web2 to web3

https://medium.com/@wefy.io/this-is-why-the-creator-economy-is-all-about-web3-fdbe44c84ee2

This is why the creator economy is all about Web3

Blockchain, membership tokens, and other Web3 technologies will create mechanisms of collaboration between creators & users (and even platforms). This article brings you new insights into this economy’s future:

Image from Pexels

1. The creator economy: solid today and skyrocketing tomorrow

Don’t blink or you will miss it. The creator economy has undergone substantial changes from its inception until today’s established status. But the main changes are yet to come.

This economy represents one of the hottest topics on the market, with countless opportunities and a rapidly changing landscape, involving major cultural shifts and technological transformations.

1.1 Let’s face it: every young kid wants to be a creator

Today, in the US, a child is 3 times more likely to want to become a content creator than to become an astronaut¹. In Brazil, 75% of young people want to join the so-called creator economy².

More than 50 million people in the world consider themselves creators, whereas only 2 million are professionals³. This economy was born just over a decade ago, when many of today’s creators were still children.

Also, with new generations joining today’s digital landscape, this number is expected to continue rising in the near future. With the youngest increasingly valuing essential aspects of creators’ work, such as turning their true passions into a living, new creators are rising up every day.

Stripe analyzed 50 side platforms to identify a growth trend in the number of creators, here’s what the graph looks like:

Source: Stripe

But it’s not all fun and games, and later in this article, we’ll explore why creators are struggling with this current scenario.

1.2 Ok, we know the market is huge. But more importantly, it has not reached its full potential yet:

According to a report by Influencer Marketing Hub, the estimated global market size for the creator economy is around U$ 104.2bi⁴. Additionally, this economy saw a record funding in 2021, totaling U$ 1.3bi invested in this sector’s startups⁵.

With many similarities to the Sharing economy or Collaborative economy, which underpinned the emergence of unicorns like Airbnb, the creator economy is known to be huge, and measuring the size of the market and its future projections is difficult:

• Creators are everywhere, producing and making money in many different ways.

The creator economy is yet in its early days, so it requires a lot of professionalization and structuring. Still, specialists from A16Z and several other venture capital firms consider this market as one of the most promising for the new waves of technology.

Okay, we understand that this has a lot of potential. Now, let’s give a brief summary of how the technology of mobile applications and the democratization of the internet, the so-called Web2, caused the creator economy to rise.

2. Web2 allowed creators to come to the surface. Here’s how that happened:

In case you are not familiar with the terms Web1 and Web2, keep in mind that in this article, our focus will be on the creator’s perspective. Long story short, this transition of webs gave birth to today’s foundations of the creator economy:

• Web1 | The information economy: consumption-only (1985–2005):

The internet was basically composed of read-only pages. A few producers uploaded their content online for users to visit and read the information on a homepage. That was it.

With almost no interaction, only some people had enough instruction to access the network on their computers and read the content, which was produced by a handful of companies on blogs and homepages like Yahoo and Google. Therefore, almost all the value went to this company’s builders.

• Web2 | The platform economy: read and write (2005-today)

With a greater internet connection, mobile phones, and user-friendly applications, more people could join the internet and connect with others effortlessly. Now, it was easy for anyone to have user-to-user interactions and create content in the most diverse formats, and the best of all: with no-code knowledge.

This new reality has allowed creators to rise to the surface and finally start making money out of their work, whether through ads, subscriptions, digital products, or partnerships with brands. The creator economy rapidly spread to almost every country in the world, showing signs of gigantism that were quickly spotted by the biggest tech players.

Web2 allowed creators to join Internet’s landscape and share some of its value, as we can see below:

Source: Wefy

The tech giants established the platforms that currently provide the foundation for almost every creator. Today, when meeting a creator, whether a musician, videomaker, game producer, writer, or kitchen chef, it is almost 100% certain that this person will be linked to some platform: you would find them on a social network such as Instagram, Pinterest, Youtube or Tiktok, then later download their app on the AppStore or Playstore, and finally subscribe on some platform, like Patreon and OnlyFans, in order to have access to private content.

Ok, as a matter of fact, Web2 has brought the creators into the game. But despite looking nice, it has also created an economy geared more towards platforms than creators. Let’s explore the problem with this.

3. After a friendly beginning, a slap in the face for the vast majority of creators:

With a handful of platforms controlling the game, the compensation model created by Web2 has become voracious and unsustainable for the creator economy. With an extreme economic inequality between creators and unreasonable take rates, only a few creators were able to thrive in their careers:

Source: Wefy

In addition, platforms have taken so much control that they did not allow creators to own their content, value, and relationships. So, without ways to control the monetization of their work, most creators were held hostage to partnering with brands to receive some kind of revenue.

