Over the past 3 years, the term “Creator Economy” has garnered a lot of attention. While some projects are solving problems for the Creator Economy, there are an equal if not more using the word very loosely without truly understanding what it takes to solve for the Creator Economy. Many top VCs worldwide have been bullish on the Creator Economy, evident from their many theses and reports supporting their belief.
My hunch is that Web3 isn’t going to completely disrupt the creator economy in the near future, but it is going to shift the power dynamics slowly from the platforms on which the creators exist to the creators themselves over the next decade. In the Creator Economy, there are the following moving parts:
- The Creator
- The Platform
- The Product
- The Consumer
- External Players
Let us look at how each of these moving parts exists on different platforms today.
So what do we notice here?
As soon as the creator “owns” the content (in the case of creators on Patreon gating their content), the involvement of external players is reduced, and the involvement of a community increases.
But does one truly own the content on Patreon? Yes and No. The content creator might own the IP or the rights around the content they create, but they don’t own the space in which the content exists.So Patreon reserves the right to the creator’s presence on the platform and hence your business as a creator.
Keeping the external players aside, the platform completely controls the Creators and their content. Creators have always been slaves to the algorithms on each of these platforms. Even if we assume that a platform doesn’t go down, a change in the platform algorithms can break a Creator’s career. The platforms are the true controllers of the creator economy today, which is flabbergasting.
The platform algorithms are also designed in ways where Creators with more followers and engagement are branded more “trustworthy” and their content gets prioritized over other creators. Platforms also start paying creators only after they’ve reached an insane number of followers or subscribers which basically allows only a minuscule amount of creators to make a decent living out of their content. If one were to put earnings v/s creators in descending order on a graph, it would definitely be a steep L- shaped curve.
It was here when I stumbled upon Kevin Kelly’s article on “True Fans” where he explains how all one needs is a 1000 true fans to make a living. He defines a true fan as “a fan that will buy anything you produce.” It sounded utopian at first, but it does get realistic as you read it. He says all you need is a thousand true fans who’ll pay you, the creator, $100 a year and you can make a living out of it.
OnlyFans helped a lot of creators do exactly this. It allowed subscriptions to their exclusive content for a year. But again, the existence of the content on a platform’s servers makes it a single point of failure.
This brings up the concept of true ownership of a Creator’s content and this is where Web3 comes in on a core level. As soon as your content goes on chain, it is truly yours. You own both the content and the location in which the content resides.
Projects such as Audius are de-monopolizing the music industry where large labels acted as gatekeepers and did injustice to music creators and producers. The film industry is also waiting to get disrupted in a similar fashion, but it might take longer due to its additional complexities. Publishing is also another industry where the top 5 companies control over 80% of the books being published. Platforms like Gumroad and Patreon helped solve this to a certain extent, but discoverability is still extremely low.
So from a platform perspective, does it mean creating an on-chain Patreon/OnlyFans is the best solution for Creators to own their content? Maybe not. A decentralized social platform shouldn’t only solve for ownership, it also has to solve for the following:
- Distribution (Supply and Demand side)
- Discoverability
- Interaction
- Consumability
- Monetization
- Growth
Most of these are currently being solved by prominent social media platforms sans the ownership aspect. Social media is the middleman who owns the real estate and uses user data to monetize itself over monetizing creators (not taking away the fact that they do allow creators to monetize via external players).
Creating an on-chain platform that does each one of these today is a monumental task.
Let us look at the problems and possible solutions for each moving part of a social platform.
Distribution
Even if the protocol and product are created, distribution, currently, is a problem. The most popular crypto wallet today is Metamask. Metamask today has 30 million monthly active users, which essentially means that the TAM is a function of only 30 million users for anybody building a social graph on Ethereum. Other wallets have a considerably lesser number of users.
When Facebook opened fully for the first time to the general public (circa 2011), the number of active consumer email accounts was at about 2.3 billion. Distribution is a direct function of how many people can actually “Sign Up” (or in the case of Web3, “Connect Wallet”), without it, there is no onboarding.
Distribution equates to the number of nodes in a social graph.
