The creator economy is simply a phrase that refers to the rapidly growing group of individuals who create content in any form including long-form text or essays, photos, videos, or audio. Historically, according to venture capital firm Flybridge, “the creator economy has been predominantly composed of individuals sharing an existing skill, perspective, ability, etc. that they are now able to distribute, and ideally monetize, through online platforms.” Today however, we witness a rapidly growing segment of online creators amassing a following through the provision of entertainment un-related to skills or perspectives, like Instagram influencers.
Thanks to the internet, communities can form unbound by geographical location and thanks to the aggregating capabilities of platforms like Facebook, Twitter, Discord, Reddit or Slack, like-minded individuals can convene and interact. According to Forbes, today there are over 2 million creators making more than six figures on YouTube, Twitch and Instagram, and sponsored influencers are worth over $8 billion. This number is expected to grow to $15 billion by 2022.
So how did the creator economy come to be?
Following the birth of the internet, as the marginal cost of distribution was reduced to effectively zero, creators could post their content online and reach a broad audience, in theory.
Source: Ben Thompson, Stratechery
The first issue with the early iteration of the internet, was the difficulty for creators to develop an audience or a community. Here, the platforms play a critical role in aggregating end users and using their data-advantages to match their users with content that would interest them. Each platform’s unique value proposition allows content creators to optimise how they interact with their audience to maximise engagement. For example, professional gamer Ninja, streams on Twitch (owned by Amazon) almost daily which matches the frequency with which his audience play games themselves, so they can watch him play in-between their own games.
Beyond enabling creators to grow their community via discovery, social platforms enabled creators to monetise their passions or hobbies through advertising revenue or affiliate fees as brands and advertisers look to capitalise on the eyeballs attracted to the content. This will come as no surprise to readers who are likely reminded of this every-time they visit YouTube and must sit through two ads before viewing their videos.
Whilst advertising revenue fee-share can be quite lucrative for larger, more popular content creators, less popular creators, however, often struggle to generate income to support the content they create through this method. Today, larger social platforms are slowly embracing tipping and e-commerce micro-transactions to grow the income of their content creators. In just the last quarter, Alphabet announced shopping capabilities allowing viewers to make purchases from their favourite creators directly and Calvin Klein saw a 200% uplift in brand search as well as multiple sold-out products. Subsequently, a small but dedicated audience supporting a creator’s clothing-line can be just as lucrative as obtaining millions of subscribers on a social platform.
Whilst the growth of the creator economy is blistering and the attention it has garnered from the largest social platforms in the world is eye-opening, it clearly has a long runway for growth and likely will continue to evolve.
Montaka owns shares in Alphabet, Facebook and Amazon.
Phill Namara is a Research Analyst with Montaka Global Investments. To learn more about Montaka, please call +612 7202 0100.