#14 - Four ways companies will invest in the creator economy
Platform owned marketplaces. Collaboration and bundling tools. Creator centric ad tech. Evergreen creator funds.
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We are witnessing constant advancements throughout the creator ecosystem. For startups and incumbents alike, there is opportunity to capitalize on the changes happening around us.
Below are four predictions for key areas companies will invest in.
1. Platform owned marketplaces
The primary value add of content platforms is connecting creators with an audience, connecting viewers with interesting content, and connecting advertisers with targeted attention. Looking ahead, platforms with a creator-first mindset will think about new ways to enable stakeholder success, starting with creators.
Platforms have the requisite scale, data, and attention from stakeholders to enable a marketplace for various creator needs ranging from creation, editing, hiring a team, and monetization. For example:
Brand <> Creator partnership marketplace (monetization)
Music / audio / meme / B-roll marketplace (creation / editing)
Editor / Analyst / Mod marketplace (hiring a team)
Let’s take the content marketplace idea, which boils down to the idea of helping creators to produce better content with lower effort. Why is this viable?
Well, Tik Tok has reminded us with its creation tools (duets, stitching, editing suite) that remixing is fundamental to content creation. Tik Tok’s network effects of creativity has shown that assembling existing media components can result in outsized returns of attention, rather than having to create entirely original content from scratch.
Following that train of thought, there is an opportunity to connect creatives with the right existing media-building-blocks to spark content creation. To unlock this opportunity, there is a sea of complexity that platforms must wade through for discovery systems, content rights, and incentive structure. However, the payoff will be huge if a platform can establish itself as the remix layer. So far, Tik Tok is winning that game.
Another platform owned marketplace is a match making system that connects creators with those that help them in various aspects of their business.
Whether it’s editors, managers, mods, or even brand partners, creators want to be connected with them, but don’t always have the time to be recruiting and hiring (they’re busy making content!). If a platform can offer an effective talent marketplace or sponsorship marketplace that works at scale, it will have an advantage when creators select a platform for content distribution. Tik Tok has made its bid here, but other platforms are not far behind.
2. Enable more collaboration & bundling
As previously discussed, more creators are finding success collaborating with others, and this will become more prevalent as creators gather (e.g. live together) to co-create more often. By combining their brands and audiences, their distribution power is multiplied through cross-promotion, and their creation power is multiplied through pooling resources, and working on bundled content offerings. Every.to is a canonical example of how this could work for newsletter writers and podcasters.
Consumers are responding positively to creator bundling, which consequently provides collaborating creators with higher and more predictable income.
As an example of building for creator collaboration: Stir aims to become the de facto place for creators to run their business. Their apparent strategy is to be the unified control center for the backend of collaboration, operations for creator SMBs, and cross-platform analytics. By doing so, they unlock optionality for extending into other aspects of running a creator SMB (e.g. workflows for brand deals or revenue sharing).
As collaboration and bundling become more prevalent, the friction and pain points with these workflows will become more obvious, and that’s where platforms can provide significant value. As Maxime Eyraud puts it:
Digital platforms should pay attention [to collaboration and bundling] if they hope to please – and retain – their top creators… services that fail to address this use case may see valuable talent move elsewhere as they outgrow their first digital home… bundling is likely to create tedious admin work for all involved, shifting time and focus away from actual creation. From proper attribution to right windowing to revenue split, creators will need dedicated tools to help them manage various aspects of these partnerships.
Creator team subscriptions (e.g. sub to a group of 4 creators for the cost of 3)
Insights on who creators should collaborate with (e.g. based on audience overlap)
Automation of brand deal workflows, using standardized templates to remove unnecessary complexity from sponsorship deals
3. Creator-centric advertising
With Clubhouse launching 0% fee tipping, Facebook and Twitter both getting in the paid newsletter game, and start ups such as Ko-fi wedging their way into the ecosystem with low cost payment offerings, it’s clear that helping creators make money will be a heavily contested arena.
Yet, the advertising infrastructure that enables brands to reach potential customers has barely adjusted to explosion of the creator economy. Brands and platforms have taken note of changes in consumer behavior and trust, but the systems that request, sell, and serve ads against content have not responded much. But they will.
