Kleefeld On Webcomics #73: Penny Arcade Sells Out

By Sean Kleefeld

So, the Penny Arcade Kickstarter project.

Two guys started a webcomic over a decade ago, and have become successful enough financially to have fourteen people on staff, set up a charity organization that’s raised over $12 million since 2003, and host annual gaming conventions in both Seattle and Boston. You wouldn’t think they’d need to Kickstart anything, and could easily afford to do pretty much whatever they wanted. What’s going on here?

Let’s run down a quick history. Jerry Holkins and Mike Krahulik started the Penny Arcade webcomic back in 1998. Their income came primarily from donations. In 2003, one of their fans, Robert Khoo, quit his job and offered to work for them for free for a few months. He kept Holkins and Krahulik focused on their strip and handled the marketing and business side of things. Dealing with advertisers, establishing the PAX conventions, setting up the charity... With Khoo’s business sense, he was able to get them comfortably profitable inside a year and has helped grow the organization into the juggernaut I alluded to earlier. Meanwhile, Holkins and Krahulik continue to work on the strip.

In talking with other webcomic creators, you can find an odd mix of feelings about Penny Arcade. On the one hand, other creators are thrilled to see “one of their own” doing so well and proving to their relatives that it’s a viable career option. On the other hand, there’s definitely twinges of jealousy that these two guys got a break (in the form of Khoo) that I believe is unique among webcomic creators. I don’t doubt there’s more than a few creators who’ve wondered when some fan will come work for them for free and make them into a raving success.

But, getting back to their Kickstarter, much of Penny Arcade’s success comes from the number of fans they have. With so many eyeballs on their site every day, they can afford to charge a premium for advertising. In fact, advertising brings in over a $1.4 million every year. But what they’ve recently realized is that that is dependent on people visiting their website consistently. The more people they have visiting, the more valuable their ad space is, but the fewer people they have visiting, the less valuable the ad space.

They don’t say precisely that they’re losing visitors, but Holkins notes that readers are increasingly able to view their comics without hitting their site, thanks to social media outlets. It’s incredibly easy now to copy and share their comics via Tumblr or Twitter or what-have-you, completely negating the need to actually see their site. Since the price they can charge for their ads is determined in part by how many visitors they get, less people coming directly to their site could mean less advertising revenue.

But still, why the Kickstarter? The whole point of their campaign is to raise enough money so that ads won’t be needed. But if people aren’t actually visiting the site and viewing the content through other means, doesn’t that mean that they wouldn’t see the ads anyway?

Well, the ads on their site are a bit different than most webcomics. While they do have the standard banner-type ads, they also do custom comics for video games. Penny Arcade Presents are unique (often eight page) comics that are done exclusively for a paying advertiser. Visitors do go out of their way to see these comics because they like what Holkins and Krahulik do, but this obviously takes time away from other comic projects they would like to tackle. So some of the funds from the Kickstarter will be used to offset these comics, allowed the two of them to make comics of their own design. It provides the same amount of content but with the new content being entirely conceived of by Holkins and Krahulik and not directed by a large video game manufacturer.

Interestingly, this particular Kickstarter campaign roughly coincided with a growing discussion about Kickstarter in general. A number of people have wondered aloud whether a crowd-funding model makes sense, or if there’s some inherent flaws that haven’t been widely uncovered yet. While it’s definitely too early to say for certain, most of the arguments strike me as having a “well, back in MY day” element of curmudgeoness to them. But regardless, the complaints I’ve seen lodged against Penny Arcade tend to center around the notion that they’re well established and that violates the spirit of Kickstarter; that it’s designed for people who don’t have the resources in place try new things.

Even with those general concerns in place, the Penny Arcade Kickstarter blew through it’s original goal of $250,000 in the first four days. It safely wrapped up earlier this week, well past Holkins and Krahulik’s expectations. It’s too early to really say how this will have a long term impact on Penny Arcade or Kickstarter, and whether or not other webcomic creators will try to follow in the vein. Although no one has really been able to successfully mimic Penny Arcade’s business model yet, I don’t doubt many have tried and it will be interesting to see if and how they follow along here as well.

Related Posts:

Kleefeld On Webcomics #72: Get Your Learnin' On

Kleefeld On Webcomics #71: Original Art

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