Why creator economy startups are struggling

0:00The Colin and Samir Show is supported by Microsoft Copilot. This is something I thought I would never say, but can I share with you my favorite prompt? I mean, like when you say something like that, I have to say yes. Were you going to say no? No, but okay. Just let me hear it. So when I'm researching for a guest or I need to know a lot about a subject matter, I say, make me a podcast about. And when you do that, you're going to get a short blurb about that subject. And then in like two minutes, you're going to get a podcast. So check this out. Welcome to Co-Pilot Podcasts. Picture this, a guy working the front desk at a hotel, making lacrosse videos in his spare time, completely unaware that he's about to become one of the most influential voices in the creator economy.

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1:10Try it for your research. Try it for getting variations of your titles, your ideas. It's one of my favorite tools on the internet right now for our creativity. And now back to the show. What's up, everyone? Welcome to Creator Support. On today's episode, we talk about why so many creator economy companies that raised a ton of money failed. We're also going to get into whether or not you should upload a video even if you think it's bad. And then we're going to talk about how you can tell a better story if you're making a review video. All right. If you make it to the deep end, let us know. All right.

1:44This is a headline from the information this week. Fire sales sweep the creator economy as startups struggle. goal. Wow. So companies that are hedging their bets, hoping that they're creating some software or some sort of service for creators are going out of business, are selling off to other companies. They're not panning out. So this is a conversation we've had in private quite a bit. We've talked about with other creators at dinner, but we realized we've never really talked about it here. And we have a lot of perspective on why this has happened. And I think it all starts back in 2020 when the creator economy all of a sudden became like the hype word.

2:33Yeah. The entrepreneurship sort of conversation coming out of the pandemic was largely about media because we were all super plugged in to a different kind of media. I think it was during the pandemic that it happened like 2020 and early 2021 was when a lot of the fundraising happened. A lot of these companies were announced. And I think largely because during the pandemic, the realization was, oh, wait, there's these independent media companies emerging online. That's the next big wave. In the same way that there's a meta on YouTube, there's like a VC funding meta that happens. And if you're unaware of what I'm talking about, let me just say three words to you and you'll realize, or three terms, creator economy, crypto, AI.

3:29Now you're like, oh yeah, those were the past three metas. Those type of things. I understand. Yeah, and that's like where the hype is. That's where funding goes. That's where every startup goes. If you're pitching your startup to a VC, depending on the year and the time and where the hype is, you need one of those words in your pitch to secure funding. And there was a moment in time where it was creator economy. And I remember thinking it was odd at that time that companies were raising so much money, you know, 20, 30, 70, a hundred million dollars to service creators. Now, the reason why that felt really funny to me at the time is because whatever the amount they're raising in, in that first round, the expectation is that the outcome of it is, you know, at best, probably 10X, whatever the valuation is, right?

4:24So if you're raising, let's say at a hundred million dollar valuation, then your assumption is you're building a billion-dollar company. Now, to build a billion-dollar company that services creators assumes all of us need to use it and that all of us have really similar needs. And it assumes there are more creators than there actually are or that the growth in the creator class is going to be crazy. So the first assumption I think that was and potentially still is incorrect, in my opinion, is that creators will open software. Like, that's the number one assumption that I think you should really look at as a founder or someone who's working in startups and go, yes, there might be 100 million content creators in the coming decade.

5:23But the assumption that they're all going to open new software that's outside of YouTube, their bank account, Instagram, their creation platforms, Adobe Premiere, that's the type of software they open. It's not management software. It's not admin software. Maybe if it is, it's monday.com. It's stuff that already exists. Yeah, or Slack. Or Slack. And I think back to the time where it's like, hey, we're building QuickBooks for creators. The biggest challenge for X for creators is that most likely that thing already exists. We're building a bank for creators. A bank already exists that creators already use.

6:05And if you replace the term creators with entrepreneurs, then all of a sudden you realize most of these software products already exist. and the specificity to creators isn't so variable that it requires its own environment. So I think that was like the first assumption was, A, like are all these creators and creatives going to regularly open up software? That's really dependent on the person. So if it's not them, who's it for? It's for the entrepreneurial type. The entrepreneurial type already has software. So that's like the number one kind of line of thinking that I think was a mismatched. And the entrepreneurial type for creators may not be the creator.

