Coinsights #12: The Creators are Back In Charge
Welcome to the 23 new people that joined this week! Join 48 (almost 50!) web3 enthusiasts by subscribing here:
Happy holidays to the Coinsights community! I’ve posted for 12 days straight now and will probably slow down in the last few days of 2021. In the meantime, please reach out in the Coinsights Discord with any feedback and what types of content you want to see in the new year!
The Creators Got Left Behind
The most dominant content engines today are free. So how do they make money?
Jokes aside, early content aggregators like Google and Facebook decided to not charge users for their service and instead monetize via ads. This allowed them to grow extremely quickly while creating a monopoly over people’s attention. So why did they choose not to charge users? Li Jin and Katie Parrot say:
Payments weren’t built into the internet’s infrastructure—it was considered too risky. Marc Andreessen called this “the original sin of the internet.”
The lack of payment infrastructure is the reason why so much of the internet is monetized via advertising.
I don’t think the lack of payment infrastructure prevented Google & Facebook from charging users; after all, they ended up charging advertisers just fine! Instead, they saw an opportunity for an effective flywheel: exponential growth of the users through a free and sticky product which in turn drove more advertisers to their platforms.
In an advertising dominated world, creators are left with no choice but to create content for these attention monopolizers. As a result, creators end up having to cater to two sets of audiences: their actual followers/fans/etc. and advertisers! Clearly, this isn’t ideal. From Li Jin:
This business model—or lack thereof—has a profound impact on which creators can make a living and what they create (incentivizing viral, attention-grabbing, and aspirational content, while disincentivizing niche, in-depth content).
Web3 Could Put Creators Back in Charge
Li Jin, who if you can’t tell already is an authority on the creator economy, wrote a piece called 100 True Fans back in February 2020. It describes how creators are able to make a living via sites like Substack (hint hint) (jk) (unless…?) by monetizing their 100 closest fans. In exchange, supporters are given special benefits like exclusive content. The web3 economy takes this model one step further. As I wrote earlier about DeSo, the decentralized social media platform being built on chain:
Every profile on DeSo comes with social tokens that anybody can buy and sell. In some ways, these tokens behave just like a stock: the price goes up when people buy, the price goes down when people sell. In essence, you can trade on someone’s “social clout:” it’s no surprise that Elon Musk has the priciest token! You can also “invest” in people that you believe in early on, with the idea that their token price will skyrocket once they go mainstream.
The potential for investing in creators also opens means of economic gain for individuals without a finance background – a crucial theme in the web3 world. A high schooler is much more likely to know which creator on TikTok will go viral soon compared to which index fund to pick!
Before I get many angry DMs about how financial rules exist for a reason, I’m not saying that we should cut kids loose and have them invest in whatever they want. There will most definitely need to be regulation put in place to protect individuals. However, the fact that web3 enables this type of economic behavior is already a step in the right direction!
Besides investing, another interesting aspect of how the creator economy interacts with web3 is through NFTs. To recap, NFTs are “unique digital assets whose ownership is tracked on a blockchain.” Similar to how an art collector may want to buy Van Gogh’s Starry Night, a Taylor Swift superfan may be interested in buying a 1/1 NFT of her latest song. I personally was against this idea for the longest time: I can hold Starry Night, but I can’t hold an MP3 file! Therefore, the song is worthless!
I understand the hype now. Anybody can print out a copy of Starry Night and frame it on their wall, just like anybody can listen to Taylor Swift’s latest song. What matters is the ownership.
Brett Shear, an NFT collector who owns 45 songs from Catalog, told Time magazine: “In the same way that you buy art that you want to put in your apartment, I want to listen to this music and enjoy it—and it’s a different feeling to own it.”
There’s no reason why digital assets can’t carry value too; our life is mostly online anyway! This article that you’re reading right now is as much a product of the creator economy as was Starry Night. They’re just represented through two different mediums (and drastically differ in value)! In short, NFTs provide yet another web3 based way to support creators for their work, freeing them from business models that put them at a disadvantage.
Thanks for reading! Do you agree with the takes in this article? Come chat in the Coinsights Discord or leave a comment!
Subscribe to Coinsights for content just like this, straight to your inbox!