Discoverability
When a creator puts out content, the content has to be discoverable. Today social media has a wide variety of features that help in content discovery. A compelling search function, a home feed of content from your favorite creators, suggested content alongside the currently consumed content, notification systems, etc.
These have been developed over the past one and a half decades in the Web2 ecosystem. The key elements that unlocked the above discoverability features were:
- A social graph
- Content Delivery
- Access to data
What does this look like in Web3?
Social Graph
Social graphs are private in the Web2 world. It is extremely beneficial to have a decentralized social graph protocol on-chain because it helps users own their social network. An open social graph helps unlock the market for various creator platforms to build over the protocol. Lens Protocol is out to solve exactly this. Here is an explainer video on the Lens Protocol from The Defiant.
Content Delivery
For people to discover content, creators have to create content. When creators create content, there has to be a way to deliver the content to the consumers.
Access to Data
Access to data here does not mean the social graph, it is data on what kind of content & creators consumers like and engage with. This data today is centralized with the media giants. Decentralizing it would mean having a data layer over the social graph. This data is the feed for the suggestion algorithms that help deliver a better consumer experience.
Interactions
Interactions can be of different kinds:
- Unilateral interactions
- Bi/Multilateral interactions
Unilateral interactions are those where one node consumes content at zero effort expense of the other node. Ex. views, likes, and comments (with no replies).
Bi/Multilateral interactions are those where one node’s content is broadcasted to one or many nodes. Ex. posting content, sharing, and messaging.
There has to be an interaction layer whose data is stored in a layer above the social graph. The interactions can again be public or private. If the platform is storing all of the posts, views, likes, comments, etc. on-chain from a privacy perspective it may be ok for public facing facing accounts. But what about direct messages? My DMs with another friend should not be visible to a third party and neither should they be interceptable. This is where E2E encryption is required for on-chain messaging. Among Indian projects, Dakiya is one that seems to have solved it. Messaging on-chain can be much more expensive as compared to off-chain messaging, if a user pays gas fees for every message sent. One cannot convince a user to pay high amounts of money in the form of gas for messages that they send, especially when they are paying nothing for it right now. It is extremely inefficient since it is both expensive and slower than the incumbent Web2 solutions.
Consumability
Consumability of content is a function of 2 things: Tech and UX.
The tech must be robust and fast. For any media platform requiring a content delivery network (CDN), it better be of high quality and very fast. Would you use YouTube if every video took 60 seconds to load? This is a problem that needs to be solved in Web3 because there currently is no fast CDN that a social platform can use to deliver high-quality content with low latency.
Monetization
Monetization is of two kinds today:
- On platform monetization
- Off platform monetization
On Platform Monetization
Online content monetization took off with Patreon where any person could create digital content of value and monetize it by selling it, or enable better content creation via crowdfunding.
Video and social platforms joined the monetization game to help creators (and hence strengthen network effects) by first paying the creators for being on the platform, and then allowing promoted content via partnerships. This allowed creators to create alternate streams of cash flow for themselves.
But the major flaw here is the pseudo ownership of content. Ex. The Bankless Youtube Debacle.
Bankless had about 150,000 subscribers and over 10,000 hours worth of content with many brand and creator collaborations. YouTube terminated the account overnight without any notification. While the fact that whether this was a mistake or not on YouTube’s end, showed the creators that there is a single point of failure with the ownership of content. YouTube can shut creators overnight or shut itself down overnight. So the platform content that could be monetized
There are a few social video platforms experimenting with ownership of video content via “Video NFTs”. Medium (although I love it and live on it) is also a point of failure where if Medium shuts down, trillions of words can disappear. Wordcel is trying to solve this problem.
As soon as a creator truly owns a piece of content, they can monetize it in any way they want. Even if the app on which it exists disappears, they will still own the data if it is on-chain.
Off-Platform Monetization
Off-platform monetization by creators today is being done through events, shows, partnerships, appearing in advertisements, etc. So how can Web3 enable a novel way of monetization off-platform?
One that comes to mind is Social Tokens. Let’s dig a little deeper.
Social Tokens
Creators can issue Social Tokens and release them in a market where the buyers form the community. So if a creator issues them, what is the incentive for a consumer to purchase them?
