Part 1: Emergence of The Creator Economy
The creator economy is bigger than just entertainment and it’s bigger than just consumer—it’s about people being able to use technology to build in new ways, and then being able to use the internet as distribution to share and monetize those creations. The creator phenomenon avoids simple categorization; no industry will go untouched.
Currently, the creator economy is estimated to be over 100 billion USD: Creator economy startups are expected to raise funds up to $5B in 2021. There are 3 big macro-drivers for this:
1) Today, nearly 70 million Americans earn income as self-employed
By 2028, that will swell to 90 million. And it’s not just the USA; this is a global trend accelerated by the pandemic
2) Freelancers want to control their destiny to achieve financial freedom faster
If freelancing appeals to workers for its autonomy, flexibility, and financial upside, freelancing’s growth is fueled by technological, macroeconomic, and cultural forces.
- On the technology front, internet platforms have enabled new forms of work. They connect worker and consumer, often making work more global, scalable, and frictionless. They make it feasible to earn a living wage online.
- On the macro front, the COVID pandemic accelerated the disaggregation of work. Many people found themselves out of work or more distrustful of traditional work. They turned to tech-enabled jobs or decided to dictate their own fate by going solo.
- And, most meaningfully, on the culture front, the disaggregation of work embodies the ethos of a new generation. It’s a reaction to institutional, centralized power, and a reaction to unprecedented inequality.
The Gini Coefficient measures income inequality, with a higher number equating to more inequality. USA’s Gini Coefficient has trended steadily upwards over the last 50 years. This chart helps explain why work is changing. The forces that led to Occupy Wall Street in 2011 are the same forces that led to GameStop mania in January 2021. As one r/WallStreetBets Redditor wrote during the GameStop craze, “This is the first time we all literally get to decide our destiny.” The disaggregation of work is about that control—that ability to control your destiny.
3) Numerous easy-to-use vertical Platforms have democratized access and broadened monetization
More than 4 Billion people, almost 60% of the human population is on the internet and are using creator platforms one way or another. However, only a tiny percentage is part of the creator economy, as most people are only generating social capital. Crypto economy will turn social capital into an economic value making every one of us part of the Creator economy.
Eventually, everybody will be in the creator economy.— Naval (@naval) May 17, 2021
In the coming 5 years, there will be large number of platforms emerging which will broaden access to new forms of work, lower the barriers to entrepreneurship, democratize the means of production and distribution, and empower the community. Eventually, this will lead to the creator middle class, wherein not just the top 1% of creators make all money, but many creators will be making a full-time living using these platforms.1
Creators include chefs, teachers, DAO workers, NFT artists, gamers, fitness gurus, small business owners, coaches, community leaders and anyone doing non-commoditized work supported by digital platforms.
What’s striking about the creator phenomenon is that it’s not a vertical trend; rather, it’s a through-line that cuts across social, gaming, crypto, media, commerce. It is both the future of work, with creators forming a new class of digitally-native entrepreneurs and the future of leisure. And while the creator phenomenon is often thought of as a consumer trend, it encompasses both enterprise and consumer.
Products like Figma, Notion, Airtable, and more let everyday people build with the software. Each has a vibrant community of creators. They become creator economy companies—and become more than just tools—when they layer on a marketplace to let creators sell what they build. Airtable marketplace, for instance, lets you build an Airtable app and then earn income as others use your App. A mom-and-pop shop owner who builds an app to track her shop’s inventory can make money when other shop owners use her app for their own stores. This is the power of shared creativity, and is not new for developers who use tons of APIs and example projects when building something new; nobody has to start from scratch.
Part 2: Evolution of Creators (Web 2 to Web 3)
We are seeing an inflection point where the top creators are straddling 2 worlds - a) Web 2 centralized platforms (Instagram, TikTok, Twitter etc) where their audience (distribution) & engagement lives, and b) Web 3 platforms which promise to give the creators direct control and monetization opportunities.
Web 2 stack
Influencers of every stripe can monetize their passions and build an audience in nearly any category—writing a food newsletter for baking enthusiasts, creating TikTok dance choreography for followers to mimic, or playing Fortnite with thousands of onlookers.
Focus on investing in creators has led to a Cambrian explosion of creator tools entering the market, competing alongside incumbents and newcomers. This wide range of creators means a category-specific section of the tech stack, with each influencer curating and culling a list of their essentials—a photographer might include photo editing tools while a podcaster relies on audio editing apps.
Moving to Web 3
Creator tools enable micro-economies. The shift from Web2 to Web3 creates revenue streams which prioritize community ownership over individual ownership. By intertwining financial assets with social capital, we’re now witnessing a new type of asset class dominated by online community coordination.
This is the rise of micro-economies.
