The creator economy

The 20th century gave birth to two different economical paradigms.

The first one – the producer economy – addressed the scarcity of things with the technological (manufacturing) revolution. We got really good at producing things, and the second paradigm naturally grew out of this one – the consumer economy – which answered the question “what to do with all these things.” Instead of the scarcity of things, it addressed the scarcity of desire for things.

The technological revolution turned into the digital revolution, and to fuel the desire that powered the consumer economy, advertising grew into the biggest socio-economical force in the history of mankind. In the beginning of the 21st century, the consumer economy and the digital revolution gave birth to the iPhone, and the connectivity revolution and the creator economy were born.

“In the creator economy, those who command engagement rule the world.”

An excess of things was supplanted by an excess of information, connections, and content. Attention and engagement became the scarce resources of the 21st century. In the creator economy, those who command engagement rule the world.

	Producer economy	Consumer economy	Creator economy
Scarcity	Stuff	Desire	Engagement
Timespan	First half of the 20th century	Second half of the 20th century	First half of the 21st century
Industrial revolution	Technological revolution	Digital revolution	Connectivity revolution
What	Overcoming scarcity of things through manufacturing	Overcoming scarcity of desire through marketing	Overcoming scarcity of attention and engagement through creativity

Media business models

Traditionally, media businesses have had three main ways to make money: selling content, selling subscriptions, and selling advertisements. If you consider newspapers, you can see that they utilize all of these models: you can buy an issue at the kiosk, you can subscribe to get it delivered to your home, and they almost always have advertisements in them.

As media shifted online, the advertising-supported model became by far the most prevalent one, making online advertising giants like Google and Facebook some of the most powerful companies in the world.

	Offline media	Online media	Creator media
Subscription	Yes	Netflix, Spotify	Patreon OnlyFans
Advertising	Inventory negotiation	Real-time ad exchanges	TBD
Sell content	Yes	TBD	TBD

Advertising in the creator economy

What is freedom in the time of an overabundance of information, content and experiences? It’s the freedom to choose what you engage with. It’s the choice to spend your time with this experience, content or creator. If that content is monetized via advertising, this freedom is violated when neither you nor the creator have control over what is advertised, and when it is or how. The old online advertising model works poorly in this era – creators must have control over the advertising tied with their content, because engagement is everything.

Automatically shown ads pushed by real-time ad exchanges break engagement. They interrupt the flow of the experience and they violate the trust between the creator and the audience. Creator control over advertisements and content is a must in the creator economy, and thus the online advertising industry needs to change.

“Creators must have control over the advertising tied with their content, because engagement is everything.”

The platform challenge

The platforms that underlie the creator economy – Facebook, Instagram, Youtube, TikTok, Twitch, Snapchat etc. – all primarily make money through automated real-time ad exchanges. Their business models today aren’t compatible with the needs of the creator economy.

These platforms won’t abandon their ad exchanges, but there will be more and more pressure for them to give the reins to the creators – at least when it comes to advertising that’s shown during or in conjunction with the creators’ own content.

Today it’s increasingly common for the audience to be subjected to multiple layers of advertising when trying to enjoy creator content – there’s the platform’s automatically picked ads that you can’t skip, and there’s the creator’s own ads that are integrated into the content. This makes for a poor audience experience. The creators’ content and the platform’s media inventory will need to be able to coexist in a manner that isn’t intrusive for the audience.

How will the online ad business change?

Creator-powered advertising

Creators are the masters of engagement. Reusing and remixing creator content as ad content in real-time ad exchanges will become commonplace because of its high engagement and low cost (the content is produced regardless of whether it’s reused as ad content or not.)

The online media giants know that the creative content of ads is the biggest driver of engagement, and they know the creators on their platforms generate significantly more engaging content than any ad agency ever could. Thus it’s natural that creator content will be leveraged to keep the traditional online advertising model going.

“Reusing and remixing creator content as ad content in real-time ad exchanges will become commonplace.”

Creator targeting

Creator-based targeting will be used to elevate or even supplant interest-based ad targeting, and it’s one of the ways the online ad industry will reduce their dependency on practices that are intrusive to their customers’ privacy.

The platforms know which creators each audience member is loyal to, which allows them to work with those creators to create custom ad content shown to their fans elsewhere on the platform and the internet.

Instead of being shown ads of sneakers because you looked at sneakers online, you’ll be shown ads by your favorite creators promoting whatever you might be expected to be interested in as their fan.

Creator media inventory marketplaces

The growth of the creator economy necessitates the creation of marketplaces for creator media inventory. It’s clear that the “manually negotiate for inventory and pricing” model of offline media doesn’t work at internet scale, but it’s equally clear that real-time automated ad exchanges won’t work in the creator economy that’s focused on engagement – to create something engaging, creators need full control of the experience.

The creator inventory marketplaces that power the advertising monetization model of the creator economy will be hybrids of these two. They will leverage big data, automation and machine learning to allow vast scale and efficiency of operations, while deferring to human judgement for the decisions that truly matter.

There will initially be two kinds of marketplaces: platform-owned and independent.

Platform-owned marketplaces

The platforms are used to owning all the inventory on their platform, and thus they naturally assume they also own the creator content inventory on their platform. They don’t. The creators engage with their audience on multiple platforms, and will therefore always prefer marketplaces where they can monetize their entire inventory without limitations. Platform-owned marketplaces will initially get some traction, but both creators and advertisers will always be migrating towards multi-platform marketplaces.

Independent marketplaces

Independent platform-agnostic marketplaces will grow quickly, with an initially ambiguous relationship with those platforms that they and their creator partners depend on to reach their audience.

The platforms will look at these marketplaces with a mix of indifference and hostility, recognizing them as both an essential part of the ecosystem and a potential long-term threat to their core ad exchange business model. As these marketplaces grow while the platform-owned ones stagnate, there will be a need to remediate this relationship.

Three-way marketplaces

The end result will be a world of three-way marketplaces – independent marketplaces for advertisers and creators that are sanctioned by the platforms, with strong integrations built in for their platform-specific advertising products and inventory.

The first marketplace to bring the majority of creators, advertisers and platforms together, wins.