Community Building June 3, 2020

Community: the new business model for indie hackers

Channing Allen @channingallen

The new business model of charging for paid communities is sweeping through the world of indie hackers.

DCoolican on Twitter: "2010: Build an audience, monetize through ads. 2015: Build an audience, monetize through merch. 2020: Build an audience, monetize through community"

The golden age of paid communities

No, they aren't "new" in the sense that no one's ever built them before. Our very first founder interview featured Pieter Levels of Nomad List, a massively successful community for digital nomads. And our very own community manager Rosie Sherry scaled her own community to seven figures before we brought her on board.

But stories like Pieter's and Rosie's have always been rare and difficult to replicate. Hence Pieter's magnetism for mainstream press and Rosie's multiple appearances on Computer Weekly's long list for the most influential women in UK tech.

This is changing. Paid communities are becoming explosively popular, and an increasing number of indie hackers are growing them to profitability. The model simply "works" like never before. And it's ushering in a golden age for paid communities.

Ness Labs community

For all their differences, the three revenue-positive communities above have one thing in common: they're all just a few weeks to a few months old — as new to the scene as the pandemic.

One of the clearest signs of the momentum behind community products is the rise in new platforms to support them. In addition to some of the traditional players like Slack, reddit, Facebook Groups, and Discord, the last few years have brought a wave of community platforms that have all the bells and whistles needed to make a more "feature-complete" community product, like Mighty Networks, Circle, and MemberSpace.

And there are plenty more on the way:

So… what gives?

Passion and the plague

Online communities have always been difficult to monetize because, more often than not, they target consumers, who are notoriously reluctant to spend money when they don't have to. Business customers, on the other hand, are much quicker to part with their cash as long as a good case can be made that a product will make them more money in the long run.

Enter the passion economy, which is now driving an increasing number of consumers to think (and spend) like businesses. Andreessen Horowitz partner Li Jin calls this the "enterprization of consumers."

Li Jin on Twitter: "New tools are emerging and focusing on consumers first. That's because consumers today aspire to become businesses tomorrow. I’ll dub this the "Enterprization of consumer."

She's talking here about all the site builders, marketplaces, and other consumer-focused platforms fueling the rise of e-commerce, no-code, podcasting, paid newsletters, and more, by extending access to people who previously didn't have any options for expressing their creativity for a living.

The passion economy supports both sides of the paid community ecosystem: supply and demand. On the supply side, it empowers consumers to build their own online communities. And on the demand side, it emboldens potential community members to see themselves as, in Li Jin's words, consumers today aspiring to become businesses tomorrow.

Now. Add to all of this the crushing effects of the coronavirus pandemic: the tens of millions of newly unemployed in the US alone; the hundreds of millions stuck at home due to lockdown. And suddenly you've got a lot more relationship-starved entrepreneurs to fill the membership ranks.

Behind the scenes at Ness Labs

I caught up with Anne-Laure to gain some perspective on the strategies and numbers behind the burgeoning Ness Labs community.

Ness Labs revenue screenshot

First, the hard numbers. Here's what she told me about her revenue and membership:

Revenue is $9.6K since launch. Currently there are 300+ active members. I went from 0 to this in the past couple of months, and as you can see from the graphs it's pretty unpredictable on a day-to-day basis.

Anne-Laure quit her job at Google a few years ago to build a portfolio of products under the Ness Labs brand, like Teeny Breaks, a Chrome extension reminding people to take breaks at work, and Maker Mind, a weekly newsletter about mindful productivity.

So did she launch the paid community just for the hell of it? Or was she following a higher strategic vision?

The community is a cornerstone of my product strategy. I have always been more comfortable with audience-first products. The community is a way to learn from my audience, to receive feedback, and to co-create products that answer their needs. For example, I don't think my course announcement would have been so successful if I hadn't based the whole content on conversations I had with members of the community.

That last point about the co-creation of products? It might be the most potent insight of all, because it separates paid communities from every other product category seeing gains from the passion economy.

