The Creator Economy in the Faceless Web3 Age
2021-12-13 8:55 by Thomas– 16m read
The digital creator economy is an extremely dynamic environment. Every day we can see new creators emerge, platforms launch, technologies getting adopted, business ideas invented, and challenges arise. Constant changes abound.
One example: the biggest trend of the last years has been the rise of subscriptions. After SaaS companies and big publications popularized the model and tech companies built the tools that made launching subscriptions accessible for small and medium-sized creator businesses, more and more creators launched them. Today, we might be reaching the breaking point. Many people can barely keep track of the subs they signed up for, suggesting we might see consolidation, more bundles, and alternative business models.
And that's just one of many developments in the creator economy. In this piece, I share our analysis of the current situation and our vision of the future. Quick tease: faceless platforms and the emerging Web3 fundamentally change the game.
Challenges for Creators and Community Organizers in Today's Digital Economy
More people than ever self-identify as a creator. According to data from VC firm SignalFire, there are almost 50 million of them, 2 million of which are professional creators.
While many a teenager dream to become YouTubers, it's by no means easy to achieve it. Let's talk about three of the most critical challenges creators face today:
1. Growing an audience
With that amount of competition for the scarce resource attention, growing an audience is hard. If you are a creator in this environment, it's not enough that your work - whether it's video, music, podcasts, photos, digital art, live streaming, or good ol' writing - is great and sticks out from the masses.
It's just as important that you foster a community (I also like Seth Godin's "Tribe" metaphor). Instead of just publishing stuff to a herd of anonymous "recipients", the digital content game played well is conversational, on eye level, and definitely not a one-way road.
Creators who understand this can steadily grow their audience as their community of loyal fans will help them by spreading the word. And just as importantly: some platforms, Tik Tok for instance, can turn almost anyone into a viral phenomenon overnight. But unless you have a community acting as your foundation, the hype train usually departs to the next one clip wonder as quickly as it arrived.
2. Depending on platforms
Speaking of platforms, most creators use the big social publishing platforms to build an audience. Given that those platforms managed to build massive user bases, invested heavily into building tech that provides a top user experience, and developed discovery tools that make sure users always get a fresh dose of content, it makes sense that many creator journeys start there.
But many do end there as well. And that's where it gets problematic. Creators who fully rely on the big platforms and are highly dependent on them. The most blatant risk you might think of is being deplatformed. It's a real risk, not only for adult entertainment creators but also researchers, LGBTQ creators, and many others. But you don't have to be deplatformed to feel the consequences of platform dependence.
Platforms influence the creative work itself. Their policies and algorithms dictate the kind of content that will find an audience and can be monetized. Platforms dictate the business model. They limit the options creators have and, of course, set the terms. The platforms also, at least in most cases, own the relationship with the fans. This allows them to build a moat around their business model.
3. Monetizing your work
All this leads to the third challenge: it's hard to earn a living as a creator. Sure, the internet has made many stand-out creators rich. Yet below the superstar tier, it's tough. That is partly to be expected in a world where publishing is simpler and consumer choice broader than ever. But the fact that most creators are locked into a platform and its business model options, makes it even harder to create a differentiated offering.
There isn't a one-size-fits-all solution for building a successful creator or community business. Hence, platforms ought to offer versatility and flexibility in terms of business models. But most don't. Plus, the most important asset is the customer relationship - i.e. the full contact data and the business relationship - but many creators today actually control neither.
Let's sum up. From growing an audience in the first place to building a sustainable business, creators face significant challenges in today's digital economy. And because many opt to build their entire digital presence on top of the big platforms, they are locked in and highly dependant on their chosen platform. That's why you'll hear people say that the creator economy is broken. Against this backdrop, we see developments aiming to transition the creator economy to its next evolutionary stage.
Towards a Better Future for Creators
While it's hard to predict the future with precision, there are some clear trendlines on the horizon. Here's what we at Liquiditeam expect is next.
More independence thanks to faceless platforms
Tech industry star blogger Ben Thompson coined the great term "Faceless Platforms". In a recent piece he wrote:
It is companies like Unity and TSMC - other examples include Stripe or Shopify or the public clouds - that are the most important to the future. The most valuable prize in technology has always been platforms, but in the beginning era of technology the most important platforms were those that interfaced directly with users; in technology's middle era the most important platforms will be faceless, empowering developers and artists and creators of all types to create completely new experiences on top of the best technology in the world, created and maintained and improved on by companies that aren't competing with them, but partnering to achieve the scale necessary to accelerate the future.
In the early days of the web 2.0 era, most creators relied on the first versions of faceless platforms, most commonly WordPress, which was the perfect tool in a web that was still mainly based on text publishing and not yet dominated by big aggregators. The downside, at least of the self-hosted version, was a certain complexity in setting up your blog and maintaining it. Still, that didn't stop the early blogosphere (age-signifying terminology) from striving.
But Creators moved on to the big platforms because they made publishing even easier, especially once the web became increasingly a multi-media environment. The platforms were simply better suited than individual creators to handle the technical complexity of, for instance, streaming video. And so they won out. But, as Thompson rightfully points out, the web 2.0 platforms with their ad-based business models are essentially competing with the creators that use them, namely for the attention and user relationship.
Faceless platforms take a different approach. They focus on developing the technology that creators need to provide a state-of-the-art user experience. This means publishing, distribution, and monetization tools, as well as social capabilities and interactive functionality. We think of faceless platforms for Creators as a "CMS on steroids".
