In 2021, a lot of categories were popping. Crypto was reaching all-time highs, with everyone from major enterprises to top venture firms buying in to the hype. Quick delivery was touting $5.9 billion in funding in the first 9 months of 2021 alone. But one category in particular has, more than any others, seen a meteoric rise that has left very few survivors: the creator economy.
In 2021, the creator economy was valued at $104 billion. Some studies found that platforms like YouTube were paying out $30 billion to creators. The number of creators skyrocketed 48% year-over-year, to include 50 million creators. But everything changed in 2022. The funding for creator economy startups saw a precipitous drop from a high of over $2.5 billion in 2021 to ~$123 million in early 2023.
Source: Napkin Math
Just a few weeks ago, TikTok announced that it was shutting down its $2 billion Creator Fund that was created in 2020 to help creators monetize their content on the platform. This followed similar news from platforms like Instagram’s Reels. Increasingly, the creator economy has proven to be less of a democratization of tools to enable a generation of creators, and instead yet another power law of supporting the loudest voices.
One overview summarized the power law that most creative platforms live by:
- YouTube: 90% of subscribers come from less than 5% of channels
- Twitch: 90% of revenue comes from less than 10% of Twitch accounts
- Patreon: 70% of revenue comes from 3% of Patreon accounts
- Substack: 90% of revenue comes from less than 10% of Substack writers
In the Napkin Math piece on the Creator Economy, Evan Armstrong articulated the dynamics at play this way:
"The power law is the only law of the internet: 99% of the value accrues to the top accounts and the rest is distributed over the population of the planet. From my article last year, “According to a Linktree survey, only 12% of full-time creators are making more than $50,000 per year, and 46% of the same cohort makes less than $1,000 a year. Even more brutally, 66% see this as a side hustle.”
Over and over again, its proven true that enabling small businesses, be they plumbers, freelancers, or YouTubers, is incredibly difficult. Going forward as the macroeconomic conditions force startups to focus on efficiency, the name of the game in serving the participants of what’s left of the creator economy will come down to (1) owning relationships with the largest players (often most doable by the content platforms themselves), or (2) efficiently serving the long-tail. And high-growth blitzscaling isn’t going to cut it in the world we live in today.
