The Creator Economy Isn't Dead
It just had the wrong definition.
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Two years ago, the creator economy was the hottest sector in venture capital as “Link in bio” startups and platforms that would let creators turn their videos into NFTs raised millions, but the party didn’t last long.
Venture funding for the creator economy was down 52% YoY in Q3, and according to The Information, founders are now selling their startups for fire-sale prices as they struggle to stay in business:
The harsh realities facing creator economy startups are getting even harsher, prompting a stampede of founders looking for exits as they struggle to find growth and funding for their businesses. So far this year, there have been 35 completed or planned sales of companies in The Information’s Creator Economy Database—from creator-focused shopping apps to providers of podcast recording software and rights management for musicians. That’s more than double the 16 sold in all of 2022. Eleven of this year’s deals happened in October, the most for any single month this year.
While startup after startup is going out of business, creators themselves are doing better than ever.
According to Influencer Marketing Hub, the total size of the influencer market has grown from $1.7B in 2016 to an estimated $21.1B in 2023, and creators across all channels are cashing in. Popular YouTuber Mr. Beast has made $82M over the past year. Instagram and TikTok influencers make thousands of dollars per endorsement deal for sponsored posts. Podcasters and newsletter writers sign five and six-figure advertising contracts with different sponsors.
The creator economy is doing just fine. It’s the economy of creator-focused startups that is crashing and burning. Why the disconnect? Because there wasn’t ever a huge need for creator-focused startups in the first place.
Allow me to first define what a “creator” is, and then explain how these “creators” make money.
Creator is a collective term for anyone who writes, produces videos, or records podcasts and publishes their content online. Within those three lenses, there are dozens of ways to make money. We’ll start with the writer, and for this exercise, we’ll ignore “conventional” writing jobs such as journalists and staff writers.
10 years ago, it was almost impossible to “make it” as an online writer. You needed a massive blog with millions of monthly views just to make some ad revenue through Google AdSense.
But now, thanks to platforms such as beehiiv, Substack, and ConvertKit, anyone can set up a blog/newsletter web page and email platform in minutes, and they can grow their audience through social media.
Writers with their own newsletters can monetize their content through sponsorships, paid subscribers, and upselling their own business/service/product, and they can leverage their written work as a resume of sorts to find outside employment opportunities (either full-time or as an independent contractor).
Writers can also ghostwrite for executives on X (Twitter) and Linkedin and produce content for non-media companies looking to use written content as part of their larger brand strategy.
Independent copywriters who secure big-ticket clients can make a comfortable living as well.
X is now splitting its ad revenue with users who generate millions of impressions too, providing another monetization arm for content that you would otherwise write for free.
And we can’t forget the original content creators, authors, who leverage their social media followings and email lists to increase their book sales and land larger advances.
On the video front, popular YouTubers such as Mr. Beast can make hundreds of thousands to millions of dollars thanks to YouTube’s revenue share policy: creators get 55% of ad revenue generated by their videos. These creators can also sign lucrative brand deals to incorporate different products in the videos.
While it’s easy to make fun of “cringe” TikTok and Instagram influencers, there is nothing cringe about the five and six-figure endorsement deals they sign, as clothing and supplement companies will pay hand over fist for exposure to their audiences.
Similar to newsletter writers, popular podcast hosts sign massive sponsorship deals as well, and two of the world’s biggest podcasters, Joe Rogan and Alex Cooper, inked 8-and-9-figure deals with Spotify to stay on their platform.
A decade ago, advertisers were wary of working with independent parties, preferring to stick with blue-chip media companies, but now marketing departments dedicate specific portions of their budget to influencer marketing.
The creator economy has grown so large that it has created other employment opportunities outside of the creators themselves. The largest creators across all mediums hire producers, editors, videographers, and researchers to help with their businesses.
So no, the creator economy wasn’t a bubble. If anything, independent creators will continue stealing market share from incumbents as media becomes more fragmented. Venture capitalists were right to think that this industry was poised for rapid growth, but they ignored two details that posed issues for creator-focused startups:
Content creation is subject to extreme power laws
Most content creators run low-cost businesses
~1% of content creators generate ~99% of revenue. Advertisers only work with writers, influencers, and podcasters with audiences of certain sizes, and only a few creators ever reach that scale. If you aren’t making money from your content, you probably aren’t going to invest much money into it, so the number of creators that would realistically use a product or service offered by a “creator economy startup” is small.
And even the creators who are making money tend to run low-cost businesses with few variable costs. As someone who makes a living online, my total expenses are $10 per month for a domain, $99 per month for my beehiiv account, $8 per month for my X Premium subscription, and a one-time $1,200 expense for my MacBook.
Podcasters might buy higher quality microphones, and influencers may purchase a pricy ring light camera, but minus a few outliers like Mr. Beast (who spends hundreds of thousands of dollars on some videos), influencers don’t have that many needs.
This Marketing Brew piece put it best:
Influencer marketing budgets are still strong, however, growing at a double-digit pace that could surpass $7 billion by 2024, according to Insider Intelligence. Still, just because the creator economy itself is growing doesn’t necessarily mean influencers want or need many of the offerings these startups have historically offered.
Most of the “needs” that creators do have are better solved as features offered by larger companies, not standalone business models offered by a startup. There wasn’t a market need for “invoicing and payment processing for influencers.” Just use a Stripe account. Why would you use a “link in bio” company when Twitter and Instagram could tweak their layouts to include that feature?
My $0.02 is that the VC/startup world attempted to penetrate the creator economy with a set of solutions looking for problems, but creators don't really need any new solutions. They just need a camera, a microphone, a keyboard, and an internet connection.
- Jack
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Jack's Picks
Zeke Faux’s new book, Number Go Up, is an excellent narrative covering all of the insane behavior going on behind FTX, Tether, and other big players in the crypto world over the last few years.
My man (and fellow newsletter writer) Olly Richards wrote a free 117-page case study about how he grew a $10M course business from scratch- Essential reading for my entrepreneurs out there, especially if you’re an educator, creator, or coach. Check it out here.
Elizabeth Lopatto wrote a hysterical piece on Sam Bankman-Fried’s behavior in court.
Issie Lapowski covered the story of a Facebook algorithm change killing a high-flying startup.