We're Getting the Creator Economy Wrong.

The State of the Creator Economy and how Crypto can fix it

Introduction:

In the age of Web 2.0, creator economy platforms became the digital playgrounds where we connected, shared, and expressed ourselves. But behind the facade of viral videos and follower counts, there's a growing realization that these platforms are fundamentally broken for both creators and users. Creators are trapped in a relentless race to the bottom for attention, beholden to algorithms that prioritize sensational content over substantive work..

Meanwhile, users find themselves drowning in a sea of content, bombarded by ads, and struggling to find genuine connections amidst the noise. The promise of connectivity touted by incumbent social platforms has become a disillusioning reality.

The Power Law Problem:

Building on this theme of disillusionment, a tiny, concentrated fraction of creators holds a monopoly on audience attention in Web2, leaving the vast majority struggling for visibility. This phenomenon is reflected in the alarming statistic that roughly 20% of creators capture a staggering 80% of the income generated on platforms like TikTok, Patreon, and OnlyFans. 

Moreover, creators' monetization options are severely limited by platform extraction. Large creators often find their primary income derived not from platforms themselves, but from supplementary streams like sponsorships and speaking opportunities. As a creator platform scales, it often follows an S-curve growth model. Initially, a platform attracts creators and users by offering favorable terms and opportunities for growth. However, as it reaches a critical mass and becomes dominant in its market, it may gradually start to exploit creators and users. This exploitation can manifest in various ways, such as reducing creator payouts, implementing restrictive policies, or prioritizing profit over user experience. Ultimately, incumbent creator platforms today are at the top of the S-Curve: Neglecting creators and users to maximize revenue. 

Compounding these challenges is the fact that creators do not own or have access to the valuable data about their audience, as social media platforms retain control over this information. These platforms prioritize monetization through the sale of user data to advertisers rather than empowering creators with insights into their audience. This lack of access to audience data not only limits creators' ability to tailor their content effectively, but hinders their capacity to cultivate meaningful relationships with their followers and superfans. It underscores the conflict illustrated by the S-Curve above. Platforms prioritize their own revenue streams over the needs of creators, who are the ones that actually drive user engagement and content creation. 

Creators in the Web2 era often face limitations on how they engage with their audience, as their interactions are heavily influenced by the functionalities and constraints of the specific social media platform they choose. Features such as ‘like’, ‘comment’, and ‘subscribe’ are predefined methods of engagement that can limit the nature of interactions. While these tools may help creators connect with their audience, they can also restrict the depth and diversity of engagement. Creators may find themselves constrained by these standardized metrics, which prioritize quantity over quality and prevent more nuanced forms of communication.

The authenticity of digital content faces growing challenges in an era where AI makes it remarkably easy to remix, alter, or even maliciously co-opt digital content. These AI tools can mimic and manipulate visuals, audio, and text with alarming precision. This raises concerns about the spread of disinformation, deepfakes, and manipulated media, ascertaining the trustworthiness of digital content becomes a daunting task.

Web3 can fix it?

As these challenges continue to shape the landscape of Web2, many are looking to Web3 as the supposed savior of the creator economy, offering promising solutions and opportunities for a more equitable and creator-centric digital era.

The Web3 creator economy, echoing decentralization, paradoxically exhibits more earnings inequality than Web2. The traditional “PFPs” exemplify this disparity, with 10% of creators generating 90% of the earnings. For the unique 1/1 NFTs, just 5% control 95% of the earnings. This extreme concentration underscores the challenges faced by smaller and independent creators in Web3. 

Additionally, creator earnings are inversely correlated with macroeconomic conditions, particularly interest rates. Reinforcing the speculative and unequal nature that creators in Web3 face.

Web3 can fix it.

Web3 does have the potential to solve Web2 challenges and even its current hurdles.  Open social graphs, provided by a fully auditable ledger, offer a chance to broaden the range of interactions between creators and their audience, giving collector information to creators. Blockchains, central to Web3, unlock an unlimited array of potential interactions between groups. Composability opens new opportunities such as gamified tipping, programmatic rewards, auditable queryable data and portability of content and user graphs. This shift allows creators to directly monetize their audience while reducing reliance on intermediary platforms. Additionally, Web3 creates fundamental authenticity guarantees, as assets issued from a creator's wallet possess indisputable cryptographic authenticity, providing a level of trust and transparency that is unmatched in traditional digital spaces.

Web3 offers solutions to these challenges through the development of next-gen and rich platforms. Exemplified by Drip and others, these platforms have demonstrated market resilience by remaining uncorrelated with factors like NFT volumes and speculation. Drip, a direct-to-consumer application pioneering creator tooling and active collecting through compressed NFT technology, has dropped more than 55 million NFTs to 1.5 million wallets. Additionally, Access Protocol, a tokenized content subscriptions service, empowers creators to build intimate relationships with their fans. 

To harness the full potential of Web3 for creators, we need to encourage further experimentation. This experimentation can bridge the gap between the theoretical benefits of blockchain technology and the creation of high-quality products tailored for creators. Such products can empower creators to directly monetize their audience while reducing platform dependency. Additionally, Web3 can provide creators with tools and products that grant them access to valuable data about their audience, enabling more informed and effective engagement strategies that are beneficial and non-exploitative to users. In this way, Web3 can usher in a new era of innovation and equity within the creator economy.

The Power Law Issue:

In conclusion, while Web3 holds the potential to address some of the imbalances within the creator economy, it may not entirely eradicate the unequal, and potentially naturally occurring, dynamics of the power law. However, it can significantly contribute to making the ecosystem more sustainable for the long tail of creators. By fostering next-generation platforms, encouraging experimentation, and providing tools for direct audience monetization and access to audience data, Web3 can create an environment where smaller and emerging creators have a better chance to thrive and earn. Although it might not entirely eliminate the concentration of wealth among a select few creators, Web3 can help democratize opportunities and empower a broader spectrum of creators, making the creator economy more inclusive and sustainable for all.