Communities don't just contribute to the co-creation of products by offering helpful discussion. The helpful discussion is itself a co-created product. After all, a paid community is, at least in part, a content product. But unlike a newsletter, or a blog, or a podcast, or a YouTube channel, community content is crowdsourced by the audience it serves, making it both uniquely scalable and, well, uniquely unique. (A community's culture, like a human fingerprint, is impossible to replicate. The moat is built-in.)

This is one of the central insights @csallen and I have leaned on to build and grow Indie Hackers as a team of — until recently — just two people. We've run every single product consideration through the following filter: "Can we crowdsource this through the community?" If the answer is no, we don't build it.

So in calling this a golden age of paid communities for indie hackers, I really do mean to emphasize for indie hackers.

As if it to reinforce the idea, Anne-Laure sent me the following message as I was wrapping this story up:

Just crossed $10K :)

Ness Labs revenue screenshot

Enjoy the read?

I'm writing a few of these roundups every month! My aim is to keep ahead of the curve on issues affecting indie hackers and to forward the message along to you.

You can subscribe here to get upcoming articles in the series.

  1. 9

    Hey Channing,

    I really enjoyed the last articles but I don't agree on this one.

    First of all, NessLabs' numbers are misleading. The community currently has 305 member, I suppose that it launched about a month ago and a bit less than 200 people bought the annual plan, so yea for this month the MRR is 10k but those annual members won't pay untile next year so the true MRR is less than 1.5k at this point.

    It should also should be added that the community is based on a newsletter that started in July 2019. I don't know how much revenue it made in the past, but again is true but misleading to say that it made 10k in one month, as it is the result of 11 months of work.

    Those numbers are to contestualize my point as I don't believe that communities are a good business model for indiehackers.

    They are fragile creatures, because of network effects and trolls/haters can die really fast and for this reason they require moderation (time-consuming task).

    I also don't agree on the conclusion that they have a built-in moat. Yes, some communities have a unique vibe, like Indie Hackers, but most can easily be replaced.

    I have no data to support it, but I believe that the failure rate of communities is also really high, surely higher than the typical indiehacking business.

    1. 8

      Hey Luca! Thanks for sharing your thoughts. Just wanted to clarify a couple of things:

      1. I agree it's not an overnight success. See this tweet with my revenue trajectory. Before I launched the membership, the total revenue from the newsletter since the launch in July 2019 was less than $2K, and most revenue at Ness Labs was from consulting work. One of my goals with the membership was to gain independence from unpredictable consulting contracts.

      2. The message I sent to @channingallen said "Just crossed $10K :)" and not "$10K/mo", there must have been a typo during the copyediting process.

      I don't agree with the idea that most communities can be replaced. Creating a thematic Slack group does not make a community. True communities—with a sense of belonging, of identity, of loyalty—cannot be easily replaced.

      1. 4

        there must have been a typo during the copyediting process.

        Yep, that mistake's on my end. (Case in point: crowdsourced copyediting via the community!)

      2. 2

        I agree with your point that true communities cannot be easily replaced.

        I explained myself poorly as my point was that communities don't have a built-in advantage. "The moat is buil-in" quoting the article.

        For good communities yes, for communities in general no.

        I am sure that you never presented it as an overnight success, but the article talked about 10k MRR which can give the exact opposite view to the reader.

        Nothing personal. I am sorry that I nitpicked your business. I didn't mean any harm but I imagine that it didn't feel good anyway. Wish you lots of success for all your ventures!

    2. 3

      Those numbers are to contestualize my point as I don't believe that communities are a good business model for indiehackers.

      I agree that full-fledged communities might not be the best "side project" if that's what you're looking for, but you can do a K.I.S.S-type of product like an email-based, or podcast-based one and live off sponsorships. Whatever works for you.

      They are fragile creatures, because of network effects and trolls/haters can die really fast and for this reason they require moderation (time-consuming task).

      Keep in mind these are business-oriented communities. While there are always problematic people within our communities, spaces designed for collaborative work might also be one of the most fulfilling spaces you could ever participate. At any age, mate. They have a very human component that no software provides on its own. That's a perk that, in my opinion, outweighs any cons you may have regarding communities and that people value as members and creators.

