The Creator Economy 2.0

0:00Today, we are going to talk about the Creator economy 2.0. and this comes written by one of our favorite people. His name is Andrew Chen. And so I'm going to share this real quick. And actually, you know what? I'm going to share it, but I'm not going to read the whole thing because it's an essay. But the gist of this thing over here is, so Andrew Chen, just some background, he's a partner at Andreessen Horowitz, which is one of the big venture firms out there. So the title of this post is Creator Economy 2.0, What We've Learned, Why It's Hard, and What's Next. And so I just want to scroll to the theories of the 9x at play because maybe in 2020 2021 there are a lot of creator companies that were raising a bunch of money let's say patreon for example substack raised a ton of money and it was all about putting the power in the hands of the creator so for example if you build your email subscription newsletter then you know substack might take 10 or something like that so the whole idea was that these creator platforms would just take a cut of whatever the creator was making Now, now that the dust is kind of cleared, we're in 2023, it's actually, we've learned that it's very hard to build a creator startup.

1:06And here are a few theories of the dynamics at play. So Neil, do you want to read these or you want me to read these? I will read them. You have a lot of noise in the background. So Andrew says here, and Andrew's a smart growth marketer. So he has a few theories of the dynamics at play. And by the way, he was the lead funder for one of the creator company's clubhouse, but I just want to call that out. So the creator power law, a small, concentrated number of creators have all the audience, which makes creator economy startups potentially fragile and dependent. Number two, battle for the bio link.

1:37Creator economy companies acquire their audience from larger social media platforms that often have one spot, the link in bio to promote a single company. It's a zero sum game to overpower other companies. Now, number three, The graduation problem. Startups often charge a take rate, percentage of bookings, and if the creator is acquiring their own customers and also doing the underlying work, they want to pressure you towards reducing costs. The biggest creators often graduate, quote unquote, from a platform building their own and taking the revenue with them. Now, the fourth and final point here is algorithmic feast and famine.

2:14So creator traffic is driven by social feed algos, which lends itself to big spikes in traffic that appear and then go away. The opposite of the steady, durable growth that startups seek. Now, before you go, Neil, the one thing I want to call out here is the graduation problem. Like if you're making a million dollars a month, do you really want to be paying sub stack$100 ,000 a month? No, you're going to keep grinding them down and you're going to grind them down to the point where you're just going to move over to your own platform. Yes. I think he's spot on with this. I also think it's just really hard to build up a massive following compared to what it was like six, seven, eight years ago when social was just much more up and coming than it is now.

2:51Now it's a really saturated market. If you look at like what threads did with X, no one really talks about threads anymore, right? It's really difficult to build a platform as an influencer and generate money as a creator. And the reason being is there's so much competition. If you can't stand out, you're not going to do well. And if you do stand out and you have a large following like a Logan Paul or a Kardashian, you're going to figure out how to monetize away from any of the platforms. Why would you want to give anyone a cut? Yeah, I mean, network effects matter, right? So going to Neil's example on threads versus X, it was cool for the first week or two.

3:26But then it's like, oh, man, I'm kind of doing the same thing I'm doing on X. But I already have there's more network effects there. There's more reward. So why would I do it? I'm not saying threads will fail, but it's not looking as good as it was before. the other thing too is the algorithmic feast and famine the problem is let's say you're like a logan paul or mr beast or let's say like emma chamberlain you have to keep feeding the beast on youtube and i remember i met jake paul at a dinner once and he was talking about like he grew his youtube to about 20 million subs and he's like i just don't want to play the game anymore and so it gets tiring because you have to keep getting on that hamster wheel of creating content and it gets tough and you know that can burn people out and well that makes it harder for these creator economy startups because they need these creators to keep pumping and pumping out content and feeding the algorithm.

4:12Speaking of that, what happened with PewDiePie? Remember, he was big on YouTube. Didn't something happen where he did something? He's still big. He was actually in a recent Mr. Beast video where he appeared in the middle of it. So he's still a big deal. Oh, okay. I'm not into games. I just assumed you would know more because you do a lot of video game stuff. Not anymore. I don't play any video games, but I watch the stuff still. But I think this is interesting too, the creator power law, right? So small concentrated number of creators have all the audience. That's the same as anything though. Like there's always have been power laws with any type of influencer out there.

4:45So I think that's always going to be a lot of businesses. There's a few that own the majority, right? If you look at the cell phone market as Apple and Google really dominate, at least on the software side with iOS and Android, although iOS is only their own devices, but still, if you look at, you know, search engines, You got Google, you got Bing, you got Baidu, Yandex. There's not too many more other than that. You got Coca-Cola, you got Pepsi, you know, electric car manufacturer. Tesla's leading the way right now. And yes, there's others, but typically in most categories, there's a few that just take all of it.

5:17And I know like with automotive, there's a lot of car companies that have the market. But if you actually look at sub segments like value cars, like cars that are affordable, that last a very long time. it's you have companies like Toyota and Honda that are crushing it yeah I mean look at the end of the day it's the Pareto principle right the 80 20 rule and it's no different in any type of business or audience or whatever it is exactly so take that for what it is I think look I still think there's potential for these creator economy starts I just think we got a little ahead of our skis here but you know at least it's a good lesson in how the game works so that is it for today please don't forget to rate subscribe five stars please and we'll see you tomorrow