What is a creator economy?
The creator economy is an industry in which people make money primarily from content and creating their own products. For example, they write music and upload it to the platform. Listeners receive positive emotions and pay the creator for the product. Today, the creator economy is primarily driven by digital and creative professions, media, and influencer marketing.
According to UNESCO , the creative economy is one of the fastest growing sectors of the economy, contributing 3% of global GDP.
At the end of 2021, the creator economy involved more than 50 million people producing content. Of these, 2 million people are professionals with permanent employment, that is, they earn a stable income from content. The creator economy market size has exceeded $104 billion and could reach $1 trillion by 2023. Moreover, venture capital money is flowing into the creative economy: from October 2020 to August 2021, startups in this industry raised $800 million. Investors mainly invest in digital platforms for influencer marketing – this market increased 40% in 2021 and reached $13. 8 billion. And the volume of services in influencer marketing increased by 26%.
But the economy of creators is not only conditional bloggers who gather an audience around themselves, sometimes not even with a product with measurable value, but simply with charisma and the ability to interest. The creator economy includes GameDev (game development), banking products, applications and technology products, as well as real goods such as jewelry, confectionery, and accessories. That is, everything related to content and the creation of exclusive products by people themselves.
In the creator economy, not only content authors, but also other market participants make money. Primarily the platforms where this content is published. The greatest interest among foreign investors is Patreon (since August 7, 2022, Patreon has been blocked in Russia): a platform for monetization through subscription. The author posts something, and his fans get access to it for money. Patreon’s capitalization grew to $4 billion in the spring of 2021. For comparison, in September 2020 it was valued at only $1.2 billion.
Companies that develop tools for content creation also make good money. For example, photo or video editors: VSCO, Lightroom, Final Cut and others. Their revenue primarily depends on subscriptions – the user pays monthly or annually to work with the full functionality of the tool. For example, a subscription to VSCO X gives photographers access not only to a wide range of filters, but also to educational materials. In 2020, VSCO had 4 million paying users – 2 times more than in 2018.
What are the benefits and risks of the creator economy?
pros
Low entry threshold. In fact, all you need is a smartphone and an Internet connection. Certain skills in some area will also be needed – for example, in graphic design or writing text. But this is not the same as mastering the conditional profession of a doctor. If there is a desire to create something, a smartphone and the Internet, a person is already one step away from entering the creator economy.
There is no ceiling on income. What the audience pays for the content is what you will get. If you develop an excellent game that will appeal to a million people, you will collect ₽300 from each person for a subscription, and you will receive ₽300 million. To do this, you need to try and this is not a wonderful story of earning money in a month.
However, the financial opportunities are enormous. Almost 50% of content creators who have been working in the creator economy for 4 years or more earn $20 thousand annually. And for 78% of professionals for whom content is the main source of income, the amounts are even higher: $23.5 thousand. This data is provided by Influencer Marketing Hub . And this is not the limit: top writers on Substack earn $500 thousand a year.
The number of potential consumers is constantly increasing. The more people in the world gain access to the Internet, the more technology and communications develop, the more the audience of content producers grows. And the emergence of more and more new payment tools like NFT tokens and smart contracts makes monetization easier. Large companies are actively following the trend and striving to make their contribution to the creator economy: for example, TikTok has created a fund to support creators – it currently contains $200 million.
Minuses
It is difficult for beginners to enter the world of digital content . The entry threshold is low – competition is high. A person posts a product and instantly disappears in the ocean of thousands of similar creators. Because the algorithms are complex, platforms show already known accounts first, and newcomers get lost.
It is impossible to accurately predict how this market will grow and change. The maker economy is a young phenomenon that has accelerated with the pandemic. The quarantine released a wave of talent and their creativity, and consumers were interested in content during the lockdown. The two sides found each other, this became an incentive for the development of the economy of the creators. But how it will develop further is not yet entirely clear.
Tools for creating and selling content
There are several ways for content creators to monetize content:
Advertising collaborations with brands – sponsored posts on social networks, video inserts, and so on. This is one of the most common ways to earn money.
Collaborations with brands or other content makers , joint marketing campaigns.
Ambassadorship – the content creator becomes a brand representative, enters into an advertising contract with him and periodically advertises in his products.
Paywalls for subscribers, donations and sponsorships are how platforms like Patreon or Boosty work: fans pay to see or use new content. But to make money using this model, you need a loyal audience.
Nearly 80% of content creators surveyed by Influencer Marketing Hub make money through brand deals. But this primarily concerns bloggers and influencers – not conventional game developers or educational courses.
