The Creator Economy: Trends, Opportunities, and Business Models

Everything you need to know about the creator economy landscape, and the opportunities it has for you.

Photo by Ivan Samkov from Pexels

What defines the creator economy?

I have defined creator economy as having two key sides: (1) individuals who are able to monetize their fans and followers in exchange for their unique content, and (2) businesses building the tools and infrastructure to create or manage content. For individuals, creators often look like independent influencers, bloggers, videographers, and writers. For businesses building the creator economy backbone, this includes platforms that host content, software to manage content, and financial enablers.

Why should we care?

Creator economy will just be termed ‘economy’ given ubiquity. In the past few years, we’ve seen demographic and cultural shifts towards workers wanting to set their own hours, pay, and type of work. With new modes and definitions of work expanding, such as the gig economy, people are able to set their own schedules. However, people are shifting away from monotonous and repetitious workflow, turning to creative ways to make money on their own terms. Almost a decade ago, it was unrealistic for people to monetize creative hobbies or passions — until now. People are able to monetize their creative interests and follower relationships through new platforms.

Younger generations are flocking to the creator economy to monetize their passions and interests. In fact, surveys show that 29% of Gen Z kids want to become YouTubers! Eventually, everyone will eventually become a content creator in some way, shape, or form. The presence of social platforms will shift people to focus away from task-based work towards coaching, services, and art.

Creators with sizeable audiences are influencers of their generation. According to Morning Consult, 3/4 of Millennials & Gen Z follow influencers on social media, with over half of them trusting influencers to provide good advice about brands and products they promote. Social media has become a platform and driver for consumer decisions. Younger generations trust recommendations from people they follow, shaping their lens on culture and the world.

There will be additional opportunities to monetize oneself through new platforms starting up. It’s no doubt that businesses and investors are paying close attention. So far, in 2021, creator economy startups have raised $4B in funding to date. In the last month, older platforms like Pinterest have tried to grab a share of creators by introducing live stream shopping with popular influencers. Dropbox has attempted to introduce creative tools for companies to collaborate on sharing and editing video content. TikTok and Clubhouse have started to experiment with monetizing by launching their creator funds in the last year.

Who are creators?

The creator economy has an estimated global market size of ~$100B, and growing, as more people shift from part-time to full-time creators.

There are ~3M creators considered to be making content full-time across major platforms. Generally speaking, full-time creators can be gauged by the number of subscribers and annual income. According to Neoreach, about 43% of creators make over $50k/year from pure content. The majority of creators earn revenue from brand collaborations and ad revenue, with YouTube making up the largest share of revenue.

Outside of full-time creators, another 47M people are amateurs or hobbyists who have the potential to move to a full-time creator role. This is important as younger generations increasingly want to monetize their passions and interests, birthing the next-gen of independent creators and solopreneurs. These burgeoning artists, mid-tail creators, and solopreneurs focus on growing their social presence across platforms and directly monetizing from followers.

Despite the growing number of amateur creators growing to become full-time creators, there is a power curve of top creators that rake in the majority of earnings and payouts. Let’s take Addison Rae as an example. Addison Rae is a popular Gen Z influencer who started on Hype House who is now considered one of the top-earning influencers. In 2020, she was the highest-earning TikToker, with an estimated $5M in earnings. that year. She currently has 86M fans on TikTok and 40M followers on Instagram. According to Rockwater, 2/3 of her earnings come from sponsorships and collaborations. Brands she’s collaborated with include Iamkoko and Fanjoy for her own merch, American Eagle as a brand ambassador, and collaborations with fashion brands like SKIMS and FashionNova. She also recently launched new ventures into music and podcasting. Addison is grouped into elite creators who make over $1M/year in earnings and make up the bulk of value in the creator economy.

Creator economy landscape

I’ve broken down the following main categories within the creator economy:

1. Social Media & Networking — Content discovery platforms with high usage for creators to grow their presence.

• Social Media: Clubhouse, TikTok, Discord, Instagram, YouTube
• Social Gaming: Twitch, Discord, Shotcall
• Social Network: Lex, Snap

2. Exclusive Creator <> Fan Content — Platforms for creators to post exclusive content for fans to access, providing direct control and monetization.

• Fan Memberships: Patreon, Onlyfans, Substack
• 1:1 Mentorship: Mentorcam, Metafy, Cameo

3. Engaged Learning — Accessible, online learning featuring a broader range of instructors and more engaging learning content and delivery.

• Cohort Based: Maven, Circle
• Interest-Based: Skillshare, Masterclass
• Educational / Higher Ed: Outlier

4. Content Editors — Software to better generate and edit content. AI-layered tools are creating faster and more efficient workflows across a variety of consumer and B2B use cases.