What faceless platforms don't, however, is competing with creators for the users' attention. The creators are their customers - and not their unpaid content suppliers. Faceless Platforms, thus, can swing the pendulum back in the direction of the creators who will regain autonomy and more control over their business.
The arrival of web3 empowers creators & communities
The term web3 is used predominantly in the blockchain community and describes the next iteration of the internet that will
- be less centralized, in both a technological and economical sense,
- give users and creators more control over their data,
- (re-)prioritize interoperability and open standards over gated islands.
Messari's Mason Nystrom writes: "Web3 is about rearchitecting the existing services and products of the Internet so that they benefit people rather than entities." To that end, as Doug Petkanics put it on Techcrunch, the web3 community is "building an open infrastructure that fosters a more collaborative, creative and user-centric internet, it's on us to solve the fundamental flaws of the last generation of technology."
While there is a deep tech aspect to web3 (read this piece by Fabric Ventures for more on that), in our context it's most relevant to discuss what those technological innovations will do for creators. Let's start here: many faceless platforms will be powered by the web3 tech stack. Plus, web3 will power a variety of new business models for creators. And last but not least, it will impact the actual work that is being created.
The two most interesting web3 developments for creators right now are social tokens and NFTs. So let's dive deeper into those.
Social tokens for creators and communities
Social tokens, sometimes also called fan tokens, are blockchain-based tokens launched by creators and issued to their fans. In the current early stage, most projects take slightly different approaches to how this works and what creators and fans can do with their tokens. Common themes are:
- fans can use tokens to unlock special content or experiences such as AMAs (solving micropayments in the process btw)
- fans can use tokens to have a stake in the creator's work, e.g. by getting to vote on new projects
- fan tokens are used to create micro-economies around creators and communities
Besides these commonalities, some projects, like Rally, focus on the investment angle and tradeability while others, like our company's LT Fan Platform, focus on creating a gamified fan experience and empowering communities.
One interesting aspect of social tokens: they give creators and community organizers an alternative to subscriptions. While subs are indeed a great and desirable business model, not all fans like them, and, importantly, not all creators can guarantee the regular output that is required to justify a subscription. In short, they give flexibility.
NFTs enable new creative forms
Non-fungible tokens, in short NFTs, are one of the most intriguing innovations for creators. And I'm not talking about this year's hype which was largely driven by record prices at the market's top end. Rather, I'm convinced that NFTs will become a mundane tool in every digital creator's bag. They are just that versatile and useful.
I'll spare you the nitty-gritty technological details and try to explain in layman's terms why that is. Here are the three critical properties that make NFTs so interesting for creators and communities:
- NFTs introduce scarcity and uniqueness in a digital world where everything used to be abundant.
- NFTs can not be copied, only transferred, so there is a real notion of ownership, manifested in technology. That's in contrast to the web2.0 digital economy where most users merely rent access to content.
- NFTs are based on open standards and, thus, tailormade to power cross-platform experiences.
What you get if you combine these into one neat digital thing, is a new design space for creatives. Think of it like this: Depending on what exactly you do with them, NFTs are some kind of hybrid between
- limited edition artifacts/content,
- digital bragging rights,
- tickets / access permissions,
- club membership IDs,
- and ownable memes.
That's why we regard them as an instrument that will lead to the development of new creative forms. Let me illustrate this with an example of what you could do.
The Fictive Artist's NFT record
You are The Fictive Artist, a musician with some notoriety in your genre's bubble. You are very aware of what the streaming economy does: it incentivizes you to create lots of music in order to maximize the number of plays you collect. But assembly-line style output is not your thing. You want to release your music only once it's ready. And that takes time. So why not switch to a world where scarcity is valued and turn your next album or EP into an NFT?
You don't have to go full Wu-Tang Clan and create only a single copy to do so. Instead, you decide to release a limited number of authentic copies and sell them directly to your fans, without intermediaries. Because you want to ensure that you cater to all segments of your fanbase - and because you believe in Kevin Kelly's 1,000 True Fans concept - you create a basic edition of your NFT record that has a thousand copies and that you sell at a fixed price.
But you also want to do something special for your super fans. So you create the digital equivalent of a limited edition vinyl: an NFT version with, say, only one hundred copies, a special animated artwork that you collaborated on with a known digital artist. And because it's all digital and because you can, you throw in a special perk: early access to all your music videos and the right for every owner to ask you a question in an AMA.
And while you are at it, you also create a special edition that exists only once. Of course, it also includes your record and some cool artwork but you also throw in a very special right: whoever owns the NFT, gets free access to all your concerts and can even meet you in person at one event. As it's hard to set a price for this package, you decide to auction this NFT.
While there's a lot more you can do than this one example can cover, it hopefully gets the basic concept across: NFTs are a cool new canvas for creatives and will lead to entirely new artistic forms and distribution concepts. If you want some more ideas, including for other disciplines than music, our Utility NFT presentation might be of interest:
Wrapping it up
The emerging web3 stack and faceless platforms aim to give back control to creators and communities. Novel mechanisms like social tokens and NFTs create a new playing field for creatives. They allow the creation of new digital offerings and present an interesting alternative (or addition) to the big platforms' monetization options.
If creators hop on board and adopt those new developments, they will gain more independence and control in the process. And the first ones to do so will also benefit from the novelty factor that new technologies present and have a differentiator that makes them stick out.
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