In Web2, creators monetize their work via SaaS or advertising models; they’re paid for a newsletter, artwork, or craft on a regular basis, or earn through platform-inserted ads around their content.
In Web3, creators monetize through the issuance of a social token or NFTs directly to their fans, with non-fungible tokens acting as digital media ownership.
How are crypto marketplaces and NFTs changing the game for creators?
The big picture is that emerging “tokenization” models, including non-fungible tokens, or NFTs, are creating new ways for collectors and investors to buy, sell, and trade digital art. More broadly, these innovations open the door to the tokenization of any products or collectibles that can be captured and owned digitally, and many new business models for creators.
Marketplaces powered by NFTs open up new revenue streams for creators, because anytime digital work is resold or their tokens traded on these platforms, the creator automatically gets a percentage of those secondary sales. It’s all transparent and governed by code on the blockchain, and it’s a big shift in creator economies.
- NFTS: NFTs introduce a kind of digital scarcity and uniqueness that aims to give power back to creators. In the past creators have tried to adopt direct monetization in a bid to create scarcity. Using e-books, albums or even subscriptions. The major drawback has been the illegal duplication and distribution of these resources. Here’s where NFTs come in. This technology with its verifiable on-chain records enables creators to maximally utilise the passion of a few 100 true fans rather than millions of fans. These 100 true fans could then be incentivized with digital bragging rights and other forms of exclusive access. While the masses keep enjoying the almost free content. An example of a platform already pushing this model with the music industry is Catalog.
- Social Tokens: social tokens would enable creators to have control of their relationship with their fans encouraging more direct engagement. The fans on the other hand would see supporting the artist, not as an act of help but rather as an investment. These fans would do all they can to assist the creator’s success. As the creator’s success would determine the token’s success leading to profit for the community of fans hodling the token.
- Data ownership and portability: The current web 2 structure puts creators at a loss whenever they attempt to leave a platform or even get de-platformed by the platform itself. Such would mean leaving behind their audience on these platforms. Future-centric platforms like substack have already begun to give creators total ownership of their audience. Substack allows writers to take along email lists of their subscribed audience if they ever decided to leave the platform.
- DAOs - community ownership and decision making : DAOs - decentralized autonomous organizations are a perfect model of community-focused platforms. They are online communities owned and operated by their members. Membership is mostly through a community token. Bringing this into the creator economy would mean decisions on algorithms, monetization and even what features to be developed on these platforms would be jointly made by the community. Decisions that would previously have been made by the profit-oriented platforms alone. A great example of this model would be Mirror.
Part 3: The Need for Developers tools (Bridging Web 2 <> Web 3)
Prior to 2006, startups weren't a thing. With the launch of AWS, the startup ecosystem boomed - Airbnb, Instagram, Uber & millions of companies launched due to AWS.
Plaid started in 2013 and post 2015 - every company wanted to offer fintech products. The launch of Plaid, Marqueta, and other fintech infrastructure players enabled new kinds of use-cases like embedded banking.
We are now at beginning of the second renaissance - a digital renaissance led by creators who are traversing both Web 2 and Web 3 worlds with their fans. This will give rise to platforms that enable the next generation of creator economy companies to be built. We see this as the inflection point from where the size of the market will grow exponentially by lowering the barriers to entry for new startups.
Why we need Developer Tools for Creator Economy
Naval:— Justin Mikolay 💻 (@jmikolay) March 29, 2021
Step one was a creator on the internet.
Step two was a creator on the social networks.
Step three is a creator on the tools for cross-network monetization.
Today, the best way to move data around for developers and creators is to share screenshots. That doesn’t sound right for the year 2022!
The problem is that the developer tools available today for the above-mentioned creator economy developers are akin to website development in the early 1990s - primitive and archaic. We aren’t kidding! History has shown that whenever a new computing platform emerges or a behavioral shift happens - it’s preceded by the developer tools needed to build great products. This was the case for desktop computers, the internet, and mass smartphone adoption. We are currently in the tools boom for the creator economy.
💻 Jobs to be done for developers:
Their biggest pain point is finding a verified source for the data of their customers, the creator. While these developers could build their own APIs to the top creator platforms, their jobs to be done are to outsource a non-core function so they can focus on their core product, achieve aggregate coverage across platforms, and go to market in the fastest possible way.
- 👨🏻💻 Outsource a non-core function so they can focus on their core product: Integrating with creator platforms’ APIs is hard enough, but maintaining the integrations after changes and updates makes it a full-time business. Hence, developers prefer to focus on their core product offering and outsource the API management part.
- 𝍑 Achieve aggregate coverage across platforms: There are a lot of creator platforms out there, well into the hundreds. For a developer to attract the right creators, they must have coverage across the platforms where their creators live. This is a challenging problem for developers to attain coverage across all platforms and anticipate future platform shifts.
