Around the world, some 50 million people consider themselves to be "creators." This is an impressive number, but makes sense when you consider that 1 in 3 children ages 8-12 say they want to be a YouTuber when they grow up. Sensing a trend, a few years ago VC's started to fire up their ring lights. Those lights started to dim earlier this year as many VC firms started to retrench and assess their strategy across all industries including the creator economy, which saw a 30% drop in VC funding between Q4 2021 and Q1 2022.
Superficially, the market dynamics have always looked good. You have high demand for creator content, a seemingly endless stream of young people hoping to become creators, a burgeoning technical ecosystem to support those creators, brands seeking authentic endorsements and VC's willing to invest in the sector, albeit at a less frantic pace than 2021. The picture is less impressive if you look closer, with issues surrounding the friction that exists between the demands of fans, the bandwidth of creators, the buying habits of brands and fundamental underpinnings of how social media platforms operate. The economic downturn has accelerated this trend and forced creators to take stock of what really drives their business.
Creating dynamic content in the hopes of hitting the virality lotto is a slog. It requires a tremendous amount of time and resources to produce - something that has been increasingly hard to come by with fewer ad dollars and VC money flowing into the sector. It's one of the reasons the majority of YouTube creators report earnings that would put them below the U.S. poverty line even without unprecedented inflation. Even if you are in the small percentage of creators who are fortunate enough to be included in the handpicked monetization cohorts the social platforms put together, you might not be that much better off. Even well-followed creators like Mr. Beast, a TikTok star with 34M fans, reported earning less than $15,000 based on his inclusion in the TikTok creator fund. That works out to about $.000015 per view or $.00044 per fan.
Creators have always been simultaneously intrigued and frustrated by the relatively low earnings but it makes sense. The social platforms are built for maximum scale to support the massive data and advertising operations that account for most of their revenue. They are algorithmically optimized to reward virality at the cost of community and meaningful interaction. Using the Mr. Beast example, if he were to create a paid, private community on Discord, Subtext (my company), Patreon, etc. and he converted .05% of his fans to a membership at $5.00 / month he would earn $10M+ annually with less platform dependency, lower barriers to content creation and less reliance on shifts in the ad market.
Optimizing for community and relationships hopefully makes for a better life too. If you ask most creators what they enjoy most about their work, it is almost always the interactions with their fans. Of course, most creators declared DM bankruptcy long ago and their comments can be a vortex of support, bots, toxicity, envy and demands for more content. Lost in the white noise are the authentic interactions and voices of real fans who, instead of being able to support the creators they love, are increasingly feeling alienated as well.
In the face of economic headwinds more creators are looking to refocus their efforts and, in doing so, they are coming to the realization that the vanity metrics they sought out on social platforms don't amount to a stable foundation to build on long term. Instead, they are increasingly turning to more private platforms.
The reality is straightforward:
- Fans want more direct connections to the creators they love (77% are willing to pay for it)
- Creators want to be able to connect with their fans and financially support their work
- Creators want to own the relationship with their fans vs. renting it
- Brands want authenticity and conversions
- Social platforms want views to support their data / ad business
The industry has been optimizing for the wrong things on the wrong platforms but a more bearish market is forcing us to take stock of what really matters. Instead of chasing vanity followership metrics, creators hoping to protect their business should focus on creating enduring value through community engagement and direct monetization. Owning a direct, monetizable line of communication to your audience means not having to worry about algorithm shifts, monetization policy changes or downward pressure in the ad market. Instead of investing in the long-term success of the social platforms, creators should be investing in themselves, their communities and the platforms that empower them to own those relationships.