      1. 1

        I have joined several business related communities and I had a different experience.

        Maybe it's just me, maybe those communities weren't that good.

        My main problem with communities is the lack of control on the final product.

        That's what makes them riskier and more unpredictable than other businesses.

        IMHO communities are the only indiehacking businesses where time, skills, and perseverance don't guarantee you "success" ("success" defined as low six figures or more in profit).

        It's also hard to test pricing and communities that command a high monthly fee are usually interesting for few people while cheaper communities require lots of member and so are more risky.

        Another problem is the growth. Gated communities can't attract users with SEO and the price-point is usually too low to advertise.

        Basically, word-of-month is the only growth channel unless you want to produce free content to attract visitors.

        In the first case, the probability that people have friends with the same interest is quite low, otherwise they woukd share it with them in real-life, instead of paying for a forum.

        In the second case (recommended) , you have to produce content, so one of the main advantages mentioned in the article disappears.

        I have no doubt that paid communities can work but honestly I can't think of a worst business model than paid communities for an IH and in general.

        I could be totally wrong.

        1. 1

          Think club not community. Everything become pretty clear for me with the club notion. Monthly/annual membership. Invite only. Member to member interaction. For Golf cooking or business. Easy to explain compared to "but what is reaaaally a community, huh ?". Think club. The term does exist for years. Ok its a little dusty. But that exists. IH club. Pretty clear for me,go for it @channingallen make a club ;-)

        2. 1

          I have no doubt that paid communities can work but honestly I can't think of a worst business model than paid communities for an IH and in general.

          I can't really say because, in my case, I'm fully invested in our community Andes Creativo, but that's by choice ofc, so we're always looking to expand our portfolio of products, etc., but yeah I can see how communities could get messy.
          I do think there are things you can do to mitigate the risk, like KYC and keeping the community -in general- open to the public, then expanding their experience with paid products as their needs get more sophisticated. Also, I don't think going global is a must. If you can keep the scale as close to one as possible (local/regional), do it. C. Segmentation is alive and well. It reduces your workload and you can invest that time on networking and partnerships.

          As with everything else, you can have "just" a newsletter and a strong community, as well as a large forum site and no community. Certainly it isn't work you can automate, but the technical requirements aren't obviously high because it's really not about software. Podcasters create communities all the time, so do bloggers. Consultants do this all the time, now they can do it digitally.

          IMHO communities are the only indiehacking businesses where time, skills, and perseverance don't guarantee you "success" ("success" defined as low six figures or more in profit).

          Ghost communities are certainly a thing, and so are low-margin ones, agreed. Most people I know building communities aren't trying to scale that much though, so I don't know if they try to keep a short lease intentionally or what's really going on there. In my case, I do want to scale big. It's not a side business anymore, sure, but the same would've happened if I wanted to scale some tool to a full-fledged company.

  2. 8

    Good read. Re your last paragraph.

    All the features you're talking about: Milestones, Meetups, Interviews, Forum etc ... leverage existing users to create new users.

    The alternative is doing all the work yourself!

    1. 4

      All the features you're talking about ... leverage existing users to create new users.

      Bingo!

  3. 6

    Love it and agree that there's definitely a larger trend at play here. I'd like to add that we at PeerBoard.io are building a tool similar to Mighty Networks to empower other community builders, but with a major focus on embeddability.

    If you have an existing product or a space and would like to add a new layer of interaction to it, it may not make sense to use one of the siloed platforms. You can enable your members to share knowledge and help each other right from your website. And to enable that we're providing a set of plugins and SDKs. It looks and feels as a natural part of your product and takes just a few minutes (hours for complex setups) to integrate.

    We spent last 6 months perfecting those integrations and I think we nailed the hardest part. So now we're ready to become your infrastructure layer for community building!

    Don't hesitate to DM me here or reach out by filling a form on our website. Would love to help you with your case.

    1. 3

      Neat! I just added you to the article.

