your users. So have a longer campaign duration, like 37 days for a 30 day campaign, open early and test with your friendliest users for 7 days or more if you like. Use your own user's feedback to get the campaign page right.
Use both 1, 2 and 3 to build a following and momentum (actually recommended by most crowdfunding sites) so that when you go to fully launch the campaign by sending links to all users and such, users will be greeted with a campaign that has lots of people already engaged which can alleviate suspicions as to whether you're campaign will actually succeed.