The creator economy is changing, but can it thrive? | FT Tech
The number of online creators active today is staggering, and the creator economy is valued at some $250bn by Goldman Sachs. But, as the FT’s Cristina Criddle explains, one key problem is that traffic and wealth tends to be concentrated among the very few. The industry has received mixed financial signals recently, so who’s actually making money and what does the future hold?
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I knew that I was going to have a career on Instagram.
It was very natural for me to pick up the camera and just share my world with others.
Now it's a real job. And the world appreciates this job. And it's like every kid's dream come true.
At first, social media was a tool for interacting with friends. But now it includes a vast ecology of people making money from posts or advertising.
All my friends thought I'd lost my mind, like at every moment taking pictures of myself. But once the cheques started coming in, and the brands and L'Oreal were knocking at the door, everyone started understanding it.
While definitions vary, the number of global creators active today is staggering. And Goldman Sachs values the online creator economy at some $250bn.
The creator economy 15, 20 years ago was very nascent. It was a very kind of web focused, blogs, creators reaching out to their fans directly. The economy as a whole was very, very small. There were 50 to 100 million creators kind of doing this on a part-time basis or full-time basis.
Creators and platforms have proliferated as technology has evolved to enable quicker and easier content creation.
It used to be really hard to produce content. You needed video. You needed audio. You needed to be able to write the content. These days a lot of that has gotten very consolidated. And I would say the phone is a big reason for that.
All right, we're getting Cherry's Food House. It is a Korean-Chinese fusion cuisine.
Anderson Nguyen started his own creative journey during the pandemic lockdown in 2021 but only recently began taking things more seriously.
I stopped working my full-time job a month ago and decided to pursue this full time. I like to go around the city and try weird foods that no one really wants to try and just tell people how the experience is.
Hey, guys. Welcome back to Lingua Marina. Hey, guys. Welcome to Silicon Valley Girl. I made my first video back in 2014. I was trying to apply to American universities. And I decided to document my journey because I felt really lonely in the process. So since 2014 everything has grown by a lot.
I have three YouTube channels now, Silicon Valley Girl, Lingua Marina, and my vlogging channel. I used to film everything myself. These days I have videographers who help me. From time to time depending on the type of content that I'm creating, I have several editors to help me with editing. I have someone who helps me post on platforms. I have a manager who is responsible for working with brands.
But the creator economy is facing mixed financial signals. After a flat 2022, YouTube ad revenues are up around 5 per cent to the third quarter of 2023. Creators receive just over half of the ad revenue generated on their channels. On the other hand, investment in the creator economy has dropped sharply. Total funding for US start-ups fell 50 per cent last year compared to 2021.
Revenue and funding going into these platforms has decreased quite dramatically.
One key problem for the creator economy is that creator traffic and wealth tends to be concentrated among the very few, such as YouTube sensation Mr Beast, who reportedly earned $82mn from his social media fame last year. Far more common are creators like Anderson.
At the moment, it's not enough to make a living. But I've made enough from my previous job to help cushion me for a little bit.
Only 4 per cent of creators are defined as professionals earning at least $100,000 a year.
It's really hard to become a creator. And I don't think they quite understand as they go into this how hard is it going to be.
Oh, the whole thing is very time consuming generally. What I'm doing today is something that I've done a lot. So I can do it quite quickly. But to come up with new concepts and to be creative, it can be a lot of work.
But because only very few creators generate significant traffic, which itself creates income for their platform, VC-funded platforms find it really difficult to scale up effectively.
This age of the creator economy is really interesting. So it kind of peaked a couple of years ago during Covid. And I feel we're at the bottom of the hype cycle now.
Yet while the creator economy might be moving away from past explosive growth, there is evidence consumers remain willing to pay for quality content.
We did research about the impact of a cost-of-living crisis on willingness to spend. And we found that spending on social media content and creative content was one of the few areas we've actually seen a growth in people being willing to pay. Of people who follow social media personalities, 29 per cent have actually paid, whether by subscriptions or tipping feature, in the last three months. It's about not just wanting that early content or wanting that exclusive content. It's also wanting to support that person.
And creators themselves might be moving more towards generating their own direct income streams.
So the new type of opportunities which we think will emerge are not just the types of platforms which will be coming out but also investing in the creators themselves. They're going to have their own products. They're going to have their own shops. If you can have that particular engagement with your fans, they're going to want to buy from you in the future.
The world of investment is getting more democratised. Now anybody who has $5 can invest in the public stock market, no fees. They make it super simple. But you haven't seen that yet in the private markets. Creators will be able to bring their audience into that. So maybe they coinvest together with their audience into a company. Or maybe their audience invests in the creator's business.
So as the creativity economy evolves, what's going to sell?
I think creator communities and platforms will evolve in the future by following just people's attention span. People have a shorter attention span now than they did perhaps 20 years ago. Will people want to read? Or maybe they want to read only short form? I would say podcasts, they tend to be an hour, maybe half hour. Well, that's kind of long. Maybe there's a world where there's a platform of just quick soundbites that are seconds or a minute.
And then, of course, there's the transformative potential of AI.
AI is booming, right? And I think it's going to have a massive impact on the creator economy in a positive way.
AI is a game changer. The first time we used it was to create a script. I had to change some things. But it was right there in front of me in 60 seconds or less. Hey, guys. If I create an AI version of myself, if AI create scripts, then my job is to decide which content goes out there and which topic my AI prototype is talking about. Good creators are becoming producers.
The great thing about AI is it saves creators so much time. They can edit their TikToks or YouTube videos in 5 to 10 minutes versus days today.
The days of wild growth might be over or at least on hold. But that's not going to stop the millions of creators out there.
Sometimes it's hard to switch off. Like I've just been on holiday, and I did three brand jobs on holiday.
If creating doesn't work out, I always have the option to go back to software engineering. That's what I did before. That door is definitely not closed. At the end of the day I will still be making videos.
And opportunities should remain for those able to create lucrative, quality content.
The investment in the creator economy is still really interesting. There's still plenty of opportunity.
There is enough demand, enough supply. And now is the time when the focus should shift from quantity to quality.