Creator, Influencer Marketing

Into the Era of Creator Economy

The world of entertainment as we knew has changed dramatically in the last decade. Instead of a few companies controlling what we read, viewed, or listened to we now have a plethora of options. The rise of the internet (and more importantly social media) decentralized media. Today we are not bound to watch only a few scheduled television programs, listen to a handful of radio shows, or read only newspapers written by journalists following their editors’ orders. Today we have a plethora of options and what’s more interesting is that much if it is written, spoken, or filmed by ordinary people like us. As Eric Freytag of Streamlabs puts in his article for VentureBeat, “Rather than ten TV shows consumed by billions of people, we now have hundreds of millions of shows that cater to billions of people. You could be only one of ten people in the world interested in a niche topic, but chances are you’ll find content for it. Additionally, the people who are creating content for that topic are truly and authentically passionate about it.”

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Now if there’s such a massive audience pool interested in exploring and engaging with “creators”, there definitely is a market, both for the creators and the tech platforms to drive engagement. Believe it or not, today the total size of the creator economy is estimated to be a little over $100 billion dollars. YouTube alone expects a $30 billion stream of revenue at the end of 2021. More amazingly, the creator economy has seen a record $1.3B in funding in 2021 alone. But before, I dive deep into the creator value chain, market map, etc, let’s uncover –

What is Creator Economy?

CBInsights defines it best, “The creator economy refers to the numerous businesses built by independent creators, from vloggers to influencers to writers, to monetize themselves, their skills, or their creations. It also encompasses the companies serving these creators, from content creation tools to analytics platforms.” Clara Bergendoff offers another interesting perspective in her article that the creator economy transitioned from the attention economy. Business models surrounding the attention economy depended on algorithms and customer attention. Bergendorff explains: “The Attention Economy monetizes an audience they speak at while the Creator Economy turns that audience into a real asset: a community they engage with.” The creator economy pushed businesses to frame their advertising based on how they could engage with audiences.

In the last decade, digital platforms like YouTube, Instagram, and Vine paved the way for the influencer economy, which was all about sponsored posts, story shout-outs, etc. But these platforms did not provide individuals with many opportunities for direct monetization. This was one of the primary reasons for the decline of Vine despite incubating top creators like Thomas Sanders, Zach King, and Shawn Mendes. Basing business around largely free content also deflated the value of creators’ work. This has driven today’s growth of more insular communities where creators strive to own their audience. Newer platforms like Substack, Twitch, Patreon, OnlyFans are realizing the power of creators to draw users to the platform and offer much larger cuts (as high as 95%) to the content creators.

Established companies are also realizing the need to keep creators on their platforms. For example,

  • Clubhouse recently rolled out its first monetization feature — tips for audio creators.
  • Twitter is rolling out a Super Follow feature to let avid Tweeters charge for their exclusive tweets and paid ticketing for its audio chat rooms.
  • TikTok has already built out a native marketplace to connect advertisers with creators and has also launched a $200M fund to invest in its top creators.
  • On top of paying out ad revenue, YouTube is taking the creator fund route as well, introducing a $100M fund for creators on its TikTok competitor, Shorts.

How much is being invested in the creator economy?

As the potential of this economy is becoming apparent, traditional venture funds are looking to get a slice of the pie. Both generalist and consumer-focused funds have infused cash into well-known creator platforms, such as Substack and Patreon.

Source: CBInsights

Quoting the report from CBInsights,

As investment in the space has swelled, some companies have catapulted to unicorn or near-unicorn status, including:

  • Patreon: The membership platform last raised a $155M Series F at a $4B valuation.
  • Kajabi: The online course platform is the top-funded company on our market map, having drawn $550M in investment at a $2B valuation.
  • Cameo: The personalized video shout-out app has garnered more than $166M in total funding for a $1B valuation.
  • Substack: The newsletter platform has raised a total of $82M at a valuation of $650M.
  • VSCO: The photo-editing app is valued at $550M, after raising $85M in funding.
  • Splice: The audio-editing platform is valued at $500M, with backers like Union Square Ventures, True Ventures, First Round Capital, and Lerer Hippeau Ventures.

New funds have emerged as well with these specifically focused on the creator economy.

Li Jin’s Atelier Ventures focuses on cultivating a community for creators, including through a Slack community and TikTok creator database. It doles out checks between $100,000 and $300,000. Its portfolio companies include Substack, Stir, Luma, and more.

Observing the huge rush among companies to invest in creators begs the question –

How big exactly is the creator economy?

There are around 50 million creators today. Out of these 50 million, around two million are professionals, as reported by Signal Fire. Amateurs compose the remaining 48 million. Many creators focus on monetary gain, making this one of the most appealing professions in the 21st century.

Source: SignalFire

On the creator front, there has been continuous money flow into this area. Forbes reported, gains worth $211M for top-performing YouTube channels between June 2019 and June 2020. Another example is Gumroad, a content-sharing platform. Since 2011, Gumroad’s creators have earned more than $460M.

On the corporate side, brands are expected to spend up to a whopping $15B on influencer marketing by 2022, per Mediakix. In fact, we already see a shift in the entertainment industry and other adjacent markets. Recently even at Cannes, we saw notable brands, including L’Oréal, heavily invest in influencers over celebrities — perhaps because they’re a lot more relatable.

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While it’s very appealing to see some creators making millions annually, there is also another side to this. On most platforms, while top creators are getting cut checks that run the gamut from 6 to 8 figures, most creators — the “middle class” — are scraping by with much less. As per the report by CBInsights, “On OnlyFans, the top 1% of creators reap a third of the profits, while most see less than $145 a month. In 2017, just 2% of Patreon creators earned more than the federal minimum wage.

Creator platforms flourish when they provide an opportunity for anyone to grow and succeed,” Atelier Ventures’ Li Jin writes. “Less wealth concentration means less risk that a would-be competitor could poach top creators and threaten the entire business.” Companies should help creators flourish in the “long tail” of content creation. To make the creator economy more sustainable, Jin argues for a few different strategies, including more funding, different content strategies, and creator training.

What’s next for the creator economy?

At this moment, the creator economy is pretty new but the rising investment in the space suggests that we can expect a lot more disruption and innovation in the coming years. As new platforms will make their debut, it will be interesting to see what the social media giants do to retain creators and in turn audiences. The tools that can help creators with their specific brands and niche business needs will emerge as the winners in the long run.

Source: Gumroad

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