A recent news about Karat Financial raising $26M in Series A funding grabbed my attention. Karat is a bank for the creator economy, And another data naibuzz shows that YouTube channel MrBeast has over 70 million subscribers as of 2021 and has accumulated over 11 billion views so far. It is able to get an average of 11 million views per day from different sources. It is able to get an average of $88,000 per day ($32 million a year) from the ads that run on the videos. I got intrigued to learn more about “Creator Economy” and that finally shaped into this blog post.

Creator Economy Defined

The Creator Economy a.k.a. Ownership Economy a.k.a. The Self-Monetization Boom is the class of businesses built by over 50+ million independent content creators, curators, and community builders including social media influencers, bloggers, and videographers, plus the software and finance tools designed to help them with growth and monetization. With over 100 newly funded companies and with an estimated $104.2 billion market size, the Creator Economy is just getting started. The following diagram reflects the CB Insights research on 125+ creator-focused companies that are capitalizing on each step of the creator work cycle, from content creation to off-platform monetization to audience management.

The Evolution of Creator Economy

By looking into the history of the creator economy over the last decade, the evolution over 4 phases becomes evident. I would describe these phases as below.

Creator Economy 1.0: This was the rise of social networking and (User Generated Content [UGC] platforms. When these platforms first began, creators didn’t really exist. Everyone was a creator, everyone was a user, and they used these platforms just to communicate with each other. Platforms like myspace, LiveJournal, Xanga, Facebook in its early days are examples of the 1.0 era of the creator economy. The first era was just the rise of more influential users who other people started gravitating to, who they didn’t know from the real world, and this had started the rise of this creator class on the internet.

Creator Economy 2.0: This was the era in which the people who started to amass influence and fame online started to monetize that primarily through advertising. The creators became influential but they were always the conduit for some other business to achieve its goals so brands would use them as a channel for advertising. Platforms like Instagram, YouTube on which people are following in like a one directional manner, it’s not bi-directional follows and mutual friendships. It was just like following an influencer who might not know that the follower existence.

Creator Economy 3.0: The era where creators started realizing that they can become the business themselves. Not just shell someone else’s product and become the face of some other brand, creators can be the brand, the product, and a business by themselves. The third era is like all of the current creator monetization platforms like Patreon, substack that exist in Web 2.0.

Creator Economy 4.0: We’re now entering this era in which the creators aren’t just trying to create a business in and of themselves, sell a product and have this transactional relationship with their audience. Creators are actually blending the line between the audience and the creator and they’re creating micro economies and richer ecosystems beyond just a one-dimensional monetization model. All of the crypto creator platforms that are arising fall under this category.

Role of Cryptos in Creator Economy

The creator economy pretty much started with the creation of the internet itself and taken a step further with Web 2.0 platforms like YouTube, Spotify, Twitch etc., where a lot of content came alive with growing number of creators on these platforms. But only top 1% or so of Web 2.0 creators really maximize self-monetization from their content and the long tail of creators are really left on the sidelines of Web 2.0 platforms. So I would touch on the growing demand for more creative outlets more equitable platforms for content creators.

There’s different degrees of creativity online, and creators are all making stuff and sharing stuff that is the nature of the medium. But to date there hasn’t been a sort of a ton of reciprocation for that value that’s created by creators as individuals and I think crypto’s gonna change that in a meaningful way. Examining the relationship between the creator economy and new crypto Web 3.0 has come about more recently.

One of the major shifts in the creator economy is that these creators are being recognized for the value that they’re contributing to all of the platforms that they’re actively using. There’s a new range of different monetization mechanisms that they’re exploring. It used to be really about Ad revenue share, branded content. and sponsored content recently. We’ve seen a lot more exploration around subscriptions, direct user payments, tipping, patronage, etc,.

What crypto introduces is the concept of digital scarcity and the ability to actually own digital media on the internet which hadn’t existed before. The platforms were trying to get to that element of digital scarcity but they existed only within walled garden ecosystems. So crypto platforms unlocks a lot of potential for monetization. Crypto platforms also brings the other intersection point around economic coordination and how to reward contributors and align economic incentives beyond just having fans be altruistically engaged with the creator.

Creator or ownership economy is about giving everyone ownership over the value that they create that’s something that didn’t happen in Web 2.0. It is because many of the platforms while gave creators new tools, but extracted the value at the platform level, the value that was built on the back of the creators who drove the value of the platforms. In Web 3.0 the opportunity is to build platforms, build networks that are built. operated and actually owned by their users. Crypto enables this so uniquely because it’s now possible to move the value of ownership or move that economic value at the same scale and the same speed that we move information. What we know from silicon valley’s history is that ownership is really powerful incentive to get talented people to come and contribute to an idea or a startup. Crypto enables sending value tokens to anyone with an internet connection regardless of where they are. That’s the big new opportunity that crypto adds to the creator economy.

While we’ve only recently seen it crystalize, it’s been inevitable for some time that crypto would become an integral part of the creator economy. The economics of crypto favor artists over the big tech-owned social media platforms that have been profiting from their labor over the past decade. Creators need fewer fans than ever to make a living, and crypto allows them to directly own their financial relationship with fans instead of relying on tech giants to serve as a middlemen. Moreover, crypto gives creators control over their own economic success and helps them maintain ownership over their IP in perpetuity.

Just a few years ago, podcasting, hosting a YouTube channel, and blogging were viewed as hobbies, not professions. Now, any of those paths can be viable entrepreneurial pursuits. There are universities that teach creators how to run their business. There are venture funds looking to invest early in creators’ careers to help them scale their channels. There are thousands of new companies popping up every day looking to help creators in every aspect of their engagement with fans and in every aspect of running their business. The challenge was that creators didn’t have a way to tie all of this together into a cohesive economy that travels with them wherever they engage with their fans.

With crypto, they do. They can launch their own economies and mint their own currencies that deliver unique value to fans. These supporters become holders of tokens that they can use to certify their super fandom or gain access to exclusive content and experiences. Artists like the DJ/producer Wax Motif are offering goods and services in exchange for their currency: Last month, he launched $WAXM to build a closer connection to his fans, and is offering a myriad of benefits ranging from 75 $WAXM for a birthday shoutout to an in-person meeting for 500 $WAXM. As a result, he and his community have driven nearly $1 million into the $WAXM economy. Similarly, streamer Alliestrasza regularly plays card games with fans on Twitch. Fans buy Twitch subscriptions with her coin, tip Allie directly with it, and also, if they choose, tip other members of the community when they do something positive. The $ALLIE economy now has more than $1.2 million.

We will continue in the PART II…

I will elaborate further on how cryptos enable Creator Economy at a deeper level and the role of NFTs in the creator economy…

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