Executive Summary:
Mastodon is a free social media platform that separates itself from the competition by being decentralized.
Mastodon makes money from user donations, sponsorships, as well as grants. It operates on an open-source-based business model.
What Is Mastodon?
Mastodon is a free social media platform that separates itself from the competition by being decentralized.
More precisely, it is centered around a so-called federated network, which is essentially a collection of thousands of smaller social networks that are all utilizing Mastodon’s open-source technology.
Each of those networks operates its own server, which you can join and take part in. Every server is operated by an independent entity or individual and may thus differ in moderation policies.
Servers are normally based on certain topics like space exploration, travel, and many more. Meanwhile, the original server, dubbed mastodon.social, is still being run by its founder Eugen ‘Gargron’ Rochko.
Due to its decentralized nature, users will need to register for each server individually, meaning they need to set up a new account for each and every one. Therefore, Mastodon is not owned by a single entity.
The user experience itself is very reminiscent of Twitter in that users can post short-form content of up to 500 characters. Said content can be enriched by adding images as well as audio or video files. Much like Twitter, you can also use hashtags.
Consequently, you can follow other users and engage with their posts, which are called ‘toots’, by liking, commenting, starring, sharing them on other platforms, or boosting them within the Mastodon server.
The feed itself also offers some variety. The ‘Home’ timeline displays all posts and shares (dubbed ‘reblogs’) from everyone you follow, the ‘Local’ feed shows everything from a user’s own server instance, and the ‘Federated’ shows all posts from all Mastodon servers on which the user follows someone.
Mastodon itself can be accessed via a web browser and by downloading its Android or iOS app. Third-party apps like Metatext or Mast, which utilize Mastodon’s freely available source code, offer similar experiences.
How Does Mastodon Make Money?
Mastodon currently makes money from user donations, sponsorships, as well as grants. However, most of that income comes from donations made via Patreon.
Mastodon offers a variety of different donation options, ranging from $1 per month all the way to $500 per month.
For example, paying $10 per month will get you on the sponsors list on joinmastodon.org and provide access to the development Discord.
Meanwhile, paying $500 per month enables sponsors to insert a medium-sized logo as a link on the front page of joinmastodon.org, which is visited by over 600,000 people every month.
Both the Gold ($200/month) and Platinum ($500/month) tiers offer limited space and are thus frequently sold out.
Users who pay annually will receive a 10 percent discount on the rate they pay. Companies like Medium or Raspberry Pi have donated to Mastodon thus far.
Mastodon, in all likeliness, does not get to keep all of that donation and sponsorship revenue, though. Patreon charges anywhere between 5 percent to 12 percent for the ability to accept donations.
Apart from sponsorships, Mastodon also makes money from grants provided by various institutions. Back in 2019, for instance, Mastodon received a grant for open-source software from Samsung.
And three years later, in 2022, Mastodon also received a grant from the European Commission, which set up its own Mastodon server called EU Voice, to finance some of the work on features.
The Mastodon Business Model Explained
The business model strategy that Mastodon pursues is to eventually offer ancillary services around its decentralized network of servers.
Mastodon’s existence is based on the premise that centralized Big Tech platforms, such as Alphabet or Meta, are controlling our personal data and the content that we consume.
Their invasive data collection practices are then being used to not only track our entire internet activity but show us highly personalized ads that we are likelier to click on.
The added enragement and cultural divide are a direct result of those practices since it often equates to more engagement and thus higher ad impressions.
Mastodon wants to turn that concept on its head by giving the power back to its users. As such, it’s the user’s responsibility to monitor server activity and moderate content (Mastodon has banned various servers in the past, though, largely for promoting discriminatory or even unlawful content).
This also means that Mastodon, at least for now, wants to stay clear of advertising to not further drive the enragement machine.
Instead, it takes advantage of its noble messaging around decentralization, responsible data collection practices, and user empowerment to collect donations from users.
Those donations are then being parleyed into the launch of new features, which could potentially include other services for server operators.
Right now, Mastodon is set up as a so-called gGmbH in Germany, a non-profit limited liability company. A gGmbH has a few key distinctions versus a for-profit company (GmbH). They include:
- The founding document of the company is written such that the activity of the company is working towards goals that benefit the public.
- The shareholders may not receive any revenue from the company’s activities and can at most withdraw the funds that they originally paid in.
- Employees may not receive extraordinarily high wages.
- The company can receive donations which are then tax-free, although any other income that does not fit the definition of a donation continues to incur various taxes
In an interview with TechCrunch, Rochko hinted at the fact that was looking at what he described as a split model, meaning a for-profit entity that operates next to the non-profit Mastodon organization.
That for-profit entity could then offer various software-related products and services. One of the likeliest options would be server hosting, which is currently offered by third parties. Running a domain registration platform could be another option.
And on the service side, Mastodon could provide the option to customize a server, for example on behalf of companies that would want to set up one.
How Much Revenue Does Mastodon Generate?
Mastodon currently generates around $34,000 per month in revenue – almost all of which comes in the form of sponsorships.
The revenue it generates from those donations is tracked on its dedicated Patreon page, which you can access here.
It uses that cash to pay the salary of its founder Eugen Rochko as well as compensate a handful of developers that work on both its app and website.
Additionally, the recurring donations also pay for any operational costs incurred by mastodon.social, mastodon.online, and joinmastodon.org.