6:53It may be their manager. Right. Exactly. Yeah. The second assumption, which is kind of similar, is that one size fits all in our scenario. I think actually the creator economy is much more similar to the music industry where we are a bunch of, you know, bands, right? It's like a bunch of groups of people making creative work that have different needs. And what has worked in, there's a lot that hasn't worked in the music industry for that. But I think when you look at what does work in the creator economy and creative businesses is like really hands-on service. What we need is really hands-on service, right?

7:33We need, it's why we work with agents. It's why I work with managers. It's why we're willing to give up so much percentage or commission to those types of people because they are very hands-on with us. And we need that. We need some hand-holding because we're creatives. Our minds work in different ways, and we need trusted individuals around us, and we're willing to pay a good amount of money for trusted individuals. So services are a great way to make money in the creator economy, not a scalable business model, right? Mm-hmm. So that's like the second piece of this. Like when you think about providing value to creators, it is in the context of a service.

8:11It's not to say that there isn't software out there that would solve some problems or be helpful, but it would solve problems or be helpful to a small subset of creators, which then does not allow it to create the return that a venture-backed business needs. Exactly. That's the thing is that when you start raising in that type of money, I don't know if those moments exist right now. You think about like Instagram was software for creators, right? It didn't know that when it started, but it became a media publishing site. expecting an outcome like that of a billion dollar exit sounds really challenging to me right now with the current climate of of creators and again that that anticipation wasn't to build something for media companies and creators it was to build something for the general public and then a subset of the general public became creators so yeah i think this doesn't surprise me In the article that Kaya wrote in the information, she brings up creators at large.

9:24Like, is this a bad sign for creators? Yeah. And in the article, she says, I don't know where this is from, but that like from their polling, creator businesses, like individual creators are still doing very well. Right. Advertising rates are holding. Like creators are still expanding their businesses. Right. Which is great. 100%. Yeah. And there are more and more creators. it's just that again going back to it there aren't enough if you're fulfilling a need to create a software about it that will then provide a big return. Patty Galloway posted this this week he said he talked to a VC and the VC said how's your business faring now that the whole creator economy thing has died down and Patty said I was a little surprised.

10:12Hype? Died down? I told him my business had basically doubled in revenue every year since 2019. I mean, that's pretty consistent with most creators we talk to and our own business. I said, as far as I'm concerned, creators, mainly YouTube creators, are doing better now than they've ever done before. Every week, I see a new YouTuber-founded business popping up. YouTube ad rates have been great this year. In fact, most of my clients have had a 10 % a 20 % increase versus previous highs. Brand deals are pouring back in after a slow start to the year. And it was at this moment that I realized what the investor market sees as the creator economy and what the creator economy actually is.

10:48Those are two very different things. I agree with that. Like what the market suggested the creator economy was and what we actually are are two different things. What we actually are is a bunch of creative individuals who have found a way to build our own small media companies. Like essentially mom and pop media companies. Yeah. Right. And what, what I think the VC world thought of us as was like the next wave of tech startups. Yeah. Right. And it's just not true. And so I think the people who look at us as creative, emotional individuals who are looking to monetize a version of our self-expression, they'll understand how to work with us.

11:35And then the other side is like, I can't emphasize this enough. Creators need trusted people to work with. That's like the most important thing that we need. We need trusted individuals because in order to create compelling content, we have to pour ourselves into the creative process and we can't really look up for a while. And then we'll go in and check in on our other projects. And when we do that, we have to know that this person hasn't taken advantage of us and that this person has our best interest in mind and that they're aligned with what we're all trying to do. So that's what I wanted to share on this.

12:12Like, I think that as you continue to build, are there still spaces? Yeah, I think of course there are. There's still spaces to build compelling companies, but be a little careful with how much money you raise as a startup. Go a little slow and make sure you're actually providing value? Like, are you actually servicing us? And I think in the beginning, when you're working with creators, do the unscalable thing. Get in a room with creators, spend time with creators, build trust with creators, then explore. This episode is brought to you by LifeLock. Between two-factor authentication, strong passwords, and a VPN, you try to be in control of how your info is protected.

