Over the past three weeks I spent many hours traveling by plane, bus, train, and foot. Suffice to say I had plenty of downtime. Inevitably, I filled much of this time catching up on my reading and podcast listening.

On one of these catch up sessions, as I trudged my way through the Italian Dolomites, I was listening to the All-In podcast. A new favorite of mine, All-In is a podcast by four venture bros discussing tech, finance, and current events. While highly educational I find myself coming back each week to hear the four of them mercilessly take shots at one another as they trade barbs back and forth.

In an episode from earlier this month the foursome spent 45 minutes discussing the Russia-Ukraine conflict and looming energy crisis in Europe. After which the group turned their attention to…Kim Kardashian. Turns out Kim had recently announced the formation of her own private equity group, Skky Partners.

While all four hosts saw this as a positive sign for the investment community, it was David Friedberg’s prediction about the demise of traditional brands that caught my attention.

“I have a really strong belief that in the next 30 years or so all traditional brands are going to die”

A bold proclamation considering brands today make up some of the largest industries on the planet. Industries like apparel ( which recorded $1.5 trillion in revenue last year) and fast moving consumer goods (which are projected to reach a $15.4B market cap by 2025). What then could cause the demise of these traditional brands?

Influencers. Specifically, content creators.

No one wants to hear directly from Proctor & Gamble, Levi’s, or Nike. They want to see their favorite influencers authentically interacting with products. I can have Nike tout the new technology of the LeBron 22’s or I can watch the king himself dunk on an unassuming defender. Which one do you think is more convincing?

It used to be reaching your audience was as simple as putting together an advertising budget to be spent across traditional media (print, radio, + television).

Then with the rise of social media, brands used their advertising budgets on promoted content to show up in your feeds and on your favorite influencer’s IG story.

Now distribution is being completely reinvented. Brands who do not authentically create content of their own must partner with or buy content producers who have natively reached audiences these brands covet. To David’s point, it’s why Penn Gaming buying Barstool was so prescient. Barstool brought their built in audience with them. An audience that is becoming borderline impossible to advertise to outside trusted influencers.

Now I know what you’re thinking. Austin, this is old news. The creator economy and influencer marketing have been around for decades. Why are you clogging my inbox with this now.

What’s changed?

Since the advent of social media, online distribution has existed through tech giant middlemen. Facebook, YouTube, Instagram, and more recently TikTok have stood between creators and their audiences. Network effects have helped these platforms grow to the size of countries. Scale became their superpower. However, the economics for creators were abysmal.

As highlighted in a16z’s 2022 State of Crypto Report, Web2 social platforms have taken between 45% (YouTube) and 100% (Facebook, Twitter, Instagram) of revenues generated on their platforms.

With the advertising model being the only game in town, creators were heavily reliant on scale to make a living. But times are changing.

In Li Jin’s follow up to Kevin Kelly’s 1,000 True Fans, she describes how subscriptions are enabling creators to focus on super serving a subset of high value purchasers who desire improvement, transformation, or exclusive access. Consumers understand the tradeoffs in quality between free platforms and paid and are increasingly willing to pony up the change where the value will be accrued back to them.

The subscription model gave creators an alternative for creating a sustainable business. Rather than focusing their efforts on creating viral content with the largest possible reach, creators could super serve a niche with high quality content. This moved the north star metric for creators from total impressions to average revenue per user (ARPU). From a business perspective, a niche subscription base with a high ARPU can go toe to toe with a massive audience whose primary revenue is attributable to advertising. As a result, more content creators can thrive with smaller, highly monetized, audiences.

Like subscriptions, Web3 primitives are opening more opportunities for smaller creators to get in and stay in the game. Namely; tokens and composability.

Tokens, both fungible (e.g. currency) and non-fungible (e.g. NFTs, collectibles, etc), give creators tools to incentive their audiences. These tokens can represent reputation, display achievements, unlock access, facilitate commerce, and governance.

Rather than ingesting content in isolation, creators are fostering a sense of belonging with their audiences by validating their participation . This community first approach has creators continually reinvesting in their fans. As Mel explains, the result is a majority of the value being generated accruing to the community.

As illustrated by Li Jin in The New Creator Playbook, tokens can also be used to bootstrap communities with capital while incentivizing individuals to participate in their growth.

