The Creator Economy - Understanding its Meteoric Rise and Predictions for the Future
We're not just witnessing a shift in business models; we're participating in the democratization of creativity, where technology and talent converge to redefine the future of work
The Rise of the Creator Economy
According to a 2019 study of 1000 American children aged 8-12, a whopping 29% wanted to become a Youtuber or Vlogger - the highest of any job. Kids from the UK gave a similar response with 30% of them wanting to be a Youtuber or Vlogger. Today in 2024, these figures are likely much higher.
Goldman Sachs expects the current 50m global creators to grow at a 10-20% annual growth rate over the next 5 years. According to the same report, the total addressable market of the creator economy could roughly double in size over the next five years to $480 billion by 2027 from $250 billion today (as of Apr-2023).
Unravelling the Reasons Behind the Content Boom
Rising Screen Times on Social Media Platforms, Particularly for Teenage Cohorts: according to a 2023 Gallup study of 1567 US adolescents, 51% of teenagers aged 13-19 spent on average 4.8 hours per day online, of which the majority was spent on social media platforms.
Rise of Influencers Impacting Consumer Purchase Decisions: A 2022 study by the Pew Research Center suggests that 30% of US social media users have purchased something as a result of an influencer or content creator. This figure peaks at 50% for women aged 18-29.
A Shift in Consumer Shopping Preferences from Physical to Digital: According to the same study as (2), approximately 50% of US adults aged 30-49 make purchases online using their smartphones weekly at minimum, while 38% of those aged 18-29 do the same.
Lucrative Earnings Opportunity for Creators: As a result of the aforementioned factors, to achieve engagement and reach, marketers are increasing their spend on influencers and content creators, which in turn is increasing earnings for content creators. In 2023, US businesses spent $2bn on influencer marketing for Instagram alone while TikTok attracted $1bn of influencer marketing spend. Note that these figures exclude non-cash payments and paid media.
Time and Attention are the Twin Beacons Guiding Capital and Innovation
To recap, recent trends show a significant shift in consumer behavior: people are increasingly spending more time online, particularly on social media platforms, while outdoor activities and other traditional pastimes are receiving less attention. This shift extends to purchasing habits as well, with e-commerce on the rise.
Furthermore, influencers, along with prevailing trends on platforms like TikTok and Instagram, now play a pivotal role in shaping public opinion. They significantly influence not only which songs and genres gain popularity but also consumer preferences in goods and services.
In response to this landscape, companies are adapting to stay relevant. To effectively reach customers and influence their purchasing decisions, businesses must align with this paradigm shift. This means embracing digital channels and influencer partnerships as key components of their marketing strategies.
Given these developments, significant growth, innovation, and capital flows are anticipated, supporting both the demand and supply sides of this evolving market. On the demand side, brands are increasingly seeking to tap into the power of influencers to market their products. On the supply side, influencers are finding opportunities to monetize their content while providing a valuable marketing channel for brands. This symbiotic relationship is expected to drive further expansion in the creator economy.
Predictions for the Creator Economy Going Forward:
The Rise of the Influencer Industrial Revolution: I predict that the influencer industry will undergo a dramatic shift towards commercialization and corporatization. Influencers who were once independent creators will increasingly be acquired and managed by larger parent companies, accelerators and even niche private equity firms.
Influencers will be bought, sold, and traded like assets and IP between agencies, brands, and investors (both entirely and fractionally) rather than operating as solo creators. The influencer industry will adopt a highly organized, profit-driven model reminiscent of the music or sports industry.
This represents the rise of the influencer industrial revolution where influencers will become standardized corporate entities packaged and monetized for maximum commercial benefit. Authenticity and grassroots appeal may be sacrificed as influencers transform into commercialized "branded" assets.
Similar to the Firebird partnership with the D'Amelio family, more corporations and holding companies are likely to emerge to scale and monetize rising influencer talent and their intellectual property.
The free market will respond with new structured deals to capitalize on influencers' success, including royalty-based compensation models and innovative influencer-brand collaborations.
New Tooling Will Democratize Creators' Ability to Create, Engage and Monetize Their Followers:
Content Creation — Creating high-quality content is difficult and time-consuming for individual content creators and small teams. It requires proficiency across a wide range of creative tools and software that are often expensive and have steep learning curves. Many creators simply don't have the resources or skills to utilize these tools effectively. The advent of next generation AI-enabled tools is set to supercharge creators by automating and enhancing many difficult aspects of the content creation process.
