Creator Economy CRASH? Think Again!

Reports Of Our Death Are Greatly Exaggerated: I’ve talked to a lot of freaked out people over the last week about the lack of VC funding for Creator Economy startups.  The latest angst was precipitated by the Information’s Kaya Yurieff reporting on the 58% plunge in funding in 2023.  Yes, it’s a huge drop – especially when compared to 2021 - but let’s temper that with reality.  First, venture funding is cyclical, impacted by economic cycles and the cost of money.  It’s supply and demand – back in the ZIRP days of 2020, money was basically free – and thus investors chased the supposedly higher returns of venture.  Today’s relatively high interest rate and rocky economic environment means less money gets allocated to venture.  Less dollars means less deals across the board.   But many VCs are also lemmings, racing hither and yon chasing the next big thing.  They fuel the hype cycle but also lead us to the trough of despair. 

There are many indicators of the state of the creator economy, and venture funding is just one.  Creators themselves, as Brendan Gahan points out, are still doing well.  And when you expand the definition of “the creator economy” beyond just YouTube, Instagram and TikTok, things look more rosy.  So yes, VCs have moved on.  I think 2024 will be an inflection year, where we’ll shift a bit from what has worked in the past and towards a new reality.  But creators and the creator economy overall are stronger than ever.

Amazon’s Gazillionth Creator Economy Effort Launches:  Amazon has had so many different fits and starts with creators. This new one enables direct linkage between creators, brands and Amazon’s Posts – using a new API (scroll down for story).  This promises better reporting and accountability, albeit at a steep price. Amazon takes roughly 15% - or even higher - of most sales.  That’s twice as much as even TikTok’s new 8% take.  This focus on creator/sales attribution comes at a curious time, as Amazon just fired 500 employees – a third of the staff – at its live-streaming platform Twitch.  Brands will likely embrace this – but at the peril of losing their core business to Amazon.  There’s more behind the move – along with Temu and Shein, TikTok’s shop has clearly deeply rattled Amazon brass. But like so many other underwhelming Amazon/creator initiatives, including Spark, the Influencer Program, Amazon Live and more, I wonder how long they will lean in - and with how much vigor.

Get Your Popcorn Out:  Generative AI and copyright battles are already the top spectator sport of 2024. OpenAI just accused the NYT of extreme prompt manipulation, calling the case without merit.  Meanwhile, Open AI offers licensing deals of just $1-$5M to shut-up media companies, much like how Logan Paul is buying back CryptoZoo NFTs in exchange for waiving the right to sue.  Hot takes abound, including Stratechery concluding that the Grey Lady has it backwards, and Gary Marcus insisting that the “desperate” AI industry is racing to save its business.  My point of view? No matter what happens, the genie will never go back into the bottle.  Extreme prompt crafting can certainly lead to odd outcomes – remember the simpler days last winter when Kevin Roose fell in love with his AI ($)?  I think we’ll end up calling them all “derivative works” with some hastily legislated guardrails to avoid spewing out fully-formed copyrighted images and texts.  Or perhaps we’ll end up with the AI version of Bit Torrent - doing the Generative AI dance in the privacy of our own homes.  FWIW, I want a “gal” and a “rabbit” (HT to Lance Ulanoff ).

TikTok’s US ARPU grows 60% YOY:  That’s just one of the many fascinating tidbits from Data.AI’s voluminous “State of Mobile 2024” report – available to peruse online or download free. In December we covered their data pre-release showing TikTok's aggregate $10B in user revenue, but there’s much more, including TikTok’s astounding $1 US monthly ARPU – and we’re talking in-app payments only, not total ARPU across sponsorship, funds, etc.  The report also chronicles the rise of Threads and the fall of X – although the former is still a small sliver of the latter. Note, you can only see regional breakouts in your browser, not in the PDF.

Hate Is Such a Strong Word: Ad Age released a story about how creators despise affiliate programs.  That’s not true – as you’ll find if you read the article (it’s not worth paying for).  Instead, creators smartly practice yield management when it comes to sponsor messaging.  A brand integration typically delivers more revenue than a performance or affiliate integration.  But both are essential.  It’s like an airline.  You only have so many sponsored slots (aka seats) per media unit.  And once you’ve published, those slots are gone forever.  So yes, put a high-value brand sponsorship in if you can.  But when those deals dry up, affiliate/performance insertions deliver less revenue – but it’s still something!  Perhaps Agentio will solve this problem with programmatic insertions.  But until then it’s all a part of dynamically managing ad inventory.  And creators have gotten very good at that.

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QUIBIS:    

YOUTUBE

• YouTube expands takedowns to include AI-generated crime victims describing their “suffering”.
• YouTube starts rolling out new ways to vet live chat participants (scroll down to “Access Channel Activity from live chat feed”).  
• YouTube actively moves authoritative emergency health videos to the top of the search stack.  Well done!

META

• Ooops.  Threads exposes internal search / sort prototype into the wild.
• Meta adds new protections for teens on its platforms – why hasn’t this already happened?
• Instagram testing new way to collab with friends on Stories.
• Lightning fails to strike twice: Instagram co-founders Kreiger and Systrom shut down Artifact.

TIKTOK

• Professor Scott Galloway uses Mr. Beast’s impressive YouTube numbers to prove that TikTok is killing Hollywood – equating it to how Asian upstart Datsun killed the US car market (C’est Wut?).  
• Bytedance wants out of the gaming industry.
• TikTok cancels its hashtag research tool in Creative Center.

OTHER CREATOR ECONOMY

• How to make money as a creator in 2024 – according to the LA Times
• Interesting conversation about how AI will transform ecommerce into “relationship commerce”.  
• Snap adds parental controls to its AI Chatbot.
• The NY Post finally decides to pivot to video.
• MatPat hangs up his theorizing – on to other projects and family.  We’ll miss you!
• Related: Reed Duchscher writes about retiring creators and what comes next.
• WhatsApp finally making inroads in the US – hey y’all, get on WhatsApp and connect with me!!
• Substack backs down a little bit on its Nazi problem – but is it enough?  Not for Garbage Day or Platformer (I’ll follow you both anywhere!).
• Related: Garbage Day unpacks the Stanley Cup phenomenon to reveal truths about TikTok, shopping and short-form video.
• Rolling layoffs continue at Discord – another 17% get the ax.
• Gersh acquires A3’s digital and alternative divisions – congrats to Marienor Madrilejo , Jade Sherman , Alec Shankman , Keith Bielory and the rest.

GENERATIVE AI

• Adam Wescott with details on how creators are using AI today to create content and make money.
• SAG’s signs a deal establishing minimums for AI-cloned voice-overs.  Members are not happy.
• Related: Celebrity voice cloning for scam ads is already a big thing ($ NYT).
• AR and VR are dead to Apple.  Instead, it’s all about “spatial computing” – my early pick for 2024 phrase of the year.
• Welcome to the “AI is DEAD” phase of the hype cycle.
• How AI can bring animation jobs home - and accelerate creator projects too.

TIPS

• Jay Clouse’s free Creator Science newsletter is worth subscribing to – this week he covers the top 9 tools he uses to run his business. 

RESEARCH

• Luma Partners’ full year market report for 2023 has good insight on Digital Content, Ad Tech and Mar Tech investments, valuation and exits last year.
• Insider Intelligence with a GenZ look at how Instagram and TikTok compare for stories and DMs – turns out IG wins both.  You’ll have to pay for the full report though.

Let’s do a meetup in your town – anywhere in the US or even around the world.

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I've built and sold multiple creator economy startups to top media companies - including Discovery and Paramount. Subscribe here on LinkedIn to get this newsletter every Monday.

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