12:49But many other places also have it, and they might not be as careful. That's why LifeLock monitors hundreds of millions of data points a second for threats. If your identity is stolen, they'll fix it. Guaranteed or your money back. Save up to 40 % your first year. Visit LifeLock.com slash podcast for 40 % off. Terms apply. Before we move on, slightly adjacent, but just even talking about the crazy boom that was the creator economy during the pandemic. Yeah. One of my favorite stories and also just crazy stories coming out of that was John Krasinski starting some good news. Yeah. And then selling it.

13:28Yeah. How much did he sell it for? A lot of money. A lot of money. A lot of money. Starting a YouTube channel based on clips of good news, selling it, and then being like, I'm good. Yeah. Yeah. That was amazing. And now it's an Instagram page. And now I think it's just an Instagram page. Occasionally post a meme. That's fun to watch. Yeah. Yeah. Yeah. I don't know. I think, you know, obviously there have been like media companies that have had really compelling acquisitions. Of course. Barstool being one of them. You know, Bleacher maybe being one of them. Did Bleacher get sold? I don't know. The Ringer.

14:00Yeah. But some of the more compelling outcomes to date in the creator space that I think we can look at is actually a lot of the podcast deals. Those do not exist anymore. They do not happen. The Alex Cooper. Yeah. Call Her Daddy Spotify deal. the Joe Rogan deal, the SmartList deal, the Dax Shepard deal. All those podcast exclusive deals were really compelling because those are not exits, but they trade at$60 million to$100 million values. And they're not exits. They're like a couple-year exclusivity deals. That's crazy. Seeing Joe Rogan post the first two hours of his interview with Elon Musk on X this week.

14:46You mean Twitter? No, I say X, man. I'm a man of the future. Okay. And I say X. I'm nostalgic for the past. I live in the present. I'm hanging on for dear life here to Twitter. Okay, I don't know if anyone, if you guys listening saw this, but Joe Rogan posted his Halloween episode, which was ridiculous. He was in the Joe Rogan ain't slick costume. If I'm speaking too much internet speak, let me know. Samir, you've lost me. I've lost you. I'm in the room with you. I'm going to take a couple steps back. Joe Rogan dressed up as a meme that someone posted of a guy looking like Joe Rogan in a costume.

15:21And the copy of the meme said, Joe Rogan ain't slick. Joe Rogan then took that costume and put it on and looks very much like the Joe Rogan lookalike in the Halloween costume. Okay. So that's the context needed to start? That's the context needed to, when you watch this interview, to realize why is he wearing a blonde wig and a jersey. Okay. Yeah. Okay. So it's also a Halloween episode of his show. And is that related to these big podcast deals? Yes. Okay. So Rogan and Elon Musk. Rogan has an exclusive deal with Spotify, but he posted the first two hours of this conversation to X. And there's a hashtag ad on there, which means he was paid to post it there.

16:05Now, obviously, the conversation is with Elon, so Elon wants it on his platform. As I'm starting to see what's happening, Lex Friedman posted his long-form pod with Mark Zuckerberg on X. Elon and Rogan are on X. And with Elon needing a play in this market, a big play, I wonder if X is the next platform to dish out exclusive podcast deals or even windowed deals. To me, that wouldn't make sense. Okay, tell me why. It's not a subscription model in the same way that Spotify is. It makes some sort of sense that you would spend that much money if it results in bringing people who will pay$9.99 a month for three to five years.

16:55You know what I mean? Like that, Timmy checks out. Maybe they'll pay less. I also think, though, that's interesting space. If some of these creators who have these exclusive podcast deals don't have it in their contract that they can't like post the first half to another platform. You know, if it's like if the definition of a clip is a gray area there and a clip can actually be two hours and you can post two of four to other platforms, that's interesting. I don't know if that's true, but maybe. I think there's like X has to become something. And Spotify is also ad backed. So we should acknowledge that.