As the Influencer Marketing Hub report shows , most creator economy participants use social networks to sell content. In first place is Instagram (the social network is banned in Russia by a court decision as extremist): 72% of Influencer Marketing Hub respondents choose it as the main channel. TikTok is in second place in popularity with 13% of the votes, and YouTube is in third place with 9% of the votes. In addition, the top five included the options “own blog” and Facebook (the social network is banned in Russia by a court decision as extremist).
The choice of a tool for selling content depends on what exactly a person produces. Social networks are more relevant for bloggers and streamers. In addition to TikTok, musicians also use iTunes, Spotify, Pandora, and Soundcloud. It is convenient to monetize podcasts through Apple Podcasts and the early access function for donation (payment).
For designers and developers, social networks will be more of a promotion channel, and sales will go through the Google Store, App Store and other similar application stores. Or through the already mentioned Patreon or Boosty.
Photographers and graphic designers also monetize content on social networks, but among the main three, only Instagram is their priority. It is complemented by Snapchat, VSCO with the internal social network Grid and Pinterest. The latter platform is more of a visual search platform than a social network through which brands are promoted whose products can be sold through a picture.
At the same time, most platforms now act as intermediaries between the content consumer and the producer. They are centralized and dictate their own rules, how much money the content creator will receive, and how much the platform will take for itself. For example, Apple and Google have the App Store and Google Play. Monetization there is 70:30 – 70% goes to the content creator, 30% goes to the platform. On YouTube, content creators earn money by inserting advertisements into their videos. That is, the dependence on platforms is direct and very strong. Content creators have to adapt to these rules.
What principles will work in the creator economy?
Despite the fact that content creators in the creator economy are motivated by money and turn their hobbies into a source of income, their main principle is rather “do what you like.” There are a lot of people who are passionate about something. And often they don’t work where they want. Because money is a priority: you need to live on something – support yourself, your family.
As the creator economy develops, this will change. Including opportunities for those who are part of it. For example, now creators who make a product needed by the masses receive more money, and then a large brand comes to them with advertising. Those who create content for 100 people earn much less. For the creative economic class to develop, and for people to truly do what they like, everyone must have the opportunity to reach consumers and get enough from their content. For example, through direct donations. That is, both promotion algorithms on platforms and monetization mechanisms must change.
Creators’ economic development forecasts
The growth and transformation of the creator economy is tightly linked to Web3: a new Internet will develop – new platforms and technologies will appear. People who want to make money from content dictate the rules, and platforms will adapt to them. They will become decentralized and change monetization.
The idea of direct donation will begin to develop more actively, when it is not conditional YouTube that pays a reward to the blogger, but the content consumers themselves: through subscriptions or one-time transfers. What Patreon is doing now, other platforms will do. This will give the creator more freedom and the opportunity to make real money. They won’t have to give up a huge portion of monetization to platforms, and consumers will be able to receive a more original and creative product. The creator economy will be characterized by ecosystems and platforms that are directly dependent on users.
Brands interested in selling their advertising and expanding their audience will follow creators to new platforms and new conditions. That’s why large companies always go where the user is. Perhaps the creator economy will actively develop in conjunction with metaverses – this is a good platform where each creator can produce content and be valued at the level of a large brand like Pepsi. This equalizes the opportunities of an ordinary person and a multimillion-dollar company.
In Russia, in the current situation, the development of the creators’ economy is now slowing down. The world’s main promotion channels and content sales have become unavailable or limited. If they don’t exist, there is no connection with subscribers; this is a Web 2.0 problem. There are no complete analogues of TikTok or Instagram. YouTube has only removed monetization so far; bloggers earn only from direct advertising – contracts with brands. If it closes, all the big three disappear. Content creators have to master new platforms.
On the one hand, if a person is talented, creates a high-quality product, content or service, and has a large and sincere attention of subscribers, little changes from switching to a new platform. You have to adapt to a different interface, other promotion tools, but a person will continue to make money from content anywhere.
On the other hand, forced transitions are an additional waste of time. You need to study the platform and its conditions, new tools, opportunities, and audience. In addition, not all subscribers will follow the content maker from TikTok to another platform, even if they are very loyal. This means that for some time the income will be less.
Now there is only one option – to actively study new platforms and tools. Later, with the development of Web3, creators will not have such dependence on the site. The transition from one to another along with your group of subscribers and clients will become simple and seamless. Because it is not the platform that should dictate the rules, but bloggers, content creators, journalists, and product creators.
