October 12, 2020
Before the Passion Economy or Creator Economy became a go-to-phrase, people were creating content, monetizing their skillsets, and building online communities. It's only recently with the tailwinds of COVID, that we're seeing the macro trend of the creator economy accelerate and infiltrate the masses. More adults are reflecting on their day-to-day and want to pursue their passions full-time. We're in a point of time where side hustles now have the opportunity to become main hustles. The creator trend was already prominent with children as 30% of children in the U.S. and U.K. aspire to be a YouTuber or Vlogger vs. an astronaut. This isn't surprising news when you combine it with the year over year upward trends in influencer related searches. In the future, everyone is a creator and the sleeping giant of a business opportunity hangs with the ability to service creators, help them manage their audience, and scale their business.
The largest pain point that impacts creators is the lack of tools geared towards them. This is primarily a result of the fact that the market size for creators is still growing. The current TAM of the influencer space is $8bn and expected to grow to $15bn by 2020, according to Mediakix. The downside is that few creators generate enough revenue for a sizable market and those that do produce a large amount of rev, work with agencies. For instance, a majority of creators don't reach a point where they're generating revenue at numbers similar to Dude Perfect. Dude Perfect does an estimated 100 million from YouTube alone. Most creators are happy earning 100k a year from being a full-time creator. While a majority of creators might not generate the same amount of revenue as Dude Perfect, what if there were more tools and resources centered around helping creators grow? Just like SMB's, everyone doesn't set out with a goal to be the biggest and best company in their area; however, some do. Those that are looking to scale and reach that next stage of their business need access to tools that make it possible.
This is the disconnect in the solutions and opportunities in the creator economy. A majority of the existing creator tools are centered around monetizing or helping creators release products. Few tools are centered around community. A creators key business pillar. Existing community tools are positioned for brands and social media platforms are more geared towards gaining followers and keeping them on the platform. This allows creators to gain followers but not cultivate their brand. The rare examples of social platforms that attempt to solve this pain point are Facebook Groups, TikTok, and Twitch which allow gifting and live chat with moderators. Live chat and moderators are only available on Twitch.
Overall the current creator stack falls shorts on building a true community. Layer that on with the fact that there is a ceiling to how much revenue a community can generate as the larger a community becomes the more difficult it is too monetize. Think back to any large community you joined and how you often feel like another number in the crowd. This is the last emotion a creator wants to evoke when a good portion of their revenue rests on whether a community member will convert into a paying customer. Creators just like brands, need to create an optimal customer experience. It needs to be branded, authentic, and interactive.
Similarly to a SaaS subscription product, creators make a bulk of their revenue via subscriptions. Others have a diverse model that consists of subscriptions, merch, courses, branded partnerships, and more. Think of a creator's basic growth loop similar to a brand. Social media provides distribution and the ability to build an audience, a portion of that audience opts into the creator's community, from there another portion convert into paying advocates. For the growth marketers out there, when done right, the k-factor of a creator's growth loop can be 1.4-2. This is what makes the creators so appealing. They develop a large reach and distribution channel through their personal brand.
There are three immediate opportunities for the creator's economy within the next 5 years.
1. Creators CRM
2. Creators Marketplace
3. Creator Academy
Just like a SaaS company, a creator needs a CRM. They need a better view point of the end-to-end journey from the point a follower signs-up for a creator's personal community, to the point they make a purchase or churn. At the moment, the closets solution for a creator's community management tool is Circle and Moe. What's missing from these platforms is the ability to give a holistic view into a creator's business. This contains everything from which traffic sources are generating followers with the highest LTV, to wherein a creator's growth loop does the drop-off occur.
Better insights and a better POV into the customer journey creates an opportunity to generate more revenue. The only alternative is piecing together community management tools with Zapier and AirTable; however, this still falls short of being a true CRM.
The second opportunity is for those individuals that want to learn how to become creators. Similar to a Lambda School model, there can be a Creators Academy that has a university or boot camp-style experience to help creators get started, grow an audience, and learn how to productize themselves. The challenge in this area is determining a pricing model. Lambda makes its revenue when a student is hired. In the Creator Academy, a creator won't generate revenue until they've either done a brand partnership campaign or sold their own products. Given the differences, the opportunity lies in a hybrid model.
The academy takes a tuition cost (e.g. $500-$3,000) and a small rev share for a certain number of years. Or reverse, the Creator Academy charges less tuition but gets a larger rev share. The latter is risker but depending on the creator network and connections built by the academy, the enrollment and LTV of that student could be higher. The players best suited for this are those with an existing tool for creators or those that have direct access to building relationship with popular creators (e.g. Pat Flynn). A combination of social proof and the trust built with existing creators births the opportunity to reach aspiring creators or creators that have traction but are looking to scale. Unlike a brand's audience which may be broad, creators tend to gravitate towards each other. Especially if those creators that are generating six figures.
The final opportunity that rises is a creator marketplace. Today's top creators do two things exceptionally well. They create quality content and they aggregate quality content. While platforms such as Gumroad, Podia, and Teachable have a marketplace like an experience, they lack the human touch of personal curation. An out of the box solution that allows creators to create dual-sided marketplaces is unmatched.
This opportunity allows creators to monetize on both the supply and demand side. In a traditional marketplace approach, the marketplace designer takes a portion of revenue in an approach similar to Fiverr or Shopify. The biggest benefit of a personally curated marketplace is that it creates an opportunity to scale horizontally and vertically. Horizontally via capturing adjacent new users through collaborations and promotions of products outside a creator's core niche. Vertically through the design and release of new products outside of creators original wheelhouse.
The previously mentioned opportunities are ripe for platforms that already have existing creators on their platform or existing tools that could be repurposed for creators. For example, Circle could layer on features that position more as a CRM, Gumroad, and Podia could start the Creators Academy, and Fiverr could make a stand-alone solution that services creators. This doesn't mean there isn't an opportunity for new players to enter the market.The success of products in the creator's economy all revolves around a creator's ability to manage, engage, and monetize their audience. Unlike tech and commerce companies that have moats that center around products, a creators moat is their community. Once lost or tarnished, it's incredibly difficult to bounce back. Especially if done via death by social media, aka canceled. The companies that recognize the growing market opportunity with creators will understand that there is a growing number of people who will pay for the opportunity to live their life working on their passions. Find a way for people to reach that point and the product sells itself.
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