How Mastodon Makes Money

The social media platform makes money through user donations, sponsorships, and grants

Mastodon is a social media platform, founded in 2016 by developer Eugen Rochko. The platform has emerged as a popular alternative to Twitter, but how it makes money is very unclear: It is a free, decentralized collection of independent, user-run servers (referred to as “instances”) that do not feature any ads or underlying algorithms.

Since 2021, the company has been registered as a gGmbH, a type of German nonprofit. Aside from grant funding, its primary means of fundraising is through direct sponsorship on its own platform as well as crowdfunding on Patreon and Open Collective. However, its website stresses that sponsorship “does not equal influence. Mastodon is fully independent.”

Key Takeaways

  • Mastodon is a free social media platform made up of independent, user-operated, decentralized servers. 
  • Unlike most social media platforms that rely on ad revenue, the platform currently collects money through grants and direct sponsorship.
  • Founded as a Twitter alternative, Mastodon is free of algorithms and uses open-source software.
  • Though millions of users joined Mastodon when Elon Musk took over Twitter in October 2022, its usership declined significantly in early 2023.

Mastodon vs. the Social Media Industry

Mastodon is a relatively new player in the social media industry, which, as of 2023, is estimated to drive more than $140 billion in revenue (the majority of it from advertising). That figure is projected to surpass $183 billion by 2027.

Founder Eugen Rochko created the software in direct opposition to companies like Facebook and Twitter. Blog posts from the early days of the project discuss issues with the existing platforms, such as lack of data privacy, online harassment, “unexpected algorithmic changes,” and the inability to build community in centrally controlled online spaces.

As a decentralized, open-source social media platform that is not reliant on ad revenue, Mastodon offers an alternative to many mainstream social media user experiences that use algorithms and sell ads. The front page of its website states: “Your home feed should be filled with what matters to you most, not what a corporation thinks you should see.” 

With anyone able to create and run their own server according to their own rules, Mastodon aims to put social media “back in the hands of the people.” According to Mastodon, the platform “is like an unlimited number of different Twitter websites, operated completely independently, users of which can follow each other and interact regardless of which Twitter website exactly they are on.”

Fundraising and Financials

Unlike platforms like Facebook and Twitter that largely rely on advertisers to make money, Mastodon is a nonprofit funded by direct sponsorship through its own platform and through crowdfunding on Patreon and Open Collective. On its website, it offers three sponsorship tiers, payable via Stripe, monthly or annually: Rosegold (currently sold out), Gold, and Platinum.

On Patreon, patrons can contribute anywhere from $1 per month to $500 per month. As of May 2023, the page lists about 9,500 patrons contributing just under $32,000 per month. Their current goal is to fundraise $50,000 per month to hire employees beyond the existing team of five developers, a moderation team, and a UX/UI designer.

To date, Mastodon has raised over $93,000 on Open Collective.

It’s worth noting that Stripe charges transaction fees, while Patreon takes a percentage of the income generated through the platform, so any funds generated by Mastodon through their own sponsorship platform or through Patreon would likely be subject to these costs.

Users who choose to contribute funds support the future expansion of Mastodon’s team as well as development, maintenance, and hosting costs for the following:

  • Mastodon and its iOS and Android apps
  • The Mastodon servers and
  • The Mastodon website and related APIs
  • Documentation of the coding project

Is Mastodon a Nonprofit?

Mastodon is registered as a gGmbH, the nonprofit version of a GmbH (the German equivalent of a limited liability company, or LLC). As such, it is subject to certain limitations:

  • The company must be for a charitable, noncommercial, or religious purpose that is specifically established on its incorporation and approved by the tax office. 
  • Profit must be directed toward the company’s objective rather than being distributed to shareholders, and salaries paid must be related to work performance. 
  • A nonprofit beneficiary must be established in the event that the company folds or loses its status as a nonprofit. This beneficiary would receive the company assets; however, the initial investment used to create it would be paid out to shareholders.

Server Monetization and Value-Added Services

Mastodon states in its project documentation that it does not “implement any monetization strategies in the software.” However, individual server costs are paid for by users, which does not preclude the possible monetization of individual servers by unaffiliated companies.

According to Mastodon, “Some server operators choose to offer paid accounts, some server operators are companies who can utilize their existing infrastructure, some server operators rely on crowdfunding from their users via Patreon and similar services, and some server operators are just paying out-of-pocket for a personal server for themselves and maybe some friends.”

For example, Medium, a publishing platform, has chosen to charge $5 per month (or a yearly $50 rate) for membership to their Mastodon server.

