5 Predictions For the Creator Economy 2023

The fundamental elements and market forces that are driving the creator economy

Happy new year, everyone! Apologies for the inconsistency with the previous issues. This past few months, I have done a lot of reflection on the newsletter's value proposition, and I want to go more in-depth with the topics and implications of the creator economy. This year, I am going to publish Creator Labs monthly with a longer format — enjoy! 

My predictions for 2023…

1. We will see more brand deals with household brands

2. We will see creators building and utilizing discord communities and email lists

3. We will see disappearing middle-class creators and creator funds

4. We will see advertising remains the center of social and entertainment platforms

5. We will see a pullback on creatorpreneurs 

In addition, I included a list of reading recommendations if you are interested in learning more about the creator economy and three creator economy startups that I’m paying attention to! 

5 Predictions For the Creator Economy 2023 

Prediction 1: We will see more brand deals with household brands

2023 will be the year influencer marketing will be a universally recognized strategy, and more traditional household brands will be striking brand deals with influencers. 

Today we spent 7 hours (on average globally) on the internet, social media users have tripled from 1.5 billion in 2012 to 4.6 billion today and yet over 37.5% of the world still has not yet had access to the internet, representing more room for growth. All of which are driving growth in the digital advertising industry. The consumer platforms — Google (Youtube), Meta (Facebook & Instagram) and Bytedance (TikTok) — have become attention farms which are sought after by brands.

Today, brand deals and affiliated links are normalized by consumers and creators. I predict that in 2023, we will see more large-scale traditional enterprises sponsoring creators beyond Betterhelp, Skillshare, NordVPN, etc. In addition, creators will have greater leverage over the brand deal negotiations and be able to do their brand integrations more creatively and in different formats. These are driven by the following two factors.

Firstly, the alternative to influencer marketing is becoming more expensive, competitive, and concentrated, mainly due to the low barrier to entry. The cost per click for paid search ads increased by 15-20% between the 2nd and 3rd quarters of 2021 alone. In addition, platforms like Meta have reduced their detailed targeting features for consumers amid privacy concerns, which led to lower conversions for advertisers and returned on advertising spend (ROAS). Last but not least, customers hate ads — ads are ruining the customer experience. According to HubSpot Research, 91% of people believe ads are more intrusive now compared to two or three years ago. As a result, paid ads have become increasingly ineffective and expensive.

Secondly, the power of parasocial relationships. Creators are valued by their communities. The attention and influence creators have obtained highly valued by brands. Marketing through creators delivers a greater level of authenticity for end-users. According to Google, 89% of viewers agree that YouTube creators give recommendations they can trust. Today, about 30% of young adults (16-24) on the internet follow influencers on social media, and it is continuing to increase in absolute and in % terms. 

Source: Datareportal

Prediction 2: We will see creators building discord communities and email list

“Creators are building their businesses on a rented land” — Matt Koval, Creator Dynamics

2022 was a year that demonstrated the power of algorithmic changes and how vulnerable creators are subject to platform modifications. For example, earlier in 2022, when Instagram changed its algorithm to prioritize video content over pictures, it received lots of backlash from creators and users. After the changes, photography influencer Peter McKinnon received about half of the view and engagement he would usually get. Kylie Jenner has also publicly urged Instagram to revert some of its algorithmic changes. Any form of algorithmic changes or community guideline policy changes towards the content's format and the content's category could have a substantial impact on creators’ channels. 

In 2021 and 2022, creators have gone multiplatform, aka they built their creator stack and kept reiterating. The benefits of going multiplatform enable creators to reach different audiences and draw attention from one to another. (TikTok & Instagram, Twitch & Youtube). A functioning creator stack allows creators to be present in multiple platforms and be able to grow their audience in size and depth. 

In 2023, Creators need to go off-platform, aka control their distribution. In 2023, it would be more common for creators to build discord communities and email lists. These are how creators can truly own their audience and distribute without any intervention from platforms. I.e. Litquidity’s Exec Sum newsletter and Colin & Samir’s publish press have enabled a new scalable medium for community interactions and a new avenue for monetization. 

