During the web2 phase, the term “creator economy” was coined because of the businesses built by social media content creators, bloggers, and anything that fit under influencer. I wanted to explore the potential dynamics that could emerge from web3 in the creator economy and whether this movement is going to drive the next 100M users onto web3.
To begin analysis, we should look back on how a few creators earned money on web2 over the last 15 years:
In the above examples, the revenue stream is driven through the platforms and then distributed to the creators. This helps create an abundance of content for platform visitors to consume, but it holds the creators’ pay behind specific rules and rates.
Web3 wants to change that dynamic between the creator, the platform and the audience by creating an economy around the creator through the use of tokens and NFTs.
Creators can now generate their personal tokens (e.g. $STAQ) and distribute them to their audience. The audience can use tokens to access reserved content behind a paywall or access limited merchandise from the creator’s shop. Creators can also generate NFTs and sell those to their audience. NFTs can be the online badge that gets you access to certain places that others can’t access. The audience can also resell these NFTs to others and make a potential profit. **This business model is honestly boring and might not work for longer than a couple of months in my opinion.**Creators have been able to host their content behind paywalls for years(e.g. Sidemen and Side+, MomentHouse live shows, YouTube members-only, Patreon), and adding crypto into the mix just to “reward” community members sounds like an unnecessary “buy low, sell high” finance gamification into the creator space
The concept of social tokens is similar to listing a company on the stock market and selling shares of that company, except in this case, the creators list themselves on the social token market and sell tokens. I believe that social tokens are not the most transparent because the creators listing their tokens don’t have any obligations to stay transparent about their activities the same way a public company has. That means that a social token’s value only goes up and down based on the supply and demand of the market, and the creator can choose to liquidate their position at any moment. Lil Yachty partnered with fyooz.io in November 2020 to create his $YACHTY coin. $YACHTY holders would be eligible to get a surprise box full of Lil Yachty’s personal stuff prepared by his mom, as well as spending an evening with Lil Yachty and a signed poster. Approximately 76000 of the tokens are in circulation and Yachty managed to raise $276,006. After the sale, Lil Yachty never interacted with the token or the community again and the community felt scammed for not even receiving the signed poster. Lil Yachty’s success in 2021 did not seem to impact the token’s value either since Yachty probably sold most of his tokens on day 1.
The exciting part of web3 in the creator community to me is listing content as NFTs. Creators can sell their online YouTube videos as NFTs and whoever owns that NFT owns the fractional share of that video. That may seem insignificant without explaining the context behind owning a video on a platform like YouTube. YouTube videos accrue views over time. Some videos make most of their views in the first week of release, and others make views through the Recommended page randomly recommending the audience of said videos.
If I buy 1 of the 1000 NFTs that Doug Demuro sold from his YouTube video about a Kia Forte, I own 1/1000 of the video.
a. Let’s say the video makes $10,000 in CRM from YouTube in the first week of release with 100,000 views. I am now owed $10 in the first week of the video’s release.
b. Let’s say the video makes $100,000 in CRM from YouTube in the first 6 months of release with 10,000,000 views. I am now owed $100 by the end of the 6 months.
Videos accrue views over time and the more views the videos get, the more money the video makes, implying that the video’s owner is owed that money. Owning fractional shares of videos is an amazing concept that was broken down to the basics really well by Colin and Samir in this video.
Creators having an economy around them can help them fund their future content without the need of relying on YouTube’s revenue after the video has been published. The creator’s community also gets to enjoy the success of the content as their NFTs generate passive income for them. Recently, Susan Wojcicki announced that she wants YouTube to be able to give the latest technologies to its creators, and in that, she highlighted NFTs. As the project gets executed through YouTube, we may see what mechanisms get released.
Musicians can also mint a song and sell it as a limited set of NFTs. Each person that buys 1 NFT owns a fraction of that song. If the song goes viral, the NFT’s value goes up. If I own an NFT, I may have an incentive to blow up the song as much as the artist does. I’ll probably use it in my next TikToks so that more people can hear it.
This differs from just owning a creator’s coin because your crypto-asset is now earning “dividends” while you are holding onto it, compared to a creator’s token that relies simply on the trading aspect of it.
Platforms like mirror.xyz, trybonfire.xyz and rally.io are actually working with smaller artists by helping them build communities through their own coins and NFTs. Daniel Allen is an example of an artist who set a goal of 20ETH and managed to raise 50ETH through mirror.xyz. Using bonfire.xyz, he shared his goals about the economy as well as personal details in a very tightly packed website: www.danielallan.xyz. Rally.io also has a list of creators that are already making tokens and generating markets.
From YouTube to TikTok, the average audience attention span has been reduced significantly. People gravitate to shorter form content with wider variety. To explore the next points, I want to break down audiences in 3 categories: lurkers, regular consumers and avid members.
Introducing social tokens and web3 models enables the creators to get closer to avid community members while potentially appealing regular consumers. As a 24 year old guy working from home, I find myself being a regular consumer of certain YouTubers, Podcasters and musicians. I used to go the extra mile and buy merch before, but I don’t really find value in them, which is why I avoid joining Patreons and other “product behind paywall” communities. However, YouTubers like the Sidemen have created side+, where they shoot extra content behind a paywall, and there seems to be traction. The same goes for live-streaming - Twitch and YouTube streamers can enable “members-only chat”, where only the people that pay a certain fee per month to become members of the community can comment on the stream.
Introducing tokens and NFTs to that combo means infrastructure in the economy created around the creator. Creators and avid community members can have more identifying traits. NFTs can help unlock more roles and content. Tokens and NFTs can also gain value, and community members can cash out. A regular consumer and a lurker might just see these movements as another paid plan/scheme that they probably won’t partake in. That might mean that they don’t need to get a wallet or even understand what an NFT is.
Right now, it seems that platforms like Rally.io, Agora.xyz and Bonfire.xyz help creators to create their social tokens, NFTs and platforms their communities through crypto, which is great. It has the potential to onboard a lot of existing communities if the creator is willing to make the move, and it makes the lives of creators easy. I think that we have yet to see products that favor the audience/consumer in the same fashion. We currently have a ton of mechanism for someone to get onboarded (discord, metamask, DEX, etc), which I believe is discouraging for anyone not in crypto to want to pay attention to. Every time I think of onboarding the next 100 million users, I think - will my 50-year-old dad be bothered to create a wallet for this? Will my 15-year-old cousin be tempted to create a wallet for this? Will I be tempted to create a wallet for this? If I were to tell my dad that my social tokens made $50,000 last month, he would be excited, but after explaining to him how I got to set it up first and what he needs to do to get in the same position, he would probably lose interest. My cousin on the other end will probably have the willpower to go through it, figure out what this is all about, and get into social tokens asap. This trend of the younger demographic willing to be early adopters and older people joining later will be replicated in the crypto economy, if the early adopters don’t choose to give up on crypto in the next 10 to 15 years.I am not sure if we’re at that stage just yet to be able to tell because of the low adoption rate and low commitments from communities around social tokens. If a creator can properly engage with their community, help their community by financially increasing that communities’ wealth in a long term manner without doing a rug pull, and that story gets publicized, we may actually see a movement of more creators adopting that model moving forward.
If a crypto-operated creator economy feels too forced, or if it’s solving a problem that does not inherently exist, it won’t last.
As much as web3 companies want to create easier ways for creators to benefit from all these tools and technologies, to onboard the next 100M people on the platform, the audience needs to see the benefits clearly enough. Clear test cases need to be proven throughout the years where creators raised money from an audience, and the audience also benefitted from contributing to that creator. We need to see cases where creators created economies that they were able to sustain, not just rug pull.