Influencers Aren’t Winning: Analyzing The Creator Economy Problem
According to a report released by Goldman Sachs, the creator economy is expected to reach a staggering $480 billion by 2027. The report demonstrates that, despite a stronghold of 50 million content creators worldwide, this number is expected to increase by a compounded annual growth rate of 10-20 percent.
Simultaneously, social media platforms new and old have experienced record growth on the back of content creators who are continuously struggling to keep their heads above water. As of today, only 4 percent of creators make more than $100,000 a year, according to that same report.
Some social platforms today have been augmenting platform features or algorithms. Both Instagram and Twitter removed their legacy verification programs that protected the identities of countless high-profile individuals. Instead, verification is offered to any person with a valid ID and $8 per month, reducing the barriers to entry for deep-fake and scam accounts to impersonate other members on the platform.
Despite influencers being a cornerstone stakeholder within the social media ecosystem, time and time again we’ve seen these creators struggle, the very people who put in the sweat equity that invariably contributed to the industry’s success. It’s time for a change.
The Influencer Experience
Today, more than 70 percent of a content creator’s revenue is derived from brand deals they secure through content creation, according to the Goldman Sachs report. Occasionally, brands might be the first to establish contact with a given influencer, but more often than not, brand deals must be sourced through the effort of the influencers and/or their management teams — who, by the way, get a cut of the deal. Influencers have to be selective with the deals they choose to pursue because shilling too many products or services will leave a bad taste in the mouths of the very fans that represent their livelihoods.
To make this juggling act more difficult, influencer stereotypes often push content creators to lead lives well beyond their means to keep pace with their public personas. It’s commonplace for influencers to do things that normal people don’t do, have things that normal people don’t have, and experience things normal people don’t experience. After all, a lot of what makes influencers appealing is that they are a mechanism for the rest of us to dream about what our lives could look like had things played out differently.
To top it all off, influencers are flying blind when assessing what type of content will be prioritized by ever-changing algorithms. Whether it’s attempting to glean more information about its users or attract a desired audience, social media algorithms are constantly evolving, making content creation an unbelievably difficult job to be proficient at for long stretches of time. Algorithm changes are almost always for the benefit of the platform, not the creator.
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The Market Opportunity
Global markets have been challenging over the past six months, which has impacted virtually all sectors of our economy. During challenging times, consumer demand across all products compresses which, for the context of this article, impacts the amount of advertising dollars companies allocate to influencer marketing campaigns. For what it’s worth, a decent number of companies dialed back their advertising. Nonetheless, the amount of money flowing through the ecosystem has begun to siphon off.
While traditional social platforms have limited monetization tools for creators, there are a handful of alternatives that have surfaced over the past few years, like Cameo, OnlyFans and Paetron, which function more like marketplaces and allow creators to monetize their fan bases more directly through selling subscriptions or digital experiences. However, these platforms can be limited in scope and don’t serve all creator demographics.
Despite how it may seem, the creator economy is a burgeoning ecosystem despite its nascency. Right now, the market is calling for a new paradigm where creators receive equitable compensation for the value they create — a paradigm where those who are endlessly influential are able to establish reliable streams of income so that they can continue doing what they do best.
What Do We Do About It?
It’s increasingly essential for creators to evaluate how they can be compensated fairly and reliably in a society where they’re being held ransom by profiteering platforms. For example, creators can aim to diversify their income streams by exploring options such as crowdfunding, personal merchandise or even by creating paywalled premium content.
In addition, standardization and transparency within the world of brand collaborations would do wonders in building a financially equitable economy. Of course, it’s impractical for such a regime to be legally enforced by government authorities but open-spirited discussions, especially amongst middle-class creators, could go a long way in ensuring no deal made is unethical.
Additionally, creators should realize that there’s strength in numbers. Collaborating with like-minded individuals can lead to mutual benefits and amplify each other’s voices. From joint initiatives to guest appearances and cross-promotions, collaboration can help expose creators to a wider audience and open new income-generation opportunities.