Tokens then have the potential to be a better monetization instrument than traditional subscriptions because they move incentives upstream and accrue value back to holders.

Subscriptions are one directional. The consumer pays a set price in exchange for a good or service. The consumer does not own anything other than the right to have access to what they paid for.

Tokens are bi-directional. Value continues to accrue to holders after purchase, incentivizes individuals to invest in the success of the creator and the community as a whole.

Web3 also has the potential to eliminate the cold start problem for creators. In “Who’s Audience is it Anyways?” we discussed how Web3 social platforms are building open, composable social graphs. Rather than having to start over with every new social platform, the composable nature of crypto enables creators to port over their existing audiences wherever they go. It can not be understated what this will do to the balance of power in the Creator Economy. Switching costs, which have served as moats for platforms, will disappear overnight. Platforms will need to shift from value extraction to building experiences that creators and communities value. Scale will no longer be enough to keep someone on their products.

So what does this all mean?

With more creators being able to make a living with smaller, more engaged, audiences, we can expect the total number of creators to sky rocket. The old model necessitated scale. New subscription and community based models will enable micro influencers to flourish.

Today, there are 50 million content creators. 2 million of which consider themselves professionals. Big numbers no doubt but they pale in comparison to where this is headed. In a recent survey, 1 in 4 Gen Z participants answered they planned to become social media influencers. Furthermore, 26% of participants said they trusted influencers more than product review pages.

We are in the early innings of a transfer of power that will define the next iteration of the attention economy. The great de-platforming, where creators will increasingly look to directly own their audiences, will be like a leaky dam. Ever so slowly eroding the status quo until suddenly the dam breaks and the paradigm shifts. Influencer marketing will get bigger by going smaller. Brands will work with creators with small but hyper engaged communities.

The creator economy is not slowing down. Far from it. With more playbooks for success, creators of the next generation will arrive in droves. Their audiences will be loyal to them, not the platforms they choose or choose not to use.

Thanks for reading. Be back later this week with the first edition of Web3 Weekly.

austin

2022 State of Crypto Report by a16z

1000 True Fans by Kevin Kelly

1,000 True Fans? Try 100 by Li Jin

The New Creator Playbook by Li Jin

Over the past three weeks I spent many hours traveling by plane, bus, train, and foot. Suffice to say I had plenty of downtime. Inevitably, I filled much of this time catching up on my reading and podcast listening.

On one of these catch up sessions, as I trudged my way through the Italian Dolomites, I was listening to the All-In podcast. A new favorite of mine, All-In is a podcast by four venture bros discussing tech, finance, and current events. While highly educational I find myself coming back each week to hear the four of them mercilessly take shots at one another as they trade barbs back and forth.

In an episode from earlier this month the foursome spent 45 minutes discussing the Russia-Ukraine conflict and looming energy crisis in Europe. After which the group turned their attention to…Kim Kardashian. Turns out Kim had recently announced the formation of her own private equity group, Skky Partners.

While all four hosts saw this as a positive sign for the investment community, it was David Friedberg’s prediction about the demise of traditional brands that caught my attention.

“I have a really strong belief that in the next 30 years or so all traditional brands are going to die”

A bold proclamation considering brands today make up some of the largest industries on the planet. Industries like apparel ( which recorded $1.5 trillion in revenue last year) and fast moving consumer goods (which are projected to reach a $15.4B market cap by 2025). What then could cause the demise of these traditional brands?

Influencers. Specifically, content creators.

No one wants to hear directly from Proctor & Gamble, Levi’s, or Nike. They want to see their favorite influencers authentically interacting with products. I can have Nike tout the new technology of the LeBron 22’s or I can watch the king himself dunk on an unassuming defender. Which one do you think is more convincing?

It used to be reaching your audience was as simple as putting together an advertising budget to be spent across traditional media (print, radio, + television).

Then with the rise of social media, brands used their advertising budgets on promoted content to show up in your feeds and on your favorite influencer’s IG story.

Now distribution is being completely reinvented. Brands who do not authentically create content of their own must partner with or buy content producers who have natively reached audiences these brands covet. To David’s point, it’s why Penn Gaming buying Barstool was so prescient. Barstool brought their built in audience with them. An audience that is becoming borderline impossible to advertise to outside trusted influencers.

Now I know what you’re thinking. Austin, this is old news. The creator economy and influencer marketing have been around for decades. Why are you clogging my inbox with this now.

