The standard formula for creative independent web companies tends to go like this 1) do something you’re good at, 2) build an audience, 3) sell T-shirts to keep the site going, 4) cave in and sell your audience for ad revenue. One company that used this method to grow remarkably large recently turned to Kickstarter to actually push advertisers further away from its now sizable audience.
Penny-Arcade.com began in 1998 as a web comic for video game fans. Started by Jerry Holkins (the writer) and Mike Krahulik (the artist), it has steadily grown into a growing business empire. It now runs two massive gaming conventions in the U.S., an international children’s hospital charity and a web publishing business of a scale realized by few – all built on the passions and wallets of 3.5 million gamers who visit the site every day.
Last summer, Penny Arcade raised funds through Kickstarter, an online crowd-funding service that connects various projects with possible donors. The company says that, to date, it has matched $455 million in donations from 3.2 million people with more than 34,000 projects. Penny Arcade’s goal was to make its site totally ad-free – which would require more than $1 million to offset lost revenue. This would, as Holkins said, return to a more “pure” version of the site that would build a “direct relationship with the reader.”
They didn’t hit their million-dollar goal, but did raise more than $528,000, enough to pull all advertising from its homepage (a redesign that went live in December).
The site has always had a unique relationship with advertisers. Every ad (almost all of them for video games) is vetted by Krahulik and Holkins, who don’t want inferior products pitched on their site. The gaming industry knows the two are tastemakers, and bombard them with free products in the hopes of getting a positive mention on the site’s news feed. When it comes to advertising, if they don’t like your game, they don’t let you buy space (the exception being video pre-roll, which will sometimes pull material from an ad network to fill remnant inventory).
Robert Khoo, the company’s president of operations and business development, put it this way: “How are you supposed to maintain an independent voice when the products you’re supposed to be critical of are also putting bread on the table? Our answer is that you can’t, and we turned the model on its head and said ‘Hey, guess what, our ads are critiques.’”