- 🚀 Go to market in the fastest possible way: For each integration with a creator platform, there’s a cumbersome and time-consuming process including app approval by the platform. All of this takes time. Developers want to use market-available APIs to launch to market in the quickest time possible
🎬 Jobs to be done for creators:
The best creators have their identities intertwined with their data on the biggest creator platform of today. Hence, their data on these platforms is their most valuable currency. Their jobs to be done are to use their data to prove their legitimacy, to ensure that it is transported in a secure manner, and to have the power to cut off access to their data whenever they want.
- 🙋🏼♀️ Use their hard-earned reputation as a part of their identity: Creators do not have formal W2 or employment verification documents. Hence, they need to use their creator platform data to prove their identity. Using this data, creators should be able to apply for loans, build influence dashboards, and even claim social-based airdrops of tokens.
- 🔐 Ensure that it (their data) is transported in a secure manner: Privacy and security are of utmost importance. For creators who have their identities established on these platforms, they need to ensure that their data and content are safe without the risk of being hacked, plagiarized, or leaked.
- 🎛 Have the power to cut off access to their data whenever they want: Creators need to be in control. They want to audit and revoke access to their data at any time and for any reason.
Potential Use cases
- Empower brands to discover niche and upcoming creators. APls will enable the scaling of engagement reporting and CPM tracking through technology rather than manually (leading to the rise of a creator middle-class)
- Enable creators to build a professional profile-based on their on-chain (NFTS, POAPs, Tokens, Votes, etc) and off-chain data (Discord, Discourse etc). This way, they can show the rest of the world what they've done, while relying on
'proof of work'.
- Access to financial products like loans and insurance to creators at fair rates
- Enable developers to build tools for creators to build their own websites (link-in-bio)
- Social identity verification of a creator for Web3 companies. Acting as a bridge between web2 & web3.
Part 4: The market for such Dev Tools
The TAM for developer tools for Creator economy across Web 2 and Web 3 is sizeable with an estimate of $4-5B. This can span multiple use cases (proof of identity, proof of work, proof of income etc.) across a host of sectors with multi-billion address able markets - notable gaming, NFT, gated content, content marketplaces, creator financing and business management tools.
Fans also need to be continuously verified by these creators for gated content, content marketplace, crypto, web3.0, NFT and Gaming. There are 300M users of these services today and influencers/platforms can engage with dev tools to verify their fans/users.
Many new players are emerging who are building APIs in tangential categories and could expand to use cases in the Creator economy.
Part 5: Betting on Phyllo - ‘Plaid for Web 2 <> Web3 Creator Economy’
Phyllo builds APIs for secure and on-demand transport of a creator's data from creator economy platforms like YouTube, Twitch, OpenSea, Discord etc to developers that are building and serving the creator economy. These developers range across influencer and affiliate marketers (#paid, creator.co), creator financing platforms (Karat, Pixel Card), NFT marketplaces (Opensea), social tokens (Rally, Autonomy Network), and many more.
As one of the earliest investors in Phyllo, I have seen the small but mighty founding team of 3 grow to 30+ strong in less than a year and solve some of the most challenges problems in the space with user-centric design. I am bullish on Phyllo and many others developer-first API businesses that will transform creator economy in the coming years!
How Phyllo Helps
Developers need access to creator data from the creator platforms for various reasons that are core to their business models.
The challenge with access to such data is that developers either integrate with public APIs of multiple platforms and hence spend immense energies in going through multiple docs, building apps, getting necessary approvals, and then maintaining the integrations. Or, in cases, where the creator platform does not provide public APIs, developers write custom scrapers and try to hack their ways to somehow get the data; an approach that eventually becomes unsustainable. Needless to say, many organizations resort to manual methods of getting creator data that are both expensive and cumbersome.
Phyllo solves this challenge in the following ways:
- Phyllo provides you a single API pipe to integrate with multiple creator platforms, whether they provide public APIs or don't.
- Takes away the headache of integration, version maintenance, platform permissions, and relationships
- Simplifies the integration process by normalizing API responses across various data attributes
- Secures the data following industry best practices of encryption, data protection, and infra security
Supply Side Coverage
Phyllo's singular focus is to give developers a single, reliable data pipe to access creator data. While they are quickly progressing to 100% coverage on all major creator platforms, their intermediary approach is tranche-based.
Phyllo's pricing for the core products are designed to mimic the current status quo - a usage-based business model charged per API pull. Over time, due to catering to large enterprises, Phyllo will shift to a subscription-based business model that will allow for continuous access
Some amazing Product demos that just scratch the surface of what dev tools can enable in the creator economy!
This article was first published here.