The Creator Economy Paradox

There are two wildly opposing truths in the creator economy that serve to complicate new financings, company operations and strategic planning.

The first truth is that basically no at-scale creator economy company is growing meaningfully over the past 12 months. It is true that there are a number of smaller creator economy companies accelerating materially month over month; however, they are broadly sub-scale and there is good evidence that they are mostly capturing niches from larger platforms. One example below is a quick trendline analysis between Substack and Beehiiv. You will see they are inversely correlated and that as Beehiiv received a new financing and material PR in Q2, it mostly served to capture share from Substack. Net, there is considerable data to suggest that at present, creator economy companies are largely playing a zero sum game.

The second truth is that digital penetration across celebrities, talent, writers and influencers at large has compounded, consistently, over the past 25 years. Celebrities, who once eschewed the internet as playground for geeks and dorks, have since adopted social media, invested in technology companies, and even launched their own digital media brands. The largest Hollywood agencies now feature venture arms, agents focused on Youtubers and even internal startup incubation studios. The tailwinds here are clear: digital media consumption is expected to continue to grow, fame will increasingly trend digitally native, and individuals will continue to build and monetize their personal digital brands.

So the paradox is effectively a duration mismatch in near term growth expectations versus long term market addressability. Meaning that every data point we have, suggests that it is inevitable that the market for direct to fan/follower engagement will be dramatically larger a decade from now than it is today. Conversely, the data points we have today suggest that fans are over-saturated with content, courses, merchandise, subscriptions, etc, and have minimal willingness to pay for more of the same. Every case is unique, but most companies with this duration mismatch should accept they now exist in a lower growth environment, investigate and experiment with areas that may deliver new value surpluses for fans, and generally reduce cost structures until they get it right.

I first wrote about this conundrum back in February where I argued that the creator economy was a misnomer, incorrectly over-weighting the creator above the fan; and that the “fan economy” would have been a more accurate designation of the value surplus experienced by fans as talent built relationships more directly, openly, and authentically in the digital sphere. 

The creator economy has slowed because the value surplus fans began experienced over the past 5-10 years has begun disappearing. Why has it disappeared? First, as with all consumer experiences, expectations change and new habits are formed. Products that produced re-imaginative experiences in 2018 are now considered table stakes. For example, Patreon helped pioneer direct to fan experience and content packages, which provided an unprecedented level of personalization, interaction, and behind the scenes content. It also provided new vectors for writers, magicians, teachers, podcasters, even street performers to connect and monetize. That level of content and interaction was considered extremely valuable in that moment and fans would happily pay five, 10 or even 100 dollars for access. While the content may be the same today, the perception of its value has degraded. And, unfortunately for creators, the perceived value of direct interactions with one’s favorite talent tends to wane as a fan accrues more of them.

Even OnlyFans, whose growth continued to outpace peers in 2022, has seen traffic level off in 2023 and is largely flat year to date (I do not know their revenue numbers which could well be up materially.) It is not surprising that OnlyFans has outperformed its peer cohort; any affiliate marketer will confirm that internet monetization is built on the three P’s: porn, poker and pharma. But what is unique about OnlyFans is the extent to which its creators innovated to improve the customer experience for their followers, note for example this thread: I hired interns to chat with thirsty dudes on OnlyFans 24/7. I do not personally endorse this approach, I believe it is highly unethical, but it did serve to generate the perfect customer experience: always-on access to the person you want to be speaking with. 

We have invested in nearly a dozen companies across our fund and angel portfolios that broadly touch the creator economy. While all have different levels of growth and unique strengths and challenges, one commonality is a continued enthusiasm across all categories of talent – from musicians to TikTokers to magicians to writers to craftspeople – to actively engage with, give to, and, of course, earn money from, their followers. The unknowns today are (1) what will be the future innovations that compel fans to open their wallets due to insatiable new value/access and (2) what will enable creators – who are now far busier than they were before the creator economy ballooned – to become more productive and offer these new experiences while maintaining their existing obligations.

It is likely that AI will play a role in these evolutions, enabling greater personalization for fans and greater productivity for creators. We are seeing early indications of this with growing momentum in iterative, composable experiences for fans to effectively choose their own adventure of content with their favorite creators. But it is just as likely that the next wave of innovation will catch us by surprise. Entrepreneurs tried for a decade during the early 2010s to build digital products that would better connect talent and fans – but they didn’t gain momentum until Youtube and Twitch founded a new generation of followers who demanded greater connectively with streamers. If you have hypotheses of where the market will evolve next or building for the next decade, please reach out to me ezra@startingline.vc.