• Visual: Kapwing, Canva, Facet
• Video: Descript, Biteable, Milk Video
• Text: Copy AI
• Sites: Webflow

4. Financial Tools — Business tools for creators to split revenue, send payments, and generate financial insights. For banking, this newer category includes tailored credit and lending for creators.

• Payments: Stir
• Banking: Karat, Oxygen

5. Shopify for Creators — Startups that allow creators to easily launch new businesses such as merchandise, product lines, courses, and centralize multiple offerings.

• Merch: Pietra, Merch, Cala
• CRM: Beacons, Stan, Pico
• Events: Moment, Playground, Welcome
• Podcast: Redcircle, Chartable

6. eCommerce & Marketplaces — New categories for consumers to shop and buy/sell unique assets.

• Livestreaming: Popshop, Supergreat
• Collectibles: Whatnot, Sorare
• NFT/Art: OpenSea, Rarible, SuperRare

6. Infrastructure — Enablers for next-gen of web3 and frictionless e-commerce.

• Crypto: Bitski, Venly
• e-commerce: Shipbob, Fabric, Postscript, Bolt
• Courses: Teachable, Kajabi, Podia

7. Other / New Asset Classes — Nascent category of startups democratizing access to traditional industries through crowdfunding.

• Social Investing: Trading TV
• Music: Royal, Indify
• Sports: Topshot

Creator trends

Multi-platform presence calls for greater collaboration and integration

• Most creators are on multiple platforms to create a following, though the majority cite Instagram as the main channel. Creators will continue to diversify their revenue streams. While YouTube still comprises the majority of dollars monetized, the percentage is slowly changing due to an explosion of new platforms that are just beginning to experiment with monetization (i.e. TikTok, Clubhouse, Substack). Beyond these popular social media platforms, new opportunities for creators to monetize themselves in select niche verticals such as 1x1 coaching for gaming (Metafy) or monetizing writing through crypto (Mirror). In general, knowledge sharing, monetization through crypto, and creator content tools appear to be growing rapidly.

Community building is essential

• Creators need true engagement and followings to monetize themselves. As kk.org wrote in one piece called “1,000 True Fans”, it’s less about the number of views/follows and more about a direct connection. Creators are able to make a livable salary if they have a few true followers who will consistently buy what the creator produces.

Creators need tools to manage their engagement and business

• Creators need tools to gather a holistic view of their revenue streams and analytics to grow their businesses. Creators are now micro-SMBs with diverse revenue streams, earning money from their fans through many channels: social media ad revenue, brand sponsorships, brand collaborations, merchandise, knowledge courses, podcasts, books/webinars, etc. As a result, it’s harder to manage, track, and grow their businesses without the right content management, financial management, data-driven, and fan engagement tools.

Tools rely on creators with already existing followings

• Creator tools, such as courses, merchandise, or content management platforms, help creators further monetize their followers rather than gain new followers. Creators rely on larger, traditional social platforms to acquire fans. Creator tools ultimately focus on mid-tail creators who already have a small following, and are typically not represented by managers. Creators who are represented by managers typically make a lion’s share of earnings from brand collaborations and sponsorships.

Market Opportunities

New Creator Platforms

• New Creator Platforms — New platforms to post and engage with content will continue forming. In particular, NFTs are creating an entirely new segment of creation and digital ownership. Digital goods that previously have been hard to monetize have become owned through NFTs — digital art (Open Sea), music royalties (Royal), research papers, tweets (Valuables by Cent), and even snippets of music videos or sports moments (Top Shot).
• New Modes of Engaged Learning — A growing segment of creators are leveraging existing platforms to monetize knowledge sharing through coaching, events, or courses. Media consumption has created more engaging channels for online learning. Examples include creators or experts building their own courses (Skillshare, Maven) — varying by category or professionalism. In the B2B space, companies will invest in education (Outlier), employee learning/training systems, virtual events/conferences (Hopin), and trade schools.