Something also worth noticing is that creators have massive leverage over platforms. Gaming creator Ludwig made the switch from Twitch to Youtube, and other streamers such as LilyPichu, Fuslie, Swagg, and Myth have also followed and migrated to Youtube. There is a ripple effect on the effects of mega-scale like Ludwig and Valkyrae’s decisions to move to Youtube. Their millions of followers follow them on Youtube and other large-scale creators who look up to these people. Therefore, for any large-scale startups and platforms that are looking to serve creators, they should adopt a top-bottom approach to scale effectively (i.e. Karat targeting large-scale influencers for its financial infrastructure services) 

Source: Power Law in Popular Media by Michael Tauberg

Prediction 3: We will see disappearing middle-class creators and creator funds

[Credit to Hugo Amsellem for sharing his ideas on Arm The Creators]

The internet looks something like the Power Law curve, operating under a winner-takes-all dynamic. According to Youtube, 3% of Youtubers made 90% of the platform’s revenue. Casey Neistat pointed out the brutal truth is that today content creation has become so easy. The top of the creator funnel has widened and gotten bigger than ever before. However, the bottom of the funnel remains the same. (Nas Summit) 

Today, roughly 30% of children in the United States and the United Kingdom answered “Youtuber” to the question “What do you want to be when you grow up?”. With easy access to smartphone cameras and editing software, Adobe recognized that the number of creators doubled in size to 300 million creators in 2022. It is a testament to how humans are innately creative and entrepreneurial. Everyone wants to inspire and be inspired. 

The past two years are the times when platforms have been bargaining for creators and content to fill the explosive demand amid the pandemic. All platforms (led by TikTok and Meta) have launched their respective creator funds respectively to subsidize and incentivize creators to publish content on their platforms. However, the effectiveness of the creator fund remains unclear, and they drew criticism. For example, TikTok’s fund pays out based on flat view counts; it doesn’t like content category (affects RPM) and engagement (like, comment and share) into consideration. It favours large-scale creators leaving smaller creators with minimal payouts. 2023 will be the year where funds are going to fade, and the invisible hand (market) will rule out who wins and who loses in the content abundance era. 

P.S: Hugo also pointed out that the Creator Economy is following the music industry and is about a decade behind: in the late ‘90s, Napster (and then Spotify) unbundled music from CD/radio, and in the late ‘00s, YouTube unbundled video from TV. In 2023, more talent management agencies will sign Youtubers like SixSevenMedia and UnitedTalents to scale channels and expand off platforms. 

Prediction 4: Advertising remains the center of social and entertainment platforms.

The internet is run on ads. It is a feature, not a bug.

In 2022, Netflix and Twitter took an unconventional path to release ads and invest in subscriptions. In 2023, we will likely see the internet apps continue to roll out subscriptions and streaming companies roll out ad-support tiers.

Ads are essential to platforms' survival, and in 2023, we hope to see platforms continue to innovate and identify a clear value exchange between advertisers, creators and platforms. In Colin & Samir’s conversation with Elon Musk, they mentioned that outside of Youtube, many platforms don’t have a clear way of sharing ad revenue with creators. For example, TikTok ads are placed between TikToks; Twitter ads are placed in between Tweets; how does the platform decide the best way to split revenue across this variety of content, and most importantly, how to communicate this with the creators? 

To further justify the essence of ads for consumer platforms. Let’s take a look at Youtube Premium and Snapchat+. 

Youtube Premium is a subscription Youtube provides an ad-free experience for the users and allows them to watch videos offline, charging $11.99/month with family and student plans available. Out of its 2.6 billion users, only ~20 million users (0.769%) have subscribed to Youtube Premium. In revenue terms, it represented about 10% of the revenue $28 billion generated from Youtube. On the flip side, Snapchat+ is a collection of exclusive, experimental, and pre-release features in Snapchat for a monthly subscription fee of $3.99 a month. In Q3 2022, Snapchat+ had about 1.5 million users, which translated to roughly $72 million. It only represents (1.8%) of the annualized revenue at ~$4 billion. 