      1. 4

        🙌 Thanks Channing. Also appreciate the work you do with IH, was one of the major sources of inspiration for us.

  4. 5

    omg. yes. all of this!

    community before product!™️ community before EVERYTHING!

    all of those platforms that you've mentioned are awesome... but we need even more of them because more folks are going to need more customized and bespoke solutions!

    this is why i'm working on a small, community platform tool as well — we're in the very, very early stages, but, i'm going to be looking for my fellow IH sisters and brothers to help test-drive!

    oh, so exciting!!!

  5. 5

    This is so true and I hope we can add Piiba to the list!

    We're building a community for people in tech to support one another in this tough times that we're going through.
    We create public AMAs and you get to answer the questions with 90 sec Audios! Kind of like an ad hoc micropodcast.

    It would be great to have you on the platform so that everyone can listen and get inspired by you @channingallen ! This is the link: www.piiba.com

    Will send you an email with an Invite
    Ps: it's built for mobile

  6. 4

    It was an interesting read, but... I'm not a big fan of paid, closed communities.

    I have a strong belief that the real, valuable community can and should be open to everyone, and if it has self-controlling mechanics and human control from founders it will be very valuable for all members.

    Yes, such closed communities can bring money because their members feel like "selected, better, special" but for me, it's not a way I would like to make money.

    Monetization can be done with many other ways like an affiliate program, ads etc.

    1. 1

      A solution might be:

      • Open the community
      • Offer paid content for hardcore members

      I think @anthilemoon's done something like this herself with Ness Labs and the Maker Mind.

  7. 4

    We have hundreds of communities using Pico (trypico.com) as the 'membership application layer' they've built on Stripe, their ESP, and (optionally) their CMS (Pico has hosted landing pages.)

    Some best practices we've seen so far:

    • your free members are the top of your funnel, so you need to give them enough reason to not just visit the site but give you their email – You. Need. Their. Email.
    • that's because: email is the number one way you'll convert people from free to paid. not offers on your site or offers on social. It will be offers via email.
    • you thus need to think of your website as the tool that converts anonymous top of funnel users to known, free users. So make sure your CMS has built-in SEO, social cards (for sharing webpages), etc. (Your website is obviously much more but this is one of its key purposes.)
    • one thing we learned quickly at Pico (and thus invested heavily in) is that your email signups system should also be a login system so that when someone eventually does get to checkout there is that much less friction. We regularly see sites that convert 20-30% of their signed up members to paid.

    Hope this is helpful! Lots of other guides and advice over at thebyline.co

  8. 3

    Don't forget about playgroup.community by @benmann (who should really add it to his profile).

  9. 3

    Alright, here's what my problem is with the paid communities. It favors the privileged and only exacerbates the issue. Now, when I say privileged I don't mean it as rich. If you can afford to spend $10/mo without breaking a sweat you can call yourself privileged in this context. I myself can be considered as one now, but I wasn't even a few years ago.

    Simply the affordability divide between certain countries are huge.

    I've always believed the Internet to be a great equalizer. When a third world country college student couldn't afford to go to an Ivy league and reap on the network benefits it provided, online communities stepped in and provided an alternative.

    I know it, because I've been a beneficiary. I've got introduced to programming from online communities, got my first job from one such community and even the idea of building products I was inspired from reading successful people's stories. And I'm sure countless others have also reaped the benefits of these communities and have been inspired to take up many things in their life.

    I'm not contesting that they can't co-exist together. But once you establish a community of passionate / successful people in a fenced forum, it only attracts more successful people to follow suite. Community breeds community, and more people get attracted to such communities and the proposition will get more and more lucrative for paid communities.

    I understand the point of this post is to introduce a lucrative business opportunity to Indiehackers, but if we can figure out better ways to monetize by keeping the communities open to everyone, well, that's just double bonus.

