Author: Clara Lindh Bergendorff
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"Goodbye, Attention Economy; Hello, Creator Economy: Why Creators and Their Communities Are Leading Us to a More Collaborative Digital Economy?"
We are at the beginning of the end of an era. The attention economy, an ad-based revenue model that has dominated the creative industries in the 21st century and made existing social platforms a vassal of the world's most valuable technology company, paved the way for its own demise. leveled the road.
The creator economy represents a paradigm shift. It is made up of platforms, marketplaces, and tools that democratize creative expression and entrepreneurship; enabling a class of independent creators to make a living doing what they love.
In the past few decades, we have evolved from an economy dominated by industrialization to a digital and information economy. In the 21st century, as the amount of information proliferates, our attention becomes increasingly scarce and valuable, and many digital products and services are freely available to the public in exchange for the opportunity to buy our attention and personal information from advertisers .
There’s a cliché about free and ad-supported products: “If you don’t pay for the product, you are the product.” Commercial companies have their customers’ best interests at heart, and the attention economy doesn’t necessarily refer to users create or consume content. And so the bills for these free products start to pile up: privacy scandals, fake news behind click-inducing headlines, an increasingly polarized society, the mental health toll, struggling long-tail creators…
To be clear, social platforms are not a bad vehicle — quite the opposite, in fact, but for their mission to more closely connect the world, platforms need to consider content creators, big and small, as primary users. The revenue model that got them to their first trillion dollars is hard to replicate again.
In the early days of social media and the attention economy, creators needed audiences for their platforms. As (1) creators and their influence increase (2) barriers for micro-entrepreneurs decrease (3) people around the world with the same niche interests are able to rally against the so-called mainstream, a subtle but poignant A power shift process has emerged, and platforms now need a committed community of creators. Whereas the attention economy monetizes audiences, the creator economy turns audiences into a real asset: a community in which they participate. Audience itself is a liability masquerading as an asset because the cost of acquiring it is higher than the value extracted from it.
Social platforms are compromising this power transfer process in favor of creators, launching a series of features to help individual creators on the platform monetize their followers, realizing that if they don’t, creators will take Take their communities and potential revenue streams elsewhere. As The Information recently commented, “There’s a paradigm shift going on here from “selling eyeballs at scale” to “getting a cut of what platform creators get paid directly.” It seems like the future of digital capitalism is in the hands of many more connected and connected micro-entrepreneurs. With a niche advantage, they know their customers better than the big brands, whether they sell content, products or knowledge.
Invest in a paradigm shift
If the creator economy is the next big shift in the digital economy, how do we understand and ultimately evaluate this market?
First, the creator economy is at the intersection of the small business economy and the creative industries. (The small business economy’s $300 billion market is expected to reach $455 billion by 2023, with 40% of the U.S. workforce earning at least 40% of their income through small businesses and 64% of full-time workers saying they want to have a “side hustle” ; the creative industries have annual revenues and profits of approximately $2.25 trillion and employ more young people aged 15-29 than any other industry, with the creative industries accounting for the largest number of employees at 14%.)
Examples of existing creator economy darlings include Patreon (valued at over $1bn this quarter; enabling individual creators to collect money directly from fans), Shopify (quadrupled in size to £133bn during COVID-19, Now the 87th largest company in the world) and Etsy (one of the best performing stocks in the S&P 500 in 2020). On the other hand, a16z led the Stir Series A round of financing last month (valued at $100 million, creator business management tools).
If community is the equivalent of a creator economy, how is its value defined, and for whom? As an inspiration, top earning writer on Substack earns $500,000 a year, streamer Ninja earns over $500,000 a month on Twitch, 8-year-old Ryan makes $26 million a year reviewing toys on Youtube, Kylie Jenner Turned her Instagram fan base into a cosmetics empire and became the youngest self-made billionaire in the world.
If considered comprehensively, the long-tail groups of small communities can be said to be more valuable, because niche communities tend to have more die-hard fans, resulting in higher participation rates, retention rates, and conversion rates. Until now, long-tail users have been underserved and ultimately underestimated due to a lack of infrastructure to support them and uncoordinated business models. Considering that about 30% of kids in the US and UK want to be Youtubers, and 70% of Americans say they want to own their own business, we may be able to capture more by aggregating and empowering smaller creators to invest in the hobby value.
For investors looking at this space, the creator economy for the creative class can be broken down into four categories: platforms, tools, monetization enablers, and creator-led businesses, and many companies will categorize the Components are combined.
The first category includes social and professional platforms that spawn new creators, democratize their engagement with audiences, and allow creators to showcase their talents more efficiently. These platforms have also enabled new forms of digital entertainment. Most successful social networks fulfill a utility-oriented need with a new type of tool, then allow platform-native stars to grow (users come for the tool, stay for the network, and if you help them make money, users will be locked into the platform).
The second category is the “shovels and picks” that empower microentrepreneurs, and the creative tools that improve the creative process itself. As the number of independent creators and micro-brands grows, companies that serve these micro-enterprises by lowering the barriers to entrepreneurship will appreciate in value. Here we’re talking about “personal enterprise”: These tools tend to start out as simple, easy-to-use consumer products that grow as a consumer passion becomes a business.
The third category refers to technology, which is used to help creators make money in new ways or through direct payments from fans. The corresponding channels include NFT, marketplaces, and novel payment solutions.
Finally, there are creator-led businesses themselves – a fraction of the most ambitious businesses creators have built utilizing the platforms and infrastructure discussed in categories 1-3. Creators who can build a highly engaged community have many ways to monetize these assets.
Towards a creative digital utopia?
The business case for the creator economy is hopefully becoming clear: money and power are shifting from the attention economy to the creator economy, from audiences to communities, and talent in the creative industries is being untied from big corporations.
To get a little more romantic, if we divert our attention once again (bye, attention economy!) and engage directly with the creators behind our favorite media and products (hello, creator economy!), we'll be back A world where manufacturers and consumers are more connected. Over the past century, our supply chains and value chains have become so complex that we have almost forgotten that there are creators behind the items and content we consume. The creator economy is a digitized and globalized version of the world we already know, and we are here to directly support and celebrate digital artisans.
*Disclosure: During a recent call with Mark Adams, Head of Innovation at Vice Media and former Chief Digital Officer at WME, he shamelessly stole the notion that audiences are a liability and communities are an asset.
About the original author:
Clara Lindh Bergendorff: Clara works at Firstminute Capital, a $240 million VC seed fund backed by 90 unicorn founders, focusing on consumer tech, commerce and media investments. She serves on numerous boards in Europe and the US, is a tech commentator and former journalist, and is an angel investor. Clara studied at Columbia University, Oxford University and New York University.