Additional Tools & Infrastructure

• Shopify for Creators — There is a greater opportunity in e-commerce for creators to launch their own direct products or services without necessarily needing brand collaboration (led by top-tier creators). Bridging the gap between brands and creators, newer startups like Merch and Pietra allow creators to create their own product lines ‘out of the box’ by directly collaborating with established suppliers.
• Tailored Financial Management — Creators lack financial infrastructure for payments, business management, and banking. The majority of creators turn to freelancer-oriented accounting and invoice software providers like Freshbooks or Honeybook. Other direct p2p apps like Venmo, Cash App, Paypal are easy to use for payments, but not deeply integrated into the creator ecosystem or compliant, which Stir aims to address. In banking, entrants like Karat provide tailored credit lines and savings for digital creators. There is an opportunity for creators to have greater visibility into their revenue streams, gain access to credit, make collaborative payouts, and automate tax and compliance needs.
• AI-Enabled Software for Content Generation — Traditional modes of creating and editing content — whether it’s text, video, live streams, photos, audio, will be 10x faster through AI-driven recommendations. On the B2B side, exciting examples of application include automated copywriting for marketing teams (Copy.AI), video and audio editing/transcription for research teams (Descript, Dovetail), personalized videos for sales teams (Tavus), smart photo editing for design teams (Facet), and even slide templates for business teams (Beautiful.AI, Matik).

How new startups differentiate

Management teams with prior content experience

• Teams that understand what creators do, whether they have personally lived the creator lifestyle or worked for relevant media platforms, can more effectively market to creators. Examples include Jack Conte who was a Musician co-founding Patreon, creating the platform to crowdfund his music video. Other founders within Another example is Stir’s management team comes from YikYak, Facebook, and Brex. Karat Financial’s team combines experience building at Instagram and YouTube. These founders care deeply about helping creators, closely partnering with them on marketing and product feedback.

Viral creator acquisition

• Creators are quite sticky in sharing referrals for tools. Creators that love products share with each other through word of mouth, or advertise to their follower base, creating a positive flywheel to lower acquisition costs. Creative ways in which teams have tried to cost-effectively market their product is through their own social media content, viral expertise, and direct collaboration with other creators. Other methods, such as in the payments space, include touting ‘creator friendly’ terms through zero transaction fees to attract users away from large competitors.

Creator earnings as a core metric

• Measuring how creator earnings grow over time is a positive indicator that the platform is providing valuable services to the creator. The more that a creator is able to earn on the platform early on, the greater the creator retention, and future revenue through add-on analytics, collaborations, and services. Higher earning and growing creators tend to retain better on platforms.

Content discovery is essential

• Any creator tool that includes creator/user content, such as Kapwing, Pinterest, or Canva, needs to create network effects through delightful content discovery & sharing. Platforms that successfully recommend great content generate higher user retention and creator engagement. Studies have shown that fans are willing to pay more per additional creator — increasing their wallet, rather than divvying it up — which is why creator discovery is actually beneficial for both parties rather than cannibalizing creators.

Current monetization models

Creators will flock towards platforms with either mass reach (to gain an audience) or a fair revenue share (to monetize).

• Ad-driven models work for major distribution platforms with mass consumption. YouTube has introduced a variety of business models through its Partner Program. YouTubers can earn through advertisements, subscriptions, donations, live streams, and YouTube Premium. YouTube takes a hefty 30% of subscriptions. YouTube began providing more transparency in its payout, introducing a new metric called revenue per mile (RPM). RPM measures a creator’s total revenue (both from ads and other monetization areas) after YouTube takes the cut, per 1000 views. Its ad-driven revenue calls for creators to skew towards aiming to produce videos with > 1M views. Ad-driven monetization tends to be less transparent and more convoluted.
• Brand collaborations provide creators with a greater payout on major platforms. TikTok and Instagram allow creators to post content in collaboration with brands. Creators will post photos or ads on Instagram with ‘in partnership’ tags. On TikTok, branded content must be tagged with #ad. Brand deals are highly dependent on the creator and payment structure (i.e. per view or engagement per post). TikTok is the latest contender in reaching mass scale and recently monetizing creators. TikTok launched its Creator Fund, a $200M initiative estimated will grow to $1B in the next three years, to payout eligible creators. These creators need over 100K video views in the last 30 days and would reive funds based on a variety of factors from their videos, which TikTok has not fully detailed.
• Tipping is a newer feature that goes directly to creators’ pockets but constitutes lower volume. For newer platforms like Clubhouse, they recently introduced a tipping feature without taking a cut, but have yet to fully monetize the platform. TikTok also recently introduced tips through gifts, with 66 coins per dollar for creators to cash out, but the frequency of tipping is likely low and creators need to be a part of their partnership program.
• Creator subscriptions ride off creator/fan relationships but have a smaller reach. Patreon and Only Fans are more creator-friendly by taking a lower cut of subscriptions (~20%), allowing creators to set their membership rates from fans. However, the majority of membership rates and donations range between $1-$20 for Patreon and around $4-$20 for OnlyFans. Both platforms are limited in content discovery; fans join after being encouraged by creators or manually search for who to follow. As a result, creators mainly turn fans to Patreon as recurring revenue, rather than to grow their following.

Thanks for reading!

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