An honest perspective on the issue from a venture side
It’s been more than 20 years since we entered the era of the creator economy. Starting with YouTube’s early days, we quickly transitioned to Facebook and Instagram, Twitter and Twitch, and finally Snapchat and TikTok. Now there are dozens of platforms, both local and global, and the creator economy is estimated to be worth more than $250 billion, with over 200 million people worldwide considering themselves creators. We constantly see celebrities in expensive cars, adorned with branded and jewelry accessories, and beneath these photos, there’s often a conspicuous “sponsored” tag.
But what about from the business perspective? The creator economy has significantly altered the entire marketing and branding landscape. According to Martech data, there are currently 11,038 marketing solutions in the market, and believe me, a significant portion of them operate within the realm of the creator economy. Community platforms, influencer marketing agencies, advertising products, and many more continue to attract investments and keep on growing.
All of this feels like the creator economy is thriving. But is it really that sunny? Not exactly. And here’s why.
1. The economy thrives thanks to creators, yet the creators themselves are significantly underpaid
It may come as a surprise, but a mere 2% (approximately 4 million) of creators boast followings exceeding 100,000, while the majority of creators (around 140 million worldwide) maintain follower counts ranging from 1,000 to 10,000. Remarkably, these 98% of creators serve as the true driving force behind the economy. Their content yields a 20% increase in conversions, and a staggering 82% of consumers place more trust in them than in macro influencers and celebrities.
However, does this translate into a compensation level that would enable them to transition away from their 9-to-5 jobs? Regrettably, the answer is a resounding no. A notable majority (59%) of fledgling creators have yet to amass earnings exceeding $100 within a year. Additionally, over a third fail to accrue more than $1,000. A mere 4% of creators earn upwards of $100,000 annually. To offer a comparative benchmark, this annual income aligns with that of a mid-level marketing manager within an average American company.
2. There is still no fair and transparent monetization models, and the market itself is very shady
Google sees thousands of queries related to topics like “How much should I pay a creator,” and the figures provided in response are incredibly varied. If you believe that agencies can rescue you from this unpredictability, unfortunately, you’ll be disappointed.
The overwhelming majority of agencies in the market don’t work with their own databases of creators with fixed prices. They manually identify suitable influencers for you and then manually negotiate the terms and costs of work. Did the creator have a bad month? Prepare to pay twice the amount you initially expected when filling out the brief. Are seasonal holidays upon us? Kindly pay several times more for the same type of integration, without any guarantee of improved results. Naturally, each market participant takes their slice in the form of a percentage of the integration cost, which in many cases can reach up to 40%.
A significant misunderstanding exists between brands and creators, and the market still lacks a unified standard for monetization. Brands would prefer to pay for specific actions (CPA), while creators aim to be compensated solely for views (CPM). There’s no one-size-fits-all solution, of course. However, I am thoroughly convinced that this issue needs to be discussed more frequently at the very least, and ideally, solutions should be sought to bring about greater transparency in the market.
3. Everyone is focused on creating tools instead of providing solutions
I’ve already mentioned the remarkable statistics from Martech, but just imagine that those figures only account for product solutions in the marketing and creator economy. Apart from them, there are an additional 428,744 global advertising agencies, and no single company holds more than 5% of market share. All of this contributes to making this market incredibly unconsolidated. And you might ask: why is that bad?
Well, in my view, the current state of the creator economy is akin to the Wild West, where everyone is fighting for themselves. Some continuously refine insignificant product features that don’t address the root problems. Others quietly raise commission percentages. And then there are those who quietly inflate their follower counts with bots to secure initial subscribers and, hopefully, their first advertising orders.
Look at the top selections on Influencer Marketing Hub (which, by the way, covers more than just influencers). Hundreds of companies offer identical solutions, yet none of them qualify as a true one-stop solution for brands or creators. I believe this is a compelling reason for reflection — at least, it has become one for me.
Fix it rather than complaining about it
I have dedicated my entire career to the realm of the creator economy, and I have experienced it from various perspectives. I founded an agency business before, and now, I work in a family fund that invests in projects reshaping the landscape of the modern economy. Honestly, I also consider myself a creator: I write here on Medium and make content on LinkedIn and Twitter on a weekly basis. This viewpoint empowers me to make products that benefit all market participants.
I would be delighted if you, too, discover a solution for yourself within our new portfolio project, Squad.App.
At Squad.App, we are developing an influencer marketing platform for brands, creators, agencies, and nonprofits fueling economic growth without intermediaries. To overcome the main challenges the creator economy is facing right now, we offer:
- open brand deals for creators of all sizes, all around the world;
- transparent pricing without any shady commissions for both creators and advertisers;
- deep analytics reports that are available 24/7 without any manual work;
- automated payments and docs solutions;
- and, in line with 2023 trends, an AI engine that enhances advertising campaigns and finds the perfect creators for your campaigns.
I am absolutely convinced that the market is ready for consolidation. At Squad.App, we firmly believe that influencer marketing, as a vital part of the creator economy, can be fully automated, transparent, and convenient.
Let’s try to make it real together.
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Connect with me on LinkedIn: https://www.linkedin.com/in/galushin/ or follow on Twitter (X): https://twitter.com/IGalushin
Why Creator Economy is Broken, and How to Fix It was originally published in The Startup on Medium, where people are continuing the conversation by highlighting and responding to this story.