For example, tools like Descript leverage powerful AI models to edit audio and automatically dub recordings into other languages. This saves creators enormous amounts of time and money on tasks like subtitling videos or localizing content. Services like Runway and Pictory provide creators with simple interfaces to create bespoke images and videos using text as input. AI content creation tool Copysmith, provides tailored marketing-related content like landing pages, blog posts, product descriptions, and social media posts. Meanwhile, Predis.ai specializes in the creation and generation of carousel and video content for social media posts using text as input.
These new AI-powered tools will unlock creativity and productivity for individual creators and small teams like never before. They provide access to capabilities that previously required large budgets and entire teams of specialized professionals.
Engagement — Today, for creators to construct an effective engagement strategy they must constantly monitor and respond to their audience (comments, forums, emails etc.) across various channels. The next generation of tools will supercharge engagement capabilities.
One such tool, Audiense, offers a suite of digital consumer intelligence solutions, effectively segmenting and labelling audiences to provide a comprehensive understanding of who you're engaging with. This audience-centric insight could support creators in tailoring their engagement strategies.
In the realm of advertising, AdCreative.ai harnesses AI to generate ad creatives that stand out. The utilization of AI in advert creation streamlines and automates the design process.
Other tools like Persado provide AI-generated messaging that resonates more effectively with each audience segment. This helps creators tailor content and messaging. Laylo helps creators blast notifications for their latest videos, drops, and merch to their fans.
The future of engagement will be automated and data driven freeing up valuable time for creators to focus on their core specialty — being a content creator.
Monetize — Properly monetizing an audience requires constant evaluation of different revenue streams like ads, sponsorships, subscriptions, and merchandise. Small creators often lack the business resources, sales skills, and backend infrastructure to effectively monetize their audience.
Platforms like Patreon and Buy Me a Coffee provide simple subscription services, but new tools like Mighty Networks and Gumroad enable creators to easily sell memberships, courses, and merchandise powered by smart recommendation engines.
Blockchain innovation also unlocks entirely new monetization models. Creators can leverage NFTs as exclusive memberships and loyalty programs or to token-gate premium offerings, earning revenues from initial sales and ongoing secondary royalties. Web3 services like Kazm are tailored to enable creators to create blockchain powered loyalty programs.
The industrial revolution in content creation will be driven by creators' enhanced abilities to monetize, manage, and optimize various revenue streams. A positive feedback loop will emerge, where innovative monetization schemes and the pursuit of profit spur the emergence of new content creators. This, in turn, leads to the creation of increasingly niche content, attracting the marketing investments of businesses eager to capitalize.
Frictionless Social Media Commerce - The Next Big Thing in Online Shopping
Imagine a world where your credit cards, bank accounts, and shipping addresses are seamlessly integrated with your social media accounts. Picture yourself scrolling through your feed and spotting an influencer wearing a pair of shoes that catches your eye. With a simple click on the tagged link, a marketplace opens, offering you the option to either explore similar products or make a direct purchase of the featured item. Within just a few days, the shoes arrive at your doorstep. Moreover, leveraging AR/VR technology, consumers can now try out products such as clothing or furniture right from the comfort of their homes. This vision is not far from becoming a reality. As innovation consistently aligns with where consumers spend their time and attention, we are on the cusp of witnessing substantial advancements in social media commerce.
China serves as a case study demonstrating how social platforms already offer in-app shops and marketplaces, enable direct purchases from video creators, facilitate livestream shopping, and personalize experiences using first-party data.
Rise and Proliferation of AI-Generated Influencers:
The concept of an AI influencer is where an AI entity, not a real human, becomes the face of content and interactions. The human behind the AI focuses on the creative ideation and strategy, while the AI executes and personalizes the interactions. This democratizes the playing field in content creation. Physical appearance, language proficiency, age, gender, or ethnicity no longer limit an influencer's appeal. From the perspective of a business, AI influencers are most cost effective, predictable and scalable.
For instance, Lil Miquela, an AI-generated influencer has amassed 2.6m followers on Instagram (as of Jan-2024) and has even striked brand deals with Calvin Klein alongside Bella Hadid. As compute costs fall and technology for AI generation improves, I predict that we will see many more AI influencers with follower counts in the millions.
It's clear we're in the midst of a seismic shift in consumer commerce and entertainment. However, to fully usher in an era of creative democracy, there's a crucial need for new technology and software. This gap presents a golden opportunity for innovators and disruptors. If you or anyone you know are building solutions to enable this next frontier of the creator economy, send me a DM and lets connect.