What is the Creator Economy?
How would the world look if Facebook, Instagram, Twitter, or TikTok were owned and operated by their users? What if these users also vote on issues such as data collection and content moderation? That is the imagined future of what the creator economy should be like.
The creator economy attracted over $1.3 billion in funding in 2021. But who takes the big share of the money generated by these platforms? It is not the creators.
The creator economy comprises over 50 million independent content creators and curators. It is also made up of community builders such as bloggers, social media influencers, videographers, and the finance and software tools designed to help these creators monetize and grow.
Creators can make money through:
- Selling digital content
- Charging for courses
- Receiving money from fans via a donation platform
- Receiving subscriptions
- Engaging in affiliate marketing
- Receiving money from a fan club
- Creating or sharing sponsored content
- Sharing advertising revenue
- Receiving tips
- Featuring product placement
- Receiving one-off sales or donations
- Selling fan engagement
Biggest Issue with the current content sharing platforms — Absence of Middle Class
Towards the end of the 2000s, we witnessed the growth of social media platforms such as Facebook, Twitter, Medium, YouTube, iTunes, Instagram, and TikTok. Content creators were no longer at the mercy of production and marketing houses. Such creators could create content and share it easily.
These platforms solved the distribution challenge for content creators, and they could now amass huge followings. However, there are limited avenues of direct monetization that these creatives can explore. YouTube was the only exception in the old days as it allowed creators to enjoy 55% of the ad revenue.
Vine was a perfect example of a platform that failed to motivate its users. The short video-sharing app was acquired by Twitter in 2012 and attracted more than 200 million active users a month by 2015. Creators left the platform in droves when they realized that Vine didn’t have any infrastructure to support creators.
Platforms like Patreon and Twitch introduced new monetization features allowing creators to benefit directly from their content. However, only the top creators bring in six-figure incomes. As seen on various platforms, the ‘middle-class’ is struggling. The top 1% of creators on OnlyFans get a third of the profits, while the ‘middle-class’ get less than $145 a month.
Stages of Creator Economy
The creator economy has undergone various revolutions. The following are some of the major stages:
Stage 1: Foundational Media Platforms
Social media platforms lay the foundations of the creator economy today. Through platforms such as YouTube, Facebook, Instagram, Twitch, and Medium, creators established big followings. These foundational platforms help content creators get discovered, and they also invest heavily in curation and recommendation algorithms.
These platforms aggregated the creators and equipped them with various audience development tools. To help polish content, these platforms created multimedia editing tools. However, these foundational media platforms don’t always have the best interest of the creators at heart. Innovative creators diversify their presence on various platforms and cross-promote to ensure that they aren’t at the mercy of the platform owners. Such an approach ensures that creators don’t suffer much when the owners decide to change priorities, a platform loses its market share, or reduces some of the monetization features.
Stage 2: Monetizing Influencer Reach
The foundational media platforms allowed some creators to attract huge followings. At this point, companies realized they could use creators with huge followings to promote their brands. Some platforms, such as YouTube, started splitting ad revenue with the creators. On the other hand, some like Facebook and Twitter initially left the creators to decide how to monetize their content. The latter arrangement bred sponsored content and led to the creation of companies like Niche that brokered such deals.
We can now see hundreds of companies in the form of influencer agencies, talent representation companies, and sponsorship marketplaces. The influencer market was worth $8 billion in 2021 and is expected to hit $15 billion by the end of 2022.
Creators in this space work with brands that match their personal brands, so they don’t have to change their content to push corporate messages. It has become evident that some creators make their followers lose trust in them with every paid/sponsored post. These creators now have to find a way out, which brings us to stage 3.
Stage 3: Creators as a Business
We are at a level where creators are seen as businesses. Creators have now created setups where their fans follow them off-platform. These creators have multiple revenue streams beyond the standard ads on traditional social platforms.
New companies have come up to help these creators create more money by selling products such as merchandise, premium content, ebooks, and newsletters. Companies also offer coaching, speaking engagements, consulting, and fan engagements. Content creators can focus more on serving their biggest fans rather than chasing high audience levels that may never convert.
The creator economy is all about handing financial control to the content creators, where they reach out directly to their followers for funding. It presents an opportunity where these creators bypass traditional ways through which they made money through ads, placements, and sponsorships.
Why have creators not have been in complete control of their careers? They had to represent brands. These creators also have to act in a certain way to maintain their incomes. Even with millions of followers and influence, creators have to bend or conform to the companies that fund them. They are not fully controlling their brand, personality, and image.
Levels of Creator Economy
Level 1: Hobbyists
Creators at this level create content for fun or as a side hustle. More hobbyists are joining the race as technology makes it easier to create content. For instance, tools such as Anchor makes it easy for anyone to launch a podcast.