Source: CB Insights (2021)

Although it seems like an opportunity, many experts report that this scenario is extremely unstable, as most creators do not have firm contracts and often need to be negotiating new agreements with different brands. Furthermore, we believe that creators should spend more time focusing on exercising their creative capacity than seeking new partnerships every month.

Last but not least, it is necessary to state a painful truth: Creators are burning out, faster than ever.

Creators need to adapt and keep up with the algorithm, which changes its rules regularly. In particular, social networks generate a hamster wheel effect, in which the creator needs to carry out a series of activities to remain relevant.

Source: Wefy | Readapted from Creator Economy by Peter Yang

4. Web3 allows us to start solving these problems, bringing the ideal technologies for the Creator Economy:

Now, more than ever, it is the time for the creator economy to thrive. If Web1 was the information economy and Web2 the platform economy, Web3 can be considered the property economy.

• Web3 | The property economy: read, write and own (today — future)

Web3 is the promise of a new internet generation based on blockchain infrastructure. Unlike the two previous eras, in Web3, user data, possessions, and contributions are no longer restricted to the originating platforms but open on the internet via secure, global public networks. Thus, network effects are shared and users are not locked into specific platforms.

In the TED “A Creator-Led Internet, Built on Blockchain”, Adam Mosserri, CEO of Instagram, states that power is shifting into the hands of creators. This means that communities will no longer be tied to social network X or Y, and that in the future, creators will own their audiences, regardless of platforms.

A Creator-Led Internet, Built on Blockchain | Adam Mosserri, 2022

“As a creator, you should be able to use technology to raise money to finance your ambitious. If you so choose, you should be able to sell equity in your future, and you should be able to set the terms. (…) And we can codify those terms in a smart contract. We can connect the revenue share you make on Youtube, the subscription fees you make on Patreon, the merchandise sales you make on Instagram, all to one token that anyone who believes in you could buy.”

Adam Mosserri

But how will this be possible?

Blockchain technology brings a wide number of enablers for this new reality: digital ownership, exclusivity, interoperability, governance and incentives, and composability.

Here’s a short brief of the most important ones (in our opinion) to the creator economy:

4.1 Digital ownership and exclusivity:

With the emergence of blockchain technology, digital records that were previously centralized under the domain of some authority — who had the power to change or delete them — became “public”, enabling the attribution of ownership to specific assets in a secure, legitimate, and easily auditable way. In this sense, the personalization of databases on networks such as Ethereum gave rise to tokens.

But why is this relevant? Through tokenization, it is possible for creators to finance their projects together with their supporters by creating and marketing scarce and exclusive digital assets. These assets can be linked to unique experiences in the physical or digital world, like providing access to communities, forums, specific content, and even the right to co-own royalties in the future.

Does this look futuristic to you? Well, get used to it. Decentralized protocols aimed at empowering creators through the construction of their own independent communities are already a reality, and it shouldn’t take long for you to see them on platforms such as your day to day favorite social network.

4.2 Interoperability:

At Web3, you can own your personal item across different platforms. With open-network programs, your items are subject to integration by third parties, so it’s possible to use those assets on a wide variety of occasions. Wait, we will explain.

What that means is, for example, if you would buy a costume for an online game integrated on the blockchain, even if that game suddenly disappeared, you would still own the costume and would be able to use it in other games that supported this integration.

In this sense, it is natural that the acceptance of such assets on multiple platforms could increase their potential value by bringing them more utility. Instagram and Twitter are already testing integrating NFTs into people’s profiles. So we wonder, who could it be next?

4.3 Governance and incentives:

Another great blockchain transformation is the possibility to easily create and distribute equity-tokens that provide governance rights to their holders.

In general, these people can actively participate in the development and direction of the network, in a process that resembles the meetings of investors.

OK. But what about creators?

The distribution of governance tokens can act as an incentive for fans to contribute to its growth, generating a sense of belonging and aligning the future of the community around common goals among its participants.

That said, let’s tie these concepts to how we envision the future of the creator economy using blockchain technologies.

5. Here’s how we see Web3 as a game-changer for the creator economy

Dear readers, considering the futurism of this topic and, obviously, all the uncertainties associated with Web3, the most cautious way to end this text would be to recognize the difficulty of predicting, with a high level of assertiveness, any concrete changes in this sector in the coming years.

However, in consideration of those who have come this far and, in order to expand future perspectives, we will deep dive into the 3 main insights on how we see this horizon:

(1) Redistribution of value and power of current major platforms into the hands of creators and new builders;

(2) New perspectives for those who want to start their journeys as creators;

(3) Users, for the first time, will have the opportunity to be rewarded and to own a piece of the internet.

Source: Wefy

(1) Firstly, we believe in the redistribution of value and power from platforms to the hands of the creators and new builders through external and independent mechanisms, such as tokenization and smart contracts.

Through them, creators will be able to establish rules such as the number of people who will be part of their communities, the price to be part of the community (most commonly, via membership tokens), which benefits will be associated with that participation, the duration of these benefits, as well as the percentage of royalties associated with their commercialization.

