After years of hype, the creator economy is becoming a reality. Shut down influencer programs. investments dry up. And deteriorating economic conditions threaten to destroy creators and the technical infrastructure behind them.
While today’s economic downturn is causing widespread pain, the creator economy is suffering particularly because its middle class has not yet developed. Online content creation is still largely only viable for the top echelons of online creators. And if mid-tier developers can’t make it, the VC-funded platforms designed to serve them won’t scale. So it will likely be a while before link-in-my-bio startups are valued at $1.3 billion again.
Hard times for content creators
“People only have time to consume so much. So you have to be the best or one of the best in every area,” said Austin Rief, Morning Brew’s chief executive officer. “It’s really hard to be the 37th best financial designer.”
Most companies that make tools for developers will go under this year, Rief predicted, noting that the industry is smaller than many had hoped and that 99% of the value still goes to the top 0.1% of creators. Many in the industry have long held similar views, but kept them to themselves as VC dollars poured in. Now, in the midst of a downturn, it’s evident that the status quo will not hold.
“Trying to siphon off 5% commissions from an industry where even the top 1% are just simple multi-millionaires would never work,” said one top 1% content creator. “How are you going to reach a billion? Their addressable market itself is not a billion dollar industry.”
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Creator Economy predictions now appear imaginative
Industry forecasts put the total value of the creator economy – a fancy term for the online content creation business – at $104.2 billion. The number seems fanciful now, especially since it includes money invested in startups that may never repay their investments.
The $100 billion figure, produced by companies that would benefit from a robust creator economy, has been repeated over and over again. It has contributed to a self-perpetuating hype cycle that has helped attract a flood of VC cash in an era of easy money. But as the days of zero-rate foam end, the investments are becoming increasingly difficult to justify.
According to TechCrunch, funding for creator-focused startups grew from 58 rounds worth $343 million in the first quarter of last year, through 42 rounds worth $336 in the second quarter, to just 19 rounds worth $110 million in the third quarter. “This is brutal, and a sufficiently steep decline,” the publication says, “to indicate that despite some traditional delays in venture reporting, we are seeing a sharp slowdown in the amount of capital that creator-centric startups are able to raise.”
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The economic slowdown and increasing challenges for creators
More challenges lie ahead. As the advertising market shrinks amid an economic slowdown, many in the already limited middle class of creators will struggle to break through. And as algorithmic feeds like TikTok gain traction — highlighting the best content, not just people with large followings — it’s becoming harder to earn predictably as a content creator. All of this will increase the pressure on creators and the platforms that support them.
There are still plenty of opportunities for creatives working online. I’m doing this on Substack, a platform that struggled to raise a round of funding last year and eventually gave up. I still believe in the format. But the days of overblown valuations and overblown forecasts are probably over.