Hobbyists either don’t have the resources or the time to invest in their craft. Such creators sometimes lack marketing or distribution channels and struggle to reach certain quality content or production value levels. Unfortunately, many creators at this level remain hobbyists and don’t earn a living off their content.
Level 2: Full-Time creators
These creators can support themselves with income from their creative works. You will often come across platforms that host these creators sharing their success stories. Full-time creators are steps ahead of hobbyists as they have sustainable cash flows.
One of these creators’ significant challenges is managing a business’s ups and downs. Managing can take much of their time, making it hard to become productive. Marketing their work can also eat so much into their profits if they are not strategic.
Level 3: Stars
Creators at this level can form partnerships with various external brands such as record labels, media companies, and publishers. Maintaining relevance and fame are some of these brands’ biggest challenges. There are also possibilities of brand crises that may cost creators at this level their partnerships. Level 3 creators face an uphill task as they try to leverage their brands to become a business.
Level 4: Moguls
These creators have created businesses that are likely to evolve, stay in power, and even outlive the creators themselves. Beyonce Knowles once said that her great-grandchildren are already rich. Why? Her content creation level is at the mogul level. It is the most challenging level to maintain and the dream of many creators.
Content Creation Tools
Content creation has changed a lot in line with the development of relevant platforms and tools. In the past, video creation was in the hands of a few people who had expensive equipment. Publishing houses could only publish books, and it was also expensive. This changed with the introduction of the internet in the late 90s and the rise of platforms such as YouTube.
YouTube allowed amateur video creators to upload videos, and they were no longer at the mercy of media houses. Low internet speed affected the usage of platforms such as YouTube in the past. However, the situation has changed, and tools have also been developed. The following are some of the most common tools powering the creator economy in the modern world.
- Content Creators — Feather, Ko-fi, Beacons, Scrollstack, Stereotheque, The Mango Jelly, OnlyFans
- Course Creator — Xperiencify, CreativeLive, Kajabi, Podia, Skillshare, Teachable, Thinkific
- Marketplace — Gumroad
- Live Streaming — Onyx, Popshop Live, OnJam, Streamloots
- Event Organizer — Eventbrite, Happily, Luma, Offsiter
- Podcasting — Anchor, Castbox, Glow, Supercast
- Gaming — Nexus.gg
- Writing — Revue, Substack, Tales, Wattpad
- Audio Content — Avocado, Racket, Knowable, Spoon
- Digital Products — ConvertKit, Ghost
- Engagement — Jemi
- Funding — Patreon, Buy Me a Coffee
- Crypto — Rally, Opensea, Mirror
Role of NFTs and Crypto in Creator Economy
Non-fungible tokens are cryptographic assets stored on the blockchain with unique IDs and metadata. The major difference between NFTs and cryptocurrencies is fungibility (the ability to replace or be replaced by another identical item). If you trade one BTC for another BTC, you will have the same thing. However, when you trade one NFT for another, you will get something completely different.
NFTs have been with us for years, but it was the Covid-19 pandemic that fueled their growth. Jack Dorsey, founder of Twitter, sold an NFT of his first tweet for $2.9 million. NFTs have been described as the future of asset trading on blockchain platforms as they represent assets and cannot be counterfeited and show proof of ownership.
The following are some of the ways that NFTs are likely to change the creator economy:
- Creative freedom. Creatives no longer have to conform to specific standards laid out by various platforms. This allows great works of art to be born. There is a lessened risk of copycats, misuse, or piracy, motivating artists to be their best.
- Grow communities. NFTs are now democratizing creator content and allowing creatives to build solid communities. The community becomes the brand ambassadors and may even help with marketing content. This approach cuts off the big corporations that dominate the traditional market.
- Monetize passion. Non-fungible tokens are loved for their convenience and accessibility. Once artwork is created, minting of the NFTs can take minutes with many marketplaces to choose from. These creators can also code royalties on the smart contracts and earn recurring passive incomes whenever their NFT is traded.
What’s Next for Creators?
We are at a point where becoming a professional creator is a career choice. Creators become professional creators when they love what they do and work hard. The burden of managing their day-to-day activities becomes heavy as these creators grow.
Startups centered around empowering creators and still helping them do what they love will dominate the next stage of evolution in this space. Creators are now evolving to become founders. On top of creating, they have to learn product design, management, eCommerce, community management, data science, and entertainment.
We are likely to see more solutions tailored for creators. Even though there are billions of dollars poured into the creator economy every year, it is not oversaturated as many hobbyists are looking for marketing channels. We need to see products tailored for different business needs such as marketing, operations, investing, copyright expertise, product launches, or even community-building. Companies that identify these needs and create tools that address them will be the ultimate winners.