What’s changed?

Since the advent of social media, online distribution has existed through tech giant middlemen. Facebook, YouTube, Instagram, and more recently TikTok have stood between creators and their audiences. Network effects have helped these platforms grow to the size of countries. Scale became their superpower. However, the economics for creators were abysmal.

As highlighted in a16z’s 2022 State of Crypto Report, Web2 social platforms have taken between 45% (YouTube) and 100% (Facebook, Twitter, Instagram) of revenues generated on their platforms.

With the advertising model being the only game in town, creators were heavily reliant on scale to make a living. But times are changing.

In Li Jin’s follow up to Kevin Kelly’s 1,000 True Fans, she describes how subscriptions are enabling creators to focus on super serving a subset of high value purchasers who desire improvement, transformation, or exclusive access. Consumers understand the tradeoffs in quality between free platforms and paid and are increasingly willing to pony up the change where the value will be accrued back to them.

The subscription model gave creators an alternative for creating a sustainable business. Rather than focusing their efforts on creating viral content with the largest possible reach, creators could super serve a niche with high quality content. This moved the north star metric for creators from total impressions to average revenue per user (ARPU). From a business perspective, a niche subscription base with a high ARPU can go toe to toe with a massive audience whose primary revenue is attributable to advertising. As a result, more content creators can thrive with smaller, highly monetized, audiences.

Like subscriptions, Web3 primitives are opening more opportunities for smaller creators to get in and stay in the game. Namely; tokens and composability.

Tokens, both fungible (e.g. currency) and non-fungible (e.g. NFTs, collectibles, etc), give creators tools to incentive their audiences. These tokens can represent reputation, display achievements, unlock access, facilitate commerce, and governance.

Rather than ingesting content in isolation, creators are fostering a sense of belonging with their audiences by validating their participation . This community first approach has creators continually reinvesting in their fans. As Mel explains, the result is a majority of the value being generated accruing to the community.

As illustrated by Li Jin in The New Creator Playbook, tokens can also be used to bootstrap communities with capital while incentivizing individuals to participate in their growth.

Tokens then have the potential to be a better monetization instrument than traditional subscriptions because they move incentives upstream and accrue value back to holders.

Subscriptions are one directional. The consumer pays a set price in exchange for a good or service. The consumer does not own anything other than the right to have access to what they paid for.

Tokens are bi-directional. Value continues to accrue to holders after purchase, incentivizes individuals to invest in the success of the creator and the community as a whole.

Web3 also has the potential to eliminate the cold start problem for creators. In “Who’s Audience is it Anyways?” we discussed how Web3 social platforms are building open, composable social graphs. Rather than having to start over with every new social platform, the composable nature of crypto enables creators to port over their existing audiences wherever they go. It can not be understated what this will do to the balance of power in the Creator Economy. Switching costs, which have served as moats for platforms, will disappear overnight. Platforms will need to shift from value extraction to building experiences that creators and communities value. Scale will no longer be enough to keep someone on their products.

So what does this all mean?

With more creators being able to make a living with smaller, more engaged, audiences, we can expect the total number of creators to sky rocket. The old model necessitated scale. New subscription and community based models will enable micro influencers to flourish.

Today, there are 50 million content creators. 2 million of which consider themselves professionals. Big numbers no doubt but they pale in comparison to where this is headed. In a recent survey, 1 in 4 Gen Z participants answered they planned to become social media influencers. Furthermore, 26% of participants said they trusted influencers more than product review pages.

We are in the early innings of a transfer of power that will define the next iteration of the attention economy. The great de-platforming, where creators will increasingly look to directly own their audiences, will be like a leaky dam. Ever so slowly eroding the status quo until suddenly the dam breaks and the paradigm shifts. Influencer marketing will get bigger by going smaller. Brands will work with creators with small but hyper engaged communities.

The creator economy is not slowing down. Far from it. With more playbooks for success, creators of the next generation will arrive in droves. Their audiences will be loyal to them, not the platforms they choose or choose not to use.

Thanks for reading. Be back later this week with the first edition of Web3 Weekly.

austin

2022 State of Crypto Report by a16z

1000 True Fans by Kevin Kelly

1,000 True Fans? Try 100 by Li Jin

The New Creator Playbook by Li Jin