The White House informs TikToker about the war in Ukraine. A Twitch streamer’s PS5 giveaway is causing a real uproar. A 25-year-old YouTuber from North Carolina is one of Time Magazine’s 100 Most Influential People in the World.
If you underestimate the power of internet personalities, don’t pay attention.
In Silicon Valley, “creator economy” used to be almost as hot a buzzword as “AI” is today. But while content creators remain at the forefront of the culture, the numbers behind venture capital investments tell a different story: Last year, the amount of money invested in creator economy companies fell by about 68% from Q1 through Q3.
But creator economy investors remain unfazed by the seemingly sharp decline. Several investors told TechCrunch+ that they know the entertainment industry will face some twists and turns as the world emerges from pandemic-era lockdowns, and that trends at risk can be cyclical. Some investors even said that the creator economy has not yet reached full maturity.
To learn more about the state of the creator economy industry and the mindset of investors, we asked seven VCs about where the industry is headed, the rise of short video, the changing role of influencer marketing, and the adoption of new platforms means .
We spoke to:
- Brian Harwitt, Partner, Coventure
- Sasha Kaletsky, Co-Founder and Managing Partner, Creator Ventures
- Julia Maltby, Director, Flybridge
- Josh Constine, Principal Investor, SignalFire
- Katelin Holloway, founding partner, 776
- Ali Hamed, Co-Founder and General Partner, Crossbeam Venture Partners
- Sima Gandhi, founder of Creative Juice; Investor and advisor at G3
Brian Harwitt, Partner, Coventure
Is the Accelerated Launch of New Twitter Competitors a Boon or a Hindrance to YouTuber Success?
Competition is good for creators as platforms have to compete for creators’ time, which is a limited resource. In order to attract and retain creators, platforms must continue to offer monetization opportunities, which will spark potential bidding wars – as we’ve seen with Kick and Twitch.
In the creator economy, there has been a slowdown in risk financing in recent years. Did you anticipate this and how are you preparing your portfolio companies to navigate a crowded market with less available capital?
The creator space growth has been fueled in two parts: COVID and the boom in e-commerce (the key advertiser in the creator economy). People have largely returned to their normal lives and e-commerce has resumed its usual pace, so the slower growth of the creative space is not surprising.
However, we still expect significant growth over the next few years and believe that the market is not yet mature. The best companies still have access to capital, while slower-growing companies keep their cash.
Many VCs backed long-tail or Web3-focused creator companies, most of which were struggling to gain traction, so their attention shifted to other areas such as AI.
What differentiated business models do you see in this area given the intense competition?
Differentiated business models are those that can cater to either the largest YouTubers or the long-tail companies with minimal human intervention required.
What types of creator economy companies are you most interested in investing in right now?
We welcome companies that offer access to capital or some form of predictable monetization. We anticipate that foreseeable monetization and monetization infrastructure will continue to make the creator economy investable for debt and equity investors.
Will the economic conditions of the digital economy be better for creatives and creative-focused start-ups in the second half of 2023 than in the first half? How will 2024 compare to 2023?
A rising tide brings all ships high. So what’s good for the creator is also good for the creator-centric startup. With all the changes in the last 12 months, many YouTubers are taking their breath away.
This year remains challenging for the ecosystem as brands have cut advertising budgets, capital markets have frozen and many fear a slowdown in the economy. Looking ahead to 2024, hopefully we will see a reversal of these three trends and enable a more confident creator economy.
Social platforms have yet to figure out how to share ad revenue from short videos. Where do you see the platform developer economy going in the coming quarters?
YouTube’s 55-45 percent model sets a good example for the platforms, but ultimately the economic split will depend on competition and size.
The launch of Kick has forced Twitch to improve its payouts, so hopefully the competitiveness of the platforms will be an advantage for developers as they continue to look for the best monetization opportunities.
How can companies protect their creators in the event of closure?
It depends on the company and whether or not the creator really comes first. However, companies interested in copyright protection are more likely to merge or sell than go under entirely, as it would bring a better outcome for their investors and customers.
How is an uneven economy affecting consumer spending on Creator products?
The Creator Products category is a nascent category and there is likely to be some catching up to do in purchasing their products, at least in the short term. Creators offering lower average order value (AOV) products are likely to see continued demand, while higher AOV items may see a slowdown.
Consumers have almost used up their excess savings due to COVID, so the next six months will be instructive as to the state of consumer demand.
Do you think influencer marketing is becoming more or less powerful? How does this compare to traditional marketing methods?
Micro-influencers have the highest ROI for advertisers, but of course, they also have the smallest scale. As a result, CMOs and ad buyers will be much more ROI-focused when approaching creator and influencer campaigns.
What trends do you think are being overlooked in the creator economy?
Access to capital and predictable monetization. These are the basics of a stable and mature industry.
Many social platforms have developed creator programs in recent years. What are the different metrics you use to measure the success of a creator program? Who is leading the field?
Predictability and consistency of monetization are key.
TikTok is an interesting case study as it has introduced a monetization platform for its creators, but viewership and revenue per thousand impressions (RPM) vary greatly from video to video, meaning a creator can predict how much money they will make each month will earn even if they produce 10 videos per month.
Sasha Kaletsky, Co-Founder and Managing Partner, Creator Ventures
Is the Accelerated Launch of New Twitter Competitors a Boon or a Hindrance to YouTuber Success?
Despite its prevalence among VCs and other professional word creators, Twitter is pretty much irrelevant to most YouTubers. Word-based platforms are difficult to monetize (both for creators and platforms…just ask Twitter believers), so Twitter and co. are best used as a tool to amplify messages rather than make money or really engage audiences .
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