Diaspora

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Cutting to the chase

My final analysis on Diaspora’s hyper-successful crowdfunding strategy demonstrates that they sold 1,942 more $25 pledges than they “should have” because of their t-shirt strategy, resulting in additional $48,550 just for the $25 pledge category!

Take a look:

Here is what that chart “should” look like:

This was because to get a Diaspora t-shirt, a person had to pledge at least $25.  Diaspora succeeded in nudging people who had a willingness to pay something, say $5 or $10, up to a $25 price point.  In one word:  Clever.

But why a t-shirt? Because a Diaspora t-shirt provides significant, visible and hard-to-fake social proof of geekness (being “cool” amongst geeks), which translates into social capital.  (Clearly, this is nothing new.  Rock bands have been doing exactly this for who-knows-how-long with concert tour t-shirts.)  If you plan on crowdfunding a project, it would behoove you to draw the right lessons from Diaspora, although I am not sanguine about the possibility of replicating what is essentially a Black Swan.

Namely:

  • You need to think of pledges/sponsorships in terms of products, pricing and value. In other words, WIIFM – What’s In It For Me (the buyer)?
  • Reward your backers appropriately. Anything that combines social proof + “cool” is probably a good bet.
  • If you can harness yourself to a growing/popular social trend, you may benefit in an extraordinary manner.
  • Don’t forget about reference pricing. My reference price for a generic “cool” t-shirt is around $20. Meaning, that is what I would expect to pay in a store for a t-shirt that was adequately “cool”. The Diaspora t-shirt, in that light, seems like a bargain.

Assumptions

First off, I don’t have access to all of the real data points. My data are gleaned directly from the fund-raising page itself.  This means I don’t “see” the exact amount pledged in many cases, if someone pledged $645.21, for example.

Second, my major assumption is that each pledge bucket is not a different product, ergo each pledge does not have its own unique demand curve. What I think we are seeing is that Diaspora is selling one product at various prices (hence, one demand curve).

A pledge is a product that signals you are:

a) a geek
b) in-the-know
c) a trend-setter
d) elite

while also providing:

e) the satisfaction of sticking it to The Man (Facebook)
f) the good feeling you get from being philanthropic

Nuts and bolts of it

I threw the publicly available data in an Excel file and given the non-linear nature of the data, I applied a natural log  transformation to both price and quantity before running an OLS regression. The regression fits well and the log transformation preserves the $25 spike.

The regression predicts a quantity of 6.5 for a price of 3.22 — to make sense of that, we simply take the antilog of 6.5 to get 664 t-shirts.  Plugging 664 into the original data set for the expected number of t-shirts to be sold at $25 pledge level generates the second image from the top above.  The one with the smooth curve.  Here, I’ll show it to to you again.

And of course, my new regression is even a better fit (no surprise given that I have plugged in one of its own outputs).  :)

If you want to see the actual regression outputs, download this Excel file: Diaspora Regressions for Blog Post

[BTW my previous thoughts on Diaspora can be found here and here as guest posts at Brant Cooper's blog.]