Ad creative featuring creator content or creators
Creator content will be partially re-purposed as ad content via the next generation of ad tech. Content from successful creators are many times more engaging than standard ads made by a creative agency. Brands know this. Platforms know this. Creators and consumers know this.
This golden opportunity is ready for the taking, brands just need to capitalize on a growing corpus of viral clips, memorable moments, and culture defining memes to associate with their own identity. Few brands have started down this path, but as creators make more awesome content, the opportunity will become too obvious to ignore. This next phase of online advertising is not a matter of if, but when.
A more apparent opportunity is to feature creators directly in ads. Creators are already starting to be featured on commercials, and it’s not a stretch to imagine brands signing on creators as brand spokespeople. It will be a throwback reinvention of celebrity spokespeople with creators at the center.
Allow brands to boost organic user generated content (UGC) featuring the brand
Let advertisers commission paid ad content creation, rewarded by performance
Enable UGC to be remixed into ads, letting brands pay creators and rights holders for content they want to use in ad creative
Creator based targeting
Interest based targeting has been largely successful over the past decade for driving online sales, but as privacy laws change and platforms change their tone on user tracking, advertisers will need to produce results without quite as much visibility.
Meanwhile, content platforms have first party insights into the relationship between creators and fans. With that data, they can not only help facilitate creator <> brand relationships, but also fuel creator based targeting.
For instance, this would let Adidas make custom ads with creators A, B, C, and use creator based targeting (provided by platforms) to show the relevant ad for different fanbases on the platform and elsewhere on the internet.
Creator centric ad exchanges
Exchanges are another angle of attack.
The current online model of real time bidding systems don’t necessarily lean into the high engagement model of the creator ecosystem. For this reason (and a host of brand safety concerns), formats such as live streams notoriously underperform on ad revenue per hour watched compared to their VOD cousins. Yet we know that live content generates a wealth of revenue through non-ads sources. So how will ads catch up?
inSTREAMLY is one example of an independent (not platform-owned) player that wants to shake up the live ad ecosystem with a new model of live stream sponsorships. If inSTREAMLY succeeds, its model would set a precedent of a hybrid approach, combining 1) the online model that utilizes big data and ML to enable economies of scale across millions of creators and live streams, with 2) the offline model of human orchestrated, custom creative and placement on the video, which gets composited directly into the video feed upon ingestion.
If this hybrid model catches on, it can supplant the existing model for live ad fulfillment, and potentially produce two other results:
Displace existing ad exchanges as middleman between brands and live creators
Render ad blockers useless (because the sponsorship is stitched into the stream)
4. Evergreen / increasing creator incentive funds
Platforms are willing to set aside funds to compete for the next generation of creators.
Snap: $1M a day
Tik Tok: $1B
YouTube: $100M for the first year
Now that the cat is out of the bag, it will be difficult for platforms to ever remove their creator funds. Why?
Creators want money, fame, and love. Now that creator funds are commonplace, it allows new creators to have a shot at earning money from content sooner. This is the new baseline. It is now part of what creators expect when they choose a place to build their brand and reach an audience.
Imagine this hypothetical scenario:
It’s 2022, the creator economy is in full swing, and platforms are competing over top creator talent to secure the best content for consumers. Every platform continues to work on their long term revenue models to better capture value from hot new content formats such as Short mobile videos or live audio. TikTok, YouTube, Snap all have creator funds that appeal to aspiring creators. Instagram announces that it is shutting down its creator fund.
What would this signal to the market about IG’s investment in creators?
How would creators justify putting their limited time and resources toward IG?
Rather than shutting their creator incentive funds down, it’s more likely that platforms will increase the fund to reward more creators in a more meaningful way, and attract additional creators in the process.
An argument against this:
These fund programs are all temporary stop gaps from the platforms’ perspective. As soon as a platform figures out a scalable, fair, and safe way to automate the process of rewarding creators of all sizes, they no longer need a creator fund to help creators make money.
Setting aside how many years this would take, it is a possible outcome. However, the perception of being the first to remove such a visible signal of creator support will be tricky to navigate. As a result, even when long term revenue models have been figured out, companies may elect to continue their creator fund.
In a way, a creator fund could be the beginning of what eventually blossoms into platform driven Universal Creator Income.
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