17:38It's not just subscriptions, right? They're also an ad backed platform. So getting an exclusive with Spotify also suggests to them a potential increase in their ad business. Yep. So X is also an ad backed platform and a subscription platform, right? It has a subscription tied to it. Maybe it's like if you're part of, is it called X blue now? If you're part of X blue, you, you can watch the pods, certain pods. I don't know. There could be something here. Could be. There could be. I'm still interested in us posting full pods to X. Yeah. We should give it a shot. We should give it a shot. And who knows?

18:17Elon, you want to do an exclusive deal? I would not take our, I wouldn't do an exclusive deal. I would not. But I would, I would explore something. I don't believe in the consumption habit on, on X. But, you know, I have to say that I, when I see something that interests me across any of the platforms, if it's a long form video and I just turn my phone horizontally, I'm in the same environment that I would be anywhere. Right? Yeah. That's true. So, I don't know. I think it could get interesting. I want to talk about my least favorite trend in the creator economy right now. Ooh. Nice. Yeah. Yeah.

18:56I've been thinking about this a lot. I don't think I voiced it here. Okay. Live IRL streams is my least favorite trend. I think the live streaming era has been a really fascinating one to watch. Like the real fact that, you know, the Kai Sinats and the iShow Speeds are some of the most popular people on the internet. And the sit down, the like sit and chat, the Ludwig version of that, I think is like the modern radio, which I'm cool with. You know, I'm good with that. the variety show that you're watching, you don't know what's going to happen next. What's been happening is that now live streams have been taken out to the general, to like public environments.

19:36So people in Times Square walking around with a camera that's live streaming directly to kick or Twitch. The Nelk boys did it. They did a live prank where they're doing a live IRL stream. And then a creator named Jack Doherty took his live IRL stream to David Dobrik's Halloween party. And he created a scenario where he, you know, got in some level of a altercation with, with Karina Kopp. Um, some other people got upset with him. Long story short, his bodyguard punched one of the guys in the face live on stream. And then Jack Doherty posted the clip on Twitter saying my bodyguard just knocked someone out live on my stream with a link to the stream.

20:21Yeah. I mean, the, the, the thing about a live stream where you haven't really prepped, like you're not at a desk, like the radio, you're not sort of like in that type of environment. You're actually requiring that the visuals be interesting and that there's drama and that there's tension means that people are sort of waiting for a car crash. And I forget, Again, you keep bringing up that quote. Andrew Schultz. Andrew Schultz. He said, what works right now is a car crash. And what he's talking about is the suggestion that sensationalism has hit an all-time high. And to actually capture attention today, you have to create a car crash.

21:02The equivalent of a car crash. Someone getting knocked out live on stream is a car crash. And the reality is the reward system of the internet is that attention equals good. Right? And so if that's the case, I think these live IRL streams are creating a scenario where in an unscripted live environment, the incentive is to have something really shocking happen. Yeah. Right? Like why are you watching as a viewer? You're waiting for something really dramatic to happen in a live environment, in a real life live environment, like a party. Yeah. That feels really dangerous and a really just not good behavior to start to train audiences.

21:47Yeah, or creators. Or creators. If you're a creator out there, this seems like one of the least safe environments that you could put yourself or other people in who are part of the content. Right? Yeah. It's like one of the – yeah. Yeah, it could be detrimental to the people in the video, in the live stream, and detrimental to you, detrimental to, you know, your business, like your whole life. It's not a good scenario. Yeah, it's my least favorite trend. I really don't like this version of what's happening in the world of online video. Do you have a favorite trend? Do I have a favorite trend? What even are the trends?

22:29Now that we're talking trends. Do I have a favorite trend right now? I mean, I think my favorite trend is the rise of long-form podcasting, you know, but that's been going on for a while. I can talk about, I wrote down some of my favorite creators. We are going to get to your questions, by the way. But I wrote down some of my favorite creators that I've been enjoying recently and what I think they're doing well. My first one is, I'm going to say Preston Goes. I've been talking about him a ton in our office. I've been watching every single one of his videos. and what I love about what he's doing, it's almost a mix of Ryan Trahan with, I guess it's like a Ryan Trahan-esque, you know, trying really hard at these things that almost feel like you don't need to try hard at.

