The creator economy, for those not familiar with the term, refers to businesses built by independent creators that range from vloggers and photographers to social media influencers to writers and more to monetize themselves, their skills, or their creations. The term also encompasses the companies serving these creators, from content creation tools to analytics platforms.
As we head into the holiday and New Year’s resolution-making season, some people will be reconsidering their work life. The most recent data on voluntary quits from the Bureau of Labor Statistics found that the number of people quitting their jobs dropped slightly from October’s record high of 4.4 million, which represented 2.7% of the civilian labor force, to sit at the third-highest level on record at 4.2 million. The past three months have seen the highest level of voluntary quits in the nation’s history. This has been dubbed the “Great Resignation” by Anthony Klotz of Texas A&M University and refers to the cultural shift in which workers are reassessing their lives and working conditions.
Those in lower-paying jobs are no longer willing to deal with the low pay and/or poor working conditions. For example, in October, the local carpenters’ union in Seattle saw a weeks-long strike over pay and conditions. White-collar workers are no longer willing to put in the long hours and deal with the high levels of stress, and some are willing to give up income in return for a simpler and more joyful life. So far, this is not a global phenomenon, and the data only supports this occurring in the U.S. and in the UK.
This shift comes at a time when we are seeing wages rising at an exceptionally high rate relative to the past few decades for the 80% of the population categorized as “Production and Nonsupervisory Employees,” and unit labor costs for all employed persons grew at the fastest pace in Q3 since the early 1980s at 6.3%. We are also seeing the percent of the workforce in small companies, defined as 1-49 employees, rising at a much faster pace than what we saw after the Great Financial Crisis and in the aftermath of most recessions.
Part of what may be helping to drive this is the growing Creator Economy and how the tools designed for it are reducing the risks, costs, and time required to start one’s own business while also making it possible to rapidly have a worldwide presence. The attraction for those feeling underpaid and/or underappreciated is significant. For example:
- Substack writers take home 90% of subscription revenue
- Twitch partners collect half of their subscription fees
- Patreon creators get paid between 88% to 95% of their subscriptions
For those who are nervous about starting at ground zero, channels on YouTube, which is owned by Alphabet (GOOG), with existing subscribers can be purchased for from less than a hundred dollars to hundreds of thousands of dollars and more, depending on how much revenue they are already generating. It is also quite easy to purchase social media “followers” that are fairly adept at evading detection by the social media giants so as to game their algorithms and get posts displayed to more users, facilitating more rapid organic follower growth. A substantial follower base for many of these systems means posts will be exposed to more new eyeballs.
You might reasonably think that this is all about a social media presence, but creators are also focusing on building out their own webpages. This shift is feeding companies that help build and manage such sites, like Wix.com (WIX), Squarespace (SQSP), and the privately held Universe, which just raised another $30 million in a Series B round.
Feeling the pressure, social media giants are looking to keep influencers on board. For example, Meta Platforms’ (FB) Instagram is partnering with several fashion and beauty creators to launch their own Shops on their profiles, giving influencers the ability to earn commission from product recommendations. Others are looking to monetize their offerings. For example, creators have been for some time selling access to their private Discord communities as part of paid subscriptions on Patreon, YouTube, and Twitch. TikTok is now offering integration with the music sync licensing platform Harvest Media so that artists can provide music and monitor the usage of their tracks on the video app.
But many creators are looking to move beyond videos and sponsored posts by building businesses that are not dependent on daily posts. Few get to this level, but those that do present further opportunities for facilitators. For example, the YouTuber Zik Asiegbu runs the channel Zias and has 4.6 million followers. In partnership with the startup Popchew, he will be launching a chain of 60 delivery-only kitchens called Wing SZN, with the first deliveries planned for New York, Los Angeles, and Miami. Popchew and Asiebgu are splitting the profits 50/50, with Popchew handling most of the logistics of launching a chain of kitchens. Meals can be ordered through Popchew’s web app, the restaurant brand’s website, or the usual delivery suspects such as DoorDash (DASH) or UberEats – launched by Uber (UBER). As for just how long this took, Asiegbu, who is 29, posted his first YouTube video just five years ago, and his operating costs are well below anything that would be required in more traditional entrepreneurial endeavors.
The creator world isn’t all about food, makeup, or lifestyles. Rumble, which hosts videos from conservative influencers, recently announced that it intends to go public through a special purpose acquisition merger, another SPAC deal, with CF Acquisition Corp VI (CFVI) that will value it at $2.1 billion.
This new generation of emerging creators grew up with social media, and not only are they not interested in winning over the traditional gatekeepers of media – Hollywood studios or publication powerhouses – but rather are looking for a way to make a living, or just make some extra on the side, doing whatever they are most passionate about. Whether that is Kudzi Chikumbu’s review of luxury candles, Doug the Pug from Nashville, or @DumpedWifesRevenge — whatever your thing is, there’s a place for you and a following that can be created.
While young, private companies like Mighty Networks are looking to help creators build their own communities, even heavy hitters like Microsoft’s (MSFT) LinkedIn are looking for ways to woo creators and attract talent to their platform. Back in late November, LinkedIn announced the kick-off of its first-class for its Creator Accelerator program. The program is a 10-week incubator that will bring 100 U.S.-based creators together for coaching, networking, and opportunities to be featured on advertising for LinkedIn. Each attendee will also receive a $15,000 grant and include creators such as TikTok’s Natalie Rose (2.5 million TikTok followers) or Marcus “Esports” Howard.
Even the mega-cap giant Amazon (AMZN) is looking to expand as a player in the creator economy through multiple channels. The most obvious is its gaming live-streaming service Twitch, which is a platform for broadcasting, observing, and playing video games while interacting in real-time with players, game creators, and audience members. As such, it is a social media platform as well as an entertainment venue. The company is also reportedly investing heavily in a new live audio feature that will be similar to Clubhouse, Twitter (TWTR) Spaces, and Spotify’s (SPOT) new live audio platform.
The other channel that it has had for years, but is seeing new growth in, is having popular creators create virtual storefronts where they can curate their favorite products and, in return, receive commissions on sales. But it isn’t just about the big names. For example, Cyndi Lundeberg started writing reviews on Amazon for fun, and in 2015 the company asked her to join an early version of its influencer program. While still being employed full-time in public relations, on the side, she now runs an Amazon storefront page called News, Booze, and Shoes and claims to generate $6,000 in commissions during a typical month, not a bad side gig! Amazon has also hosted live shopping streams on Amazon live with names like Dua Lipa and with consumer goods companies such as The Honest Company (HNST).
As is often the case, much of the innovation is occurring in the startup world. According to The Information’s Creator Economy Database, startups in this database will have likely raised $5 billion by the end of this year. Startups that are focused on creator services such as Impact and Norby are taking the largest portion of funding, about one-third of the total, closely followed by creator platforms that connect fans with creators on apps and websites such as WordPress owner Automattic. Eight of the startups in this database already have valuations of more than $1 billion, including the aforementioned Impact, the live-shopping app Whatnot, and digital asset marketplace (think NFTs) OpenSea. Unsurprisingly, nearly 10% of the companies in the database have crypto bent.
The bottom line is that we are at the start of an exponential age of transformation. Just as Apple’s iTunes store upended the music industry and the smartphone decimated the point-and-click camera, the creator economy is completely changing the way products and services are marketed and delivered. As we head into what is being called the Metaverse, or Internet 3.0, we will see this economy further evolve into new business models. Some will fail, and some will turn into something we cannot imagine how we ever lived without. There are and will increasingly be more opportunities for people to make a living doing what they love most, and investors will be able to capitalize on this shift.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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