  10. 3

    Thanks for the post and case study. Do others believe people will join a paid community to just be a part of the community? Or does there need to be some hook, like a paid newsletter, or events, for people to join? There is evidence of community helping with retention -- golf clubs, gyms, rotary clubs, etc. But using "community" as the initial hook may be a challenge because it is so difficult to define. People join the golf club to play golf but then stay because of the people. Maybe that's changing??

    1. 3

      Chiming in :) I think that except for status based clubs (gentlemen's clubs etc.), people don't join paid communities just to be part of the community. They join because of the value they will get from joining the community. That value can be extra time, money, physical or mental well-being... But ultimately, it's all about value.

      1. 1

        Totally agreed. It's the equivalent of product-market fit. People pay for something when it solves a problem for them.

  11. 3

    Great post @channingallen 🙌

    At MemberSpace we're seeing a high correlation between successful membership communities and high recurring revenue. In other words, many of our largest customers also have a vibrant and growing community as part of their membership or as a free offering that leads to the paid offering.

    I agree with Anne-Laure about building an audience first before launching a community. If you don't do that in my opinion you're running uphill.

    We personally put off launching our own community for MemberSpace customers until we had built up our base more. And now we're planning to launch one soon on Circe (using our new SSO integration). I'm confident we'll be able to hit the ground running because of the large audience and customer base we already have. If we tried to do this when we first launched I feel like the community would have fizzled out due to inactivity.

  12. 3

    Not going to lie, I was a bit freaked out when I saw the title and then the first thing I read is "Golden Age for Paid Communities". I thought you were about to tell us that you have decided to charge for Indie Hackers.

    But I think you are correct right now is a great time to build a paid community. With everyone stuck at home, virtual communities are exploding right now!

    1. 3

      I thought you were about to tell us that you have decided to charge for Indie Hackers.

      Ha, yes, there's a critical distinction between capitalized "Indie Hackers" (our company) and lowercased "indie hackers" (our term for independent entrepreneurs).

      A little confusing, but also another of our very deliberate trade secrets. ;)

  13. 2

    Thanks for the inspiration! This gave me extra energy! Love every line of it!

    1. 1
  14. 2

    Channing, this is so interesting. Thank you!

    I'm writing a book about community building right now, and so this topic is at the forefront of all my thoughts at the moment. I'm not coming at it from a monetization angle (just communities in general - running clubs, Slack groups, chess clubs, whatever), but I do believe that the communities of low engagement, which is the complaint I hear most regularly, are ones that suffer from poor product-market-fit.

    In other words, I'm trying to introduce a little bit of product-thinking into those communities that aren't founded by people who necessarily have entrepreneurial skills and insight. I think they can learn a lot on that front from these successful paid communities.

    Anyway, I'm gathering some data from community builders right now if anyone reading is willing to give 2 mins of their time. I'll happily share my findings with anyone who contributes:

    https://docs.google.com/forms/d/e/1FAIpQLSco_lK6UkdNnJfHj0kWSpuCFvvgm0xCjpHZN9v7OeM5UsI60A/viewform?usp=sf_link

  15. 2

    I'm late to the thread, but its worth shouting out @mijustin, who started a paid community in 2013 that still runs to this day. (Correct me if I'm wrong, Justin 😉).

  16. 2

    I've been thinking about starting a paid community for Product Disrupt but unsure about the time commitment between my full-time job and ongoing work with Product Disrupt newsletter.

    Reading this article, I'm tempted to just take the plunge. Thanks for writing this @channingallen

  17. 2

    I like this phrase: consumers today aspiring to become businesses tomorrow. The lockdown accelerates that.

    The motivation comes from when people read about / listen to stories and get inspired. People want to build things at such a state, be it a community, a newsletter, or a SaaS app. It basically increases the top funnel size of people getting into the next business stage.

  18. 2

    Mate, this is an incredible article! and the whole concept of "enterprization of consumers" wow. Lot to think about.

    I've noticed that business models are getting more and more sophisticated after a couple years. Parallel to this, solutions are getting more and more personalised. Exciting times indeed!