Ads are here to stay. Don’t forget that the internet is run on ads. It is a feature, not a bug.

P.S. I believe that BeReal will fade out in 2023. This year BeReal will struggle to maintain its existing users as they become culturally irrelevant. The monetization regime remains unknown, and it would have to rely on ads to survive. 

Prediction 5: We will see a pullback on creatorpreneurs 

In 2023 I bet there will be a pullback of creatorpreneur, which means creators are launching businesses, particularly in services. I wanted to separate this into services and products. 

For services, I’m referring to courses. Last September, Maven, a platform for live cohort-based learning, announced a pivot from creators to experts. In summary, they cited that creators don’t make the best instructors. 2021-2022 marked a gold rush for creators launching courses because it was high margins, and they could convert. 

“We had the hypothesis that a creator with a big audience will have a great course and be able to fill it, and we were surprised that this hypothesis was wrong,” Kao said in an interview with TechCrunch. “Just because somebody is a creator doesn’t mean they will run a successful course. Instead, we were seeing tons of smaller instructors who were subject matter experts in their field and didn’t necessarily have big audiences, who wanted to put in the hustle and put in the effort…doing really well on the platform.”

In the future, we will see fewer courses, especially live courses. Most creators did not enjoy teaching live because it is not scalable. Cohort-based courses are marginally more beneficial for students, but it limits the upside potential for the creators. For example, Li Jin, the General Partner at Variant Fund, has released her materials and recordings on the creator economy for free. She said, "I loved teaching live, but only 150 students could take it… I really believe education should be accessible to anyone, anywhere on their own schedule.” 

For products, I’m referring to physical goods. 2023 will be a real testament to a lot of the creator-led retail businesses as economic and supply conditions continue to be challenging. Even today, there are massive media coverage for creator starting businesses, often citing MrBeast’s Feastable, Mark Rober’s CrunchLabs, and Emma Chamberlains’ Chamberlain Coffee. However, it isn’t as intuitive as it sounds. This year there are large creators like Graham Stephan (Bankroll Coffee), Ace Family (Silly Juice) and Khaby Lame (Khaby Juicer) who have halted or got into controversies with their operations. 

For products, creators have a survivor bias towards successful creator-led brands and often underestimate the logistical difficulties of launching a business. A community can sometimes be a double-edged sword for creators. A community can guarantee you traction, but it could blind you from realizing this is a lack of product market fit. To achieve any form of longevity for a consumer brand, it is important to realize the need for product market fit and healthy unit economics. 

To summarize, creator-founded businesses will continue to have an unfair advantage in distribution. However, business fundamentals remain the largest determinant of whether the business will succeed. 2023 will mark a year of challenge for many creator-led businesses. In the long term, I’m super bullish on creator entrepreneurs. 

Top Startups You Should Pay Attention To

1. Beehiiv (Seed Stage, Led by Creator Ventures)

Beehiiv is a newsletter infrastructure platform for creators, serving as a substack and Mailchimp alternative. Beehiiv has a robust suite of tools, including A/B Testing, advanced customization, referral programs, paid subscriptions, etc., which have driven massive product-led growth with featured customers, including Exec Sum, Publish Press and The Milk Road. 

2. Vitrine (Seed Stage, Backed by Sequoia Capital and Index Ventures)

Vitrine is a no-code e-commerce and merchandise platform that enables creators to set up their online shops and sell the brands and products they recommend without having to hold inventory. Vitrine also allows brands to customize curator campaigns and revenue share logistics.

3. Drop (No Public Fundraising Record - Public Beta) 

Drop is an API that enables direct message automation on Instagram for creators and brands. With the tool, their customers have achieved an opening rate of 80-100%, 20-30% CTR and 8-15% conversion, significantly higher than the industry average of 0.9%. 

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