Social media platforms and creator-focused startups haven't looked too hot this year, as companies like Snapchat, Patreon, Cameo and Meta all waged layoffs along with the rest of the tech industry. YouTube ad revenue is declining, and creator funds for platforms like Pinterest have dried up.
It might seem like things are bad on the surface, but the creator economy is more than just a buzzword that's losing interest among venture capitalists. Despite challenges on a platform level, creators are continuing to make a living outside of the bounds of traditional media and will only continue to grow in 2023.
Social media platforms will need to commit to creators (seriously, this time)
In my opinion, the biggest creator news in 2022 was YouTube's announcement that it would include Shorts creators in the YouTube Partner Program, allowing short-form creators to earn ad revenue for the first time ever. Starting in early 2023, creators will be able to apply to the YouTube Partner Program if they meet a new Shorts-specific threshold of 1,000 subscribers and 10 million Shorts views over 90 days. As members of the Partner Program, these creators will earn 45% of ad revenue from their videos.
This is huge, because it's an open secret that short-form video is hard to monetize. For example, TikTok pays creators through its Creator Fund, a pool of $200 million unveiled in summer 2020. At the time, TikTok said it planned to expand that pool to $1 billion in the U.S. over the next three years, and double that internationally. That might sound like a lot of money, but by comparison, YouTube paid creators over $30 billion in ad revenue over the last three years. As the pool of eligible creators becomes more saturated, creator funds are pretty useless -- if you're in TikTok's creator program and have a video get 1 million views, you might be able to cash out for a small latte. So while these multimillion- (or -billion) dollar creator funds might seem like a beacon for creators, they don't help too much. Most popular TikTokers make their money from sponsorships and off-platform opportunities, rather than from their videos.
TikTok has long been the dominant platform in short-form video, while Snapchat, Instagram and YouTube largely copied the newcomer to keep up. But creators will finally be incentivized to flock to YouTube Shorts once they can actually earn ad money there. The best part? There has never been more pressure on TikTok to follow suit.
"Creator economy" isn't a buzzword
What's a buzzword? You know it when you see it. It's when Facebook rebrands to Meta and you suddenly get hundreds of emails about "the metaverse," or when a crypto startup declares its commitment to fostering "community" just because it has a semi-active Discord server. You could also classify "creator economy" as a buzzword -- I personally find myself cringing whenever I say it out loud, but I stand by the fact that it's a much easier shorthand than saying "the industry in which talented people on the internet are leveraging social media audiences to develop careers as independent creatives."
But all of these buzzwords actually represent real things. Yes, even the metaverse is a thing, though I'd argue we're talking more about Club Penguin than whatever Mark Zuckerberg is into. The problem with buzzwords, though, is that they dilute real phenomena into fads that get further muddled by disconnected venture capitalists doubling down on the trend with over-enthusiastic investments.
"The passion economy isn't sustainable," he read, quoting his prediction from last year. "Nailed it! Who talks about creators these day? Nobody!"
I can forgive Alex because I do hate "passion economy" with the fire of an exploding supernova for each and every follower Khaby Lame has on TikTok. The term glorifies the relentless, soul-crushing hustle that people face while trying to "make it" in a field they love, while ignoring that industries that people pursue out of passion (art, nonprofit work, politics) are often the most exploitative of all.
I think what Alex is getting at here, though, is that in 2021, venture capitalists poured money into the creator economy in the same way they pursued "trendy" tech like AI and web3. According to data retrieved from Crunchbase earlier this year, here's the breakdown of creator economy funding for the first three quarters of 2022:
Q1: 58 rounds worth $343.2 million.
Q2: 42 rounds worth $336.0 million.
Q3: 19 rounds worth $110.2 million.
I don't think this means that the creator economy is failing, though. It could just mean that the industry is correcting for overinvesting in a bunch of creator-focused companies that creators didn't actually want or need. Also, you know, the economy.
I've been saying for the entire past year that creator economy startups can only succeed if their foremost goal is truly to help creators. In 2021, a year when venture capital flowed like champagne at a Gatsby party, we joked that there were more creator economy startups than creators. But that's a problem for investors, not creators, many of whom operate completely oblivious to the whims of a16z. It's indicative of an environment that incentivizes tech moguls with no hands-on experience to try to solve problems of an industry that they don't quite understand, and as a result, the space became deeply oversaturated. I cannot keep track of the number of companies I've encountered that attempt to automate the process of securing brand deals or help creators make white label products.
I'd go as far as to say that it's bad for creators when there are too many startups angling for their partnership. We know that most startups are doomed to fail -- what happens if you rely on a company to offer your business some sort of service, and then they fail within a few years? This is why I've made it a personal policy to always ask creator-focused startup founders how they would plan to protect their creators from harm if their company fails.
No matter where the VC funds may fall in 2023, the playbook for creators' success remains the same. Diversify your income streams, build trust with your audience, and make sure you don't burn yourself out.
Venture capital will continue to intersect with creators, but not in the way you think
Investments into creator economy companies might be down, but creators are continuing to interface with VC money in a way that their audiences don't often see. Charli D'Amelio and her family have become investors themselves. MrBeast is seeking funding at a unicorn-sized valuation, which isn't surprising given that other especially successful creators have accomplished the same.
In less extreme cases, many creators are growing their businesses through startups like Creative Juice, Spotter and Jellysmack, which offer up-front cash in exchange for temporary ownership over a creator's YouTube back catalog, which means the company gets all of the ad revenue from those videos. These companies operate similarly to venture capital firms. They invest in creators they believe will turn that cash infusion into even more money, giving both parties a return.
Despite securing massive funding rounds and mammoth valuations, the model that these companies operate with is still relatively new, and creators should exercise caution, as they should with any business deal.