  19. 2

    Thanks for this article and for sharing your numbers and process...
    Since I'm leading a subscription website since 2009 which has been my main income channel ever since, and I know how hard it is to launch something successful, I started a startup called Comonetize which enables leaders of professional communities to launch a flexible membership subscription site&job board.
    It does work like a charm and you definitely see that once community members get value from their subscription community site they'll stay.
    We have over 40 communities that are using our product so far so I can say it works.

    (you can see it here: www.comonetize.me)

  20. 2

    What's the 2nd screenshot by chance? Anyone know what that is?
    I see Ness is using WP for homepage and CMS, and memberful for the subscription/membership managemnet, but I'm not sure what the community software she's using is. Curious :)

    Thanks!

  21. 2

    As someone building a product based on community, this is a heartening read.

  22. 2

    Learnt a lot just by reading this! I think that’s the reason why I built pubb.at. We are trying to give community builder a platform to create this feedback loop and co-creation opportunity.

    Love this reading!

  23. 2

    Great read 👏

  24. 2

    A great read! I realise it's impossible to cover everyone but I'd like to include WIP on telegram as well. Marc makes about $2k a month from essentially "network effects" as Naval calls it. The community provides the value, rather than Marc directly.

    1. 1

      Is that a Naval's Twitter thread?

      1. 1

        he mentions it, yeah

  25. 2

    I'm also inspired by Pieter Levels and somehow want to replicate it, and let see if it works :)
    But when it comes to a developing nation like Indonesia, it's hard to charge recurring money on people, so I build a community to then offer them my products, I think that's better.

    1. 1

      What your community ?

  26. 2

    Really great insights! And yes it's a trend that's growing more and more recently.

    Actually, its sky rocketing because of the forced social distancing from corona virus where people are looking online for communities for support and connecting with other people. As you have mentioned it's an area where it was previously difficult to monetize, but because of these events people are willing to spend (where its also known that most times paid communities provide more quality for the members which is win-win for all).

  27. 2

    "Can we crowdsource this through the community?" If the answer is no, we don't build it. - Love this.

  28. 2

    Very interesting read @channingallen. Just a few hours back me and my cofounder were talking about the possibility of a closed, paid community for "Product Managers driven by Metrics".

    The value being cutting down of noise - and whatever you pay in the community, you get more than that in worth by talking to others. Eg, I'd happily pay 20 dollars if that leads to 2-3 conversations with product managers who have solved the problems I am struggling with.

    Since there are so many ways to connect with people, gated communities probably help have more contextual conversations.

  29. 1

    Good read.

    Was curious if you could elaborate on the filter, "Can we crowdsource this through the community?"

    I'm trying to figure out how to crowdsource certain things better and I am interested in that process looks like at Indie Hackers.

    TY

    1. 3

      I can elaborate, but you'll have to be a bit more specific.

      Below are the products we greenlit because they were amenable to crowdsourcing; what is it you'd like to know about them?

      1. 1

        I'm not sure what you mean by "they were amenable to crowdsourcing"

        Good chance we're looking at crowdsourcing from different angles here.

        I assume based on the examples you put, that what your are referring to is essentially sections that are community driven

        I'm trying to figure out something similar but for creating content much like a wiki

  30. 1

    I have to say I don't quite understand this trend. Perhaps it's because I'm new to the indie hacker space but I can't imagine what value an online community is providing when so much content is available for free. Is it for the sense of camaraderie? Unless I'm seeing financially quantifiable result I can't imagine paying for a couple of newsletters or blog posts worth of content. Perhaps I'm not the target market for this..

    1. 4

      I can't imagine what value an online community is providing when so much content is available for free. … Perhaps I'm not the target market for this.

      All content isn't created equal. Generic free content targeted at people in your demographic is worth less than personalized information targeted directly at you based on your specific situation. It's the difference between a large public school and a private tutor. And good communities can provide this.

      But yes, you're embodying the consumer mindset I mentioned in the article, namely: "reluctant to spend money when they don't have to." The market of people paying money for these communities are those who see it as an investment. (I don't mean to imply judgment here; neither side is "right" or "wrong". They're just two separate philosophies on how to build wealth over time.)