23:12You know, Max Fosch, Ryan Trahan, that kind of feel of wholesome entertainment. But the X factor with Preston is that he makes music. And like he makes original music in the middle of his vlogs. Yeah, it's very Bo Burnham-esque. It's super Bo Burnham-esque. parody type of music. So you're watching and then you're waiting for an original song and then it comes and then you're listening and you're like, that's, that's so incredible that he's singing this original song and that he made this original song. Um, so yeah, I think it's just like lighthearted and fun. I want to give a shout out to, uh, Tejas Huller.

23:49I think his videos have been really great recently. They're like deep dives into specific subject matter and topics. It's almost a modernization of the video essay with like live action acting. Yeah. His most recent video, I've only watched half of it. Yeah. For no other reason than I had to come down here and record this. Wow. Had to. Real chore. Well, I just, we had a time on the schedule, you know, and couldn't push it back. So I'm in the middle of that video right now. But yeah, really enjoyable and fun. I like that the entire content closet and so much of the New York scene is integrating this acting component.

24:25it's really really fun you have any creators that you're watching right now? I really need to write it down because whenever I'm watching I think oh that's someone I want to talk about and then I watch 8 other videos and I've completely forget so I'm scrolling back in my watch history right now but no off the top of my head no here's a question from the discord from Thunder Eagle Is it better to upload a bad video than to not upload at all? I upload roughly every four to five days. Let's say I finish a video and I'm beginning production of my next one. Looking at my current list of ideas, none of them really seem to be all that clickable.

25:07Should I break this four to five day schedule to spend more time brainstorming or just go with the best I've got, even if it's not very good? I'm going to say press publish. I'm going to go put it out in the world, see what happens for us. We set ourselves to a schedule in 2021. I think that's the most consistent we've ever really been. I mean, obviously now we're a lot more consistent, but we were very inconsistent for a long period of time. Videos weren't good enough. We couldn't get into flow. 2021, we just started putting things out. Sometimes we put out videos that we thought were going to tank, where we would tell the team, don't take any lessons from this video because it is bad.

25:43It's not good. We're going to move on. And many times they were some of our highest performing videos. And I look back at them now and dissect them sometimes. I'm like, oh, actually, you know what? Like that intro was really thoughtful. And I can see why this did well. But when I was in the moment in the edit and it was difficult and we didn't think it was worth it, we didn't want to post it. I'm torn on this one because I think that I agree with you, but I think there's moments in time where you have to get off the hamster wheel and get a broader perspective and take inspiration from different places and understand your why.

26:16So I think it depends on where you're at. Like if you can handle it, if you don't feel fatigued by it, I agree that the pressure of putting something out makes you a better storyteller. But sometimes you're just in the wheel and you can't see the broader picture and you need to take a step back. And one thing that you could do is something in the middle, which is maintain the consistency, but reduce the output. So say rather than one every four to five days, I'm going to release two a month. So you maintain the pressure and the consistent framework of I'm putting a video out, but you reduce the pace because maybe you're the type of creator that takes way more than four or five days to come up with an idea, edit, and put something out.

27:01And something that we've seen is that this year, less output has created higher average views and higher AVDs and just overall, like it's actually been a better year by the metrics. The only metric that is down this year for us is output, like meaning videos posted to the main channel. Yeah, but videos posted in total, I would say our output's way higher. Sure. Between the creator support channel, Instagram. Sure, but I think if you look at the main channel format, that's the one that saw the highest increase. Yeah. That's the one that outperformed with a lower output. With almost half the output.

27:48With half the output. Yeah. So my main thing, I say press publish mainly talking about understanding your relationship with failure. Because I find that in the beginning of our career, I really was not afraid to fail. I don't even know if I fully felt what failure was like in certain parts of our career. It was just like on to the next one, on to the next one, learn on to the next one. and as our channel has grown, as the brand has grown, there have been periods where I get a little bit more uncomfortable in even some of the micro decisions of edits and videos that I don't think I would have even thought of, you know, in earlier parts of our career.