After a conversation with Jenil Thakker from Coinvise, I gathered the following incentives Creators and Communities use:
- Governance
- Access to Social Capital
- Crowdfunding
- Creating a Microeconomy
Governance
Governance here is collective decision-making. The Creator that releases these tokens will define the extent to which decisions are made. The Creator may not allow the community to make decisions such as “Which shampoo should I use?” but rather keep it close to the kind of content the community wants to consume. Ex. “Should I record my next podcast with Elon Musk?”. The incentive of “Governance” here holds true only if the creators are true to their word of listening to their community. Creators have to find a comfort zone on the level of access into their lives ( a community would love to have more “power” over the creator) and also find ways to deliver what the community actually votes on.
Access to Social Capital
Today there is access to the content made by creators, but how accessible are the creators themselves? Today, if I wanted to get access to a creator and have a chat with them, I’d have to go through a vicious process of PR people and the managers of the creators. Community-focused creators with an extremely high number of followers will also find it very difficult to interact and truly listen to their community. This is what social tokens solve.
Creators can give their token holders special access to events, their network, etc. as an added incentive to buy and hold a social token for the community members
Crowdfunding
Social Tokens are a great way to crowdfund a Creator’s treasury. Crowdfunding can help creators up their game to the next level. This is also one of the ways where DAOs can issue tokens to seed their treasury and pay DAO contributors.
Creating a Microeconomy
All of this sounds fine, but a simple NFT drop should do the same, correct? It does.
After a conversation with Joel Alexander (the Co-Founder of Crowdpad) is when I realized that Social Tokens must be seen as the “currency” of a Creator’s microeconomy. Are you a token holder who helped Mr. Beast Edit a video or set up the props for a new video? Get paid in his social tokens. This helps with the interaction and involvement of the community, and hence stronger network effects within a community.
The price of a social token is what the market decides, and meme values govern the price of the token a lot more than the economic and financial factors. This is because purchasing social tokens is often a cultural bet, rather than a financial speculative bet. Ex. If Logan Paul issued social tokens in his early YouTube days, the token price would’ve shot up after his multi-million dollar deal with Disney, and plummeted after he got canceled after putting out a certain controversial video. True believers of Logan who would’ve held onto the token even after that episode may have gotten a bigger upside after his resurrection as a creator with the Podcast and a stint as an entrepreneur. There are no Logan tokens as of today, but if it did exist, this was my thesis on how it would’ve played out since it’s clearly a cultural bet over a financial one.
Growth
In order for a creator to grow on different platforms, a lot of their tasks need to be automated or at least streamlined. Creators are more than happy to spend on equipment and solutions that help them make better content faster. A creator today has to create content for which they need a content creation platform (Ex. Photoshop, Premier Pro, Canva, etc.). Once the content is created they need to track engagement via analytics tools that most social platforms generally provide. They also need to manage the inflow and outflow of cash via multiple channels that come in through external partners, affiliate marketing, and platform-based payments for which they will need accounting and finance management tools.
There’s nothing big Web3 can disrupt in the above-mentioned tools other than the fact that when creators accept crypto payments, they will need a new tool for accounting. Automated accounting is a long-standing “bounty” put out by Balaji Srinivasan in the Non-Sexy problems to solve in Web3.
When Social tokens come in, there is a great need for community management. The community platform must have gated access to the token holders who then get an opportunity for a higher level of engagement with the Creator. If the Creator allows for governance, there needs to be a tool for that to be carried out diligently. There are very few tools out there that help do all of this for a creator.
A full-stack platform for creator growth management today is not going to be an on-chain solution.
Conclusion
There are many moving parts in the Creator Economy today. The core tenet of Web3, i.e. Ownership is going to shift the power dynamic from the monopolies of the creator world to the hands of the creators. Creators will not need to rely solely on the distribution of these monopolies and can create their tight-knit communities of “true fans”.
As far as social platforms go, there is an element of decentralization that is required, but the task is monumental. A builder trying to build an on-chain social platform to combat the incumbent giants probably should adopt the progressive decentralization approach to optimize costs, time and energy. Decentralizing each moving part is quite a battle in itself, and winning the “war” is probably going to be winning a series of battles rather than fighting many battles all at once.