FLO projects have many existing funding options, but they do not cover all needs, and most present potential ethical issues.
We encourage projects to promote and prioritize their Snowdrift.coop funding stream as the most robust, sustainable, and ethical option. Still, projects may use other funding mechanisms as long as they report the revenue as part of our transparency requirements.
Projects may sell space or time alongside (or even within) their works to third-party advertisers.1
In addition to funding coming directly from advertisers, some projects use ads to run a ransom where the regular audience pays to make the ads go away.2
Though public goods can use third-party ads, this funding source discourages FLO terms. Keeping proprietary restrictions makes it easier to tie the works to the ads. By contrast, FLO works can be freely shared with the ads removed.
Furthermore, despite some exceptions, most advertising has serious ethical problems:
- Ad-revenue follows whatever draws the most attention, thus favoring superficial spectacles over more meaningful works.
- Ads often manipulate audiences through dishonesty, titillation, and emphasis on social and personal anxieties.
- Many ads encourage wasteful consumption or otherwise promote products we would not support (such as proprietary competitors to FLO public goods).
- Ubiquity of commercial advertising pollutes our cultural space.
- Paid advertising exacerbates the dominance of messages from powerful moneyed interests.
- Reliance on ad-revenue reduces a project’s integrity and creates conflicts of interest.
- Most online ad systems violate our privacy in order to better target each of us as individuals.
Sales of associated scarce goods
Sales of physical goods such as printed books or logo shirts do not present an ethical issue, but not all projects lend themselves to this kind of revenue, and the funding stream is often very limited. Even large, recognizable projects such as Wikipedia receive only a tiny percentage of their overall income from the sale of physical merchandise.
Traditional fundraising by simply asking each supporter to donate is helpful, but has been insufficient for most projects (unless they have some major “angel” patrons). Various twists on simple donations have been tried such as connecting donations to special-access social events or offering tiny microdonation one-click buttons. Some approaches work better than others, but they all suffer from some underlying challenges. Snowdrift.coop is designed specifically to address the inadequacies of simple requests for individual donations.
Fundraisers commonly ask for donors to become “sustaining members” by committing to ongoing, regular donations. Donors get charged automatically, and the project gets more stable, reliable funding. Snowdrift.coop uses such subscription funding, but we improve over unilateral donations with our matching pledge that addresses the snowdrift dilemma.
One-time crowdfunding campaigns 3
There are serious drawbacks to threshold systems that mean these now-common fundraising drives are best used for major initiatives that require one-time infusions of capital.
In a bounty-based funding system, people offer rewards for certain requested improvements to projects. Existing bounty systems focus almost exclusively on software but could conceivably work for other types of projects as well.
Bounty systems have serious limitations. Trying to put a price on every little detail may promote narrow self-interested behavior. Most people outside the project team do not have the time or inclination to give much thought to individual features. Bounty systems are also vulnerable to disagreements between developers and funders about the adequacy of a bounty claim. Bounties can even backfire, causing casual volunteers to avoid an item with a bounty. For more details, read about the unfortunate history of FLOSS bounty funding.
Fee for service
Some projects (notably Red Hat Linux) have successfully funded development of FLOSS by charging a fee for professional technical support, but this model is much more suitable for some projects than others. Also, fee-for-service systems may create a conflict of interest against the goal of making products usable even without professional support.
Some service models involve developing custom features for paying customers (somewhat like an institutionalized bounty system). This presents no ethical problems when the new features are still released to the public as part of the main project. This funding stream only works for projects that cater to those with the resources to pay for such custom development. The Snowdrift.coop model works somewhat as a generalized version of pay-for-service where the whole community becomes the paying client and the focus is on overall development rather than specific custom features.
Public or private grants can be wonderful, but applications can cost project teams a lot of time and distract from real work. Also, top-down grants do not necessarily encourage community participation and are not awarded democratically. More importantly, reliance on grants gives great influence to certain wealthy entities and can involve conflicts of interest.
Overall, grants are still great if you can get them. A large portion of existing funding for FLO projects comes from grants, but they only reach a small minority of deserving projects.
The whole economics of the ad industry are complex. Some ads truly increase sales. Others promote political views or candidates. Much of the time, ads are speculative and lack a clear way to evaluate their effects. Besides manipulating ad-viewers, the ad industry also puts enormous resources into manipulating businesses and others to pay for ads that may or may not be actually worthwhile.↩
Another sort of ransom used sometimes: after enough funding comes through (generally from multiple donors), a previously ad-laden, proprietary work is released publicly under FLO terms without ads. By contrast, the most common style of ad-removal ransom offers only a proprietary license for each customer on their own to access a restricted ad-free version (while continuing to publish an ad-laden version for others). A mixed approach is also possible: giving private access one-at-a-time to a FLO-licensed ad-free version, accepting that recipients could then share that version widely if they choose.↩
In this context, we mean “crowdfunding” only in terms of donations rather than equity investing (which does not apply here because investors cannot usually expect a financial return from FLO projects).↩