If before, creators were 100% subject and dependent on large platforms to engage their audiences and progress their work, especially with regard to forms of monetization and the rules of algorithms, now they will have another way to finance and develop their careers, involving:

• The users that matter most: Their most loyal fans.

• And the best of all: Doing only what they love.

Furthermore, it is worth mentioning the advent of new builders on the web3: new platforms, many of them decentralized (DAOs), built with and for the creators. It is expected that creators will have extra platform options to choose from and that these new networks will take up more space on the internet.

Audius, for example, is referred to by the general public as a Spotify of the Web3. The platform bills itself as a “modern streaming service designed for artists and built for musicians of all types to create, grow and monetize”. As of January 2022, AAudius boasted a library of over 200,000 tracks and averaged six million monthly listeners.

Fonte: Audius

(2) Second, given the scenario discussed above, are the new perspectives for those who want to start their journeys as creators.

As we have seen, there is no shortage of people wanting to become creators and turn their passions into a living, but the available resources allowed only a select portion of creators to thrive.

Now, with more value available to capture, flexibility to change platforms, and stability via ownership, it is expected that millions of people to onboard the economy and start their creator journey as the scenario advances and technologies become easier for the non-crypto natives.

The Rally platform, for example, allows creators to create their fan community cryptocurrency (or “creator coins”), which are basically community-owned tokens. Through Rally, creators can trade their coins, allow access to exclusive content for their social token holders, as well as return value to their most loyal fans. This opens the door to independent monetization and a new cooperative relationship between creators and fans.

Source: Rally

(3) Last but not least, for the first time, users will have the opportunity to be rewarded and have a piece of the internet.

At Web3, rather than just consuming or producing content, users will invest in a piece of their favorite projects, whether it’s a new game that’s being released or the career of a creator that is already doing well, or another one that is just starting.

Can you imagine if you, as a fan, could have supported a creator and 5 years later he or she became really famous?

This scenario can also be a game changer for creators, as it unlocks a new way of relating to their fans that goes far beyond subscriptions. By owning a piece of their favorite creators’ careers, this community of supporters are not just super fans, they are also investors in their creators’ career success.

Adam Mosserri, CEO of Instagram, on the TED we showed earlier in the text, quotes that can be an analogy to people being able to invest in creators as they invest in Startups. This would mean that fewer creators would need to resort to loans, since having adequate funding for financial stability and take the next step in their careers.

At this point, you might be wondering what the difference is between a subscription and a token. Peter Yang, in the article “Are NFTs the future of subscriptions?”, mentions that membership tokens go beyond subscriptions for basically two reasons:

1. They are not built on platforms that may change policies and fees at any time

2. They are focused on users who are willing to spend higher amounts in exchange for benefits and to co-own the creator’s career.

Source: Wefy | Readapted from Creator Economy by Peter Yang

As you can see in the chart above, we have 3 different user ranges:

• Casual Followers: The ones not willing to pay anything and consume creators’ free content via platforms whose business model is based on ads;

• Subscribers: Fans who are willing to pay a certain amount usually resort to subscriptions in order to access more premium and exclusive content;

• Super fans: Those who are willing to spend more value, monetary and supportive, to co-own the creator’s career with them in the long term and seek for a successful journey together.

To wrap it up, in this new paradigm, we see a relatively more balanced relationship, in which everyone involved can add value some value to the creator’s work. By forming an alliance based on collaboration between builders, creators, and users, these players create a community that shares the success of creators and accompanies them in the long term.

Source: Wefy

At Web3, each stakeholder performs its role in favor of the success of the creator and, thus, of all those involved, which we call here “community”.

• Builders provide infrastructure and support, adapting their platforms to the creators, seeking to keep as many of them as possible, and adapting to offer the best experience for the users of their platforms, who are fans of the creators, so that they can consume the content and interact in the best possible way.

• Users participate in co-owning the creators’ careers, becoming their most loyal fans, and giving feedback to the creators, considering their stronger bond and interest in the success of that career.

• Creators have enough support and stability to do what they do best: produce great content.

It’s an encouraging scenario for the creator economy. The transition from Web2 to Web3 is, above all, a cultural shift, which certainly holds many opportunities for today’s society.

At Wefy, we are building what we believe will be the future of the Creator Economy: a collaborative economy built on top of Web3 technologies. Feel free to send us a message, and connect with us.

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References:

¹ Kids now dream of being professional YouTubers rather than astronauts, study finds: Fatherly

² Por que tantos jovens querem se tornar influenciadores?: Meio & Mensagem e Inflr

³ SignalFire’s Creator Economy Market Map: Signal Fire

⁴ Creator Earnings — Benchmark Report 2021: Influencer Marketing Hub

⁵ The Creator Economy Explained: How Companies Are Transforming The Self-Monetization Boom: CBInsights