Content has grown increasingly abundant and overflowing, and the limiting factor in content consumption has become attention. By definition, economics is the study of how a society uses its scarce resources. Now that human attention has become a scarce commodity, content creators and companies are competing for attention. But the demand for content has not diminished – quite the contrary. Never before did content creators have as many possibilities as today to build economies around themselves. The creative process has barely changed and has many timeless qualities, but creativity tools are constantly evolving.
In his essay "1000 True Fans," Kevin Kelly predicted that the internet would transform creative activities' economics, but the internet took a detour. Centralized platforms became the dominant way for creators and fans to connect. The platforms used this power to become the new intermediaries - inserting ads and recommendations between creators and users while keeping most of their revenue. The monopoly power of just a few viable platforms for creators is declining and therefore diversifying revenue streams.
Peter Yang defines three categories of problems that content creators need help within their work. All companies in this space try to cover one or more of these areas.
Publish: To get started, creators need to find a niche and publish frequently. Most creators give up before finding an audience, so staying motivated and avoiding burnout is key.
Grow: To grow an audience, creators need to understand what's working, interact with fans, and collaborate with other creators.
Monetize: To make money, creators need to add multiple revenue streams and learn how to run a business.
Not all platforms are created equal
But not all platforms are paying the creators the same amount of money. Today, most fans pay artists and creators the same amount. But some superfans would like to spend more – leading to artists capturing more of the value they create and to many more creators.
A new Paradigm
NFTs allow for the accurate monetization of superfans and accelerate the trend of creators monetizing directly with their fans. Social platforms will continue to help build audiences, although these could be replaced with superior decentralized alternatives. NFTs, as an umbrella term, meaning that each digital token on the network is unique. Each token contains a tiny bit of data that is unique to the token in question. That's it. They're just little data containers transferred around the blockchain between addresses.
In Li Jin's famous article The Passion Economy and the Future of Work, she focuses on the different types of companies that are being built around the growing number of content creators. Companies in this space not only need to consider the creators but also their desired audience. Until now, there were mainly two types of companies flourishing in this environment: marketplaces and SaaS platforms.
Marketplaces are entirely plug and play, meaning providers can sign up and start earning revenue with minimal set-up. The strength of a marketplace’s two-sided network effect is directly correlated to the value it provides as an intermediary between supply and demand. One example of this model is Medium, which charges readers a subscription fee to access stories across the entire platform. The amount of money a writer makes is proportionate to the amount of time readers spend engaging with their stories.
By contrast, SaaS platforms require creators to work independently to acquire customers. Such platforms might help with distribution—providing tools for marketing, managing customer relationships, and attribution—but users are largely responsible for growing their own businesses. On Substack, for example, features include a writer homepage, mailing list, payments, analytics, and a variety of different subscription offerings. Substack collects a portion of the creator’s subscription revenue.
These types of companies will continue to grow and flourish. But there are a couple of benefits that decentralized tools and especially NFTs are bringing to the table.
Once an NFT is purchased, it is entirely in control of the owner – only regulated by the Smart Contract rules. Just like buying a book in the real world. Platforms and Marketplaces will constrain what they can change or charge because the ownership of assets shifts power back to the creator and users.
Pricing & Superfans
As a creator, your fans have different willingness to pay:
- Casual fans aren't willing to pay anything.
- Active fans are eager to pay a small amount.
- Superfans are keen to spend a lot.
Traditionally revenue is generated more or less uniformly regardless of the consumer's enthusiasm level. Crypto products are better at capturing more enthusiastic superfans' revenue potential by slicing products into a descending series of price tiers.
Until next week,