The Catch-22 of the Web2 Creator Economy
The creator economy is a machine consisting of 3 key components: creators as the fundamental cogs, advertising spend as the fuel, and consumers as everything else in between and the glue that holds it all together. The Web2 creator economy is enormous and continues to grow, however as far as machines go, it is not a very well-oiled one. While on the surface the current system appears to be flourishing with an ever-expanding advertising fuel-tank, beneath the surface the distribution of said pool is increasingly inequitable.
BIG TECH
Up to 90% of digital advertising last year was accounted for by Big Tech. This ominous sounding syndicate refers to the likes of Meta, Alphabet, and Amazon. Like any corporate entity, their focus is on growth, which manifests itself in a constant effort to maximize market share, oftentimes at the expense of the little guy. This behavioral trait is deeply embedded into all corporate DNA and not a unique feature of the industry. What is unique, however, is the predatory approach to take rates, with up to half of ad revenue being hoarded by incumbent ad platforms. The Web2 digital advertising model is antiquated, and hasn’t been disrupted since Google launched Adwords in the year 2000.
SUPERSTAR PHENOMENON
Top-heavy concentration within the creator economy is not limited to tech oligopolies. The “superstar phenomenon”, a term coined by economist Sherwin Rosen in his 1981 paper, posits that reward distribution is far more skewed than talent distribution. In other words, there are numerous factors that determine appropriate compensation in any given system, lowering the correlation between talent and reward. In the case of content creators, the top-heavy concentration of popularity translates to disproportionate distribution of resources for the creation of content. Strictly speaking, centralized forces at play squeeze out any hope for a “content creator middle class.”
CATCH-22
The catch-22 of the existing system is that creators need to spend money to make money. One of the key factors in determining a creator’s access to funding is the maturity of their project. Early-stage creators have less access to capital to finance their projects, and more importantly their livelihoods. In the current system, content is only monetizable above a certain threshold of followers. Even above this threshold, starting to advertise too early in the career may hinder growth. Aside from advertising, creators can tap into merchandise sales or donations for funding. Merchandise does not address this issue due to the implicit cost of sourcing/production. Donations, on the other hand, tackle this problem head on and can leverage the support system of a fanbase. While conceptually sound, they lack incentive structures to achieve appropriate scale. Only 2% of creators on Patreon made the federal minimum wage in 2017 (albeit a somewhat dated stat, the points stands). The current modus operandi is peppered with frictions and inefficiencies, while community-based alternatives are limited in upside potential. The scope of opportunity unveiled by the newfound popularity of Web3 merely exposes the cracks in the system.
WEB3 — PODIUM
In 2004, Wired editor Chris Anderson published his “Long Tail” theory, suggesting that the removal of physical limitations on reach as a by-product of the internet would be the great leveler of the creator economy. This idea refers to the broader ideology behind the all-encompassing concept of the Web. It is now becoming increasingly evident that the archaic nature of Web2 prevents this from becoming a reality. The promise of Web3 revives the possibility of a practical implementation of these ideals. We at Podium want to turn this possibility into reality.
If you’ve encountered these issues as a creator or simply want to learn more, our DMs are open on Twitter: https://twitter.com/NftPodium
The article was written by Daniel on the Podium team
“The Creator Economy Needs a Middle Class.” Harvard Business Review, 31 Aug. 2021, https://hbr.org/2020/12/the-creator-economy-needs-a-middle-class.
Rosen, Sherwin. The Economics of Superstars, Dept. of Economics and Graduate School of Business, University of Chicago, Chicago, 1981, pp. 845–858.
Anderson, Chris. “The Long Tail.” Wired, Conde Nast, 1 Oct. 2004, https://www.wired.com/2004/10/tail/.
Sanchez, Daniel, et al. “Less than 2% of Content Creators on Patreon Earn Monthly Minimum Wage.” Digital Music News, 10 Nov. 2020, https://www.digitalmusicnews.com/2018/01/02/patreon-content-creators-monthly-minimum-wage/.
Russell-Jones, Lily. “Tech Giants Alphabet, Meta and Amazon Control Half of Ads Outside China.” CityAM, 6 Dec. 2021, https://www.cityam.com/tech-giants-alphabet-meta-and-amazon-control-half-of-ads-outside-china/.