Value-Added Services

Some third-party companies, such as, offer value-added services such as subscriptions, community fees, cloud storage, and advanced search capabilities. These add-ons may be purchased by server administrators for added security or to enhance the user experience in different ways; however, these services are unaffiliated with Mastodon.

Other Funding

In 2021, Mastodon received €53,900 in grant funding and earned €55,300 through Patreon and its own sponsorship portal. It was also selected by the European Commission to receive a bug bounty grant worth €50,000 in 2022.

In 2022, Mastodon rejected multiple investment offers representing “hundreds of thousands of dollars” from venture capital firms in Silicon Valley, citing concerns about independence and ownership. Their development documentation stresses that “No venture capital is involved” in the project.

History and Leadership

Mastodon was founded in 2016 while its founder, software developer Eugen Rochko, was still in school. It first launched publicly in October 2016, though posts on its Patreon page date back to August 2016.

As a Twitter competitor, major fluctuations in its user base have been tied to developments on Twitter. Millions of people joined Mastodon in October 2022, following the news of Elon Musk’s Twitter takeover, peaking at around 2.5 million active monthly users. However, as of 2023, Mastodon’s user base has declined significantly: Monthly active users as of May 2023 are listed at 1.1 million users across 9,300 servers.

The decline in usership may be attributed to there being a learning curve to using the platform, as well as a failure to yet reach a critical mass of users in order to achieve a network effect.

Recent Developments

Though Mastodon is currently a nonprofit, Rochko stated in an interview that they are considering a split model wherein the nonprofit would focus on developing the core product, and a software as a service (SaaS) business on the side would provide hosting capabilities for servers. In this model, there would still be no advertising and servers and data would remain under users’ control.

Is Mastodon Free?

Yes, Mastodon is free to join. However, those who wish to set up their own Mastodon server must bear the costs of doing so, which has led some individual servers to set up paid account models or crowdfund to cover costs.

How Is Mastodon Different from Twitter?

Mastodon is decentralized, open-source, and free of algorithms and ads. Any user can create and run their own server according to their own rules. In Mastodon’s words, the platform “is like an unlimited number of different Twitter websites, operated completely independently, users of which can follow each other and interact regardless of which Twitter website exactly they are on. This has obvious benefits as there is no single company that has a monopoly.”

Who Pays for Mastodon?

From a user perspective, Mastodon is free to join. However, if a user wishes to run their own server, they must cover the associated costs. As a company, Mastodon is funded by user donations, sponsorships, and grants.

Is Mastodon Decentralized?

Yes, Mastodon is decentralized, meaning that there is no one company or entity that owns the entire software. Users are free to set up and run their own servers according to their own rules and regulations.

Does Mastodon Sell Data?

No, Mastodon does not sell user data. Their website states, “We will never serve ads or push profiles for you to see. That means your data and your time are yours and yours alone.”

The Bottom Line

Mastodon is a free social media software platform funded by user donations, sponsorships, and grants. Its founder, Eugen Rochko, created it in 2016 as an alternative to Twitter. It differs from mainstream social media platforms in that it is decentralized, open-source, and free of algorithms and advertising.

Though the company is currently registered as a nonprofit, Rochko recently stated in an interview that he is considering a split business model that could include a for-profit SaaS division that hosts servers for users who do not wish to set up their own.

Article Sources
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  2. Mastodon. “Home Page.”

  3. Statista. “Social Networking—Worldwide.”

  4. Mastodon Blog. “The Power to Build Communities.”

  5. Mastodon Blog. “Learning from Twitter’s Mistakes.”

  6. Patreon. “About Mastodon.”

  7. Mastodon. “Become a Sponsor.”

  8. Patreon. “Mastodon.”

  9. Open Collective. “Mastodon.”

  10. Stripe. “Pricing Page.”

  11. Patreon. “Pricing Page.”

  12. “gGmbH: What Is the German Non-profit Limited Liability Company?

  13. Mastodon Documentation. “Funding and Monetization.”

  14. The Verge. “Medium Wants You to Pay $5 a Month to Join Its Mastodon Server.”

  15. “The Fediverse Awaits.”

  16. Mastodon. “2021 Annual Report,” Pages 4 and 8.

  17. Financial Times. “Twitter Rival Mastodon Rejects Funding to Protect Non-profit Status.”

  18. Patreon. “Mastodon: Posts.”

  19. TechCrunch. “Mastodon Creator Eugen Rochko Talks Funding and How to Build the Anti-Twitter.”

  20. The Guardian. “Elon Musk Drove More than a Million People to Mastodon—But Many Aren’t Sticking Around.”

  21. Mastodon. “Post by Jon Prosser.”

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