One of the things I’ve noticed is how quickly creators and influencers these days are diversifying their revenue streams. Seems like only a few years ago, many creators were reliant on one platform and revenue stream for their income. Today, many of them might start by building an audience on one platform but monetize in many ways, on and off the platform.
In this piece, I’ll cover the various monetization methods I’ve seen, some of the companies enabling each, and a rough sense of scale of the various methods.
Different methods target the casual fans vs the super fans, and so no one method is best. Rather, a mix of the methods based on the creator’s fan base, the type of content they create and their own interests works best.
This is the most basic form of monetization and arguably one of the most developed. In the typical model, ads are interspersed throughout the influencer’s content and handled by the platform which publishes the content.
The platform keeps some revenue for itself and the rest is distributed to creators. 55%. likely driven by Youtube’s dominance has become the “industry-standard” share that creators get, with 45% going to the platform.
Typically, creators, depending on their niche and the kinds of ads that are displayed, receive $2.5-10 per thousand impressions of their content (CPMs).
Different platforms have different eligibility requirements, so not all creators are eligible for monetization in this way, but for any creator with a decent set of followers, it tends to be one of the easiest ways to get started.
The key here for creators is to produce a lot of content that reaches a lot of people since the amount of money they make from this is effectively = CPMs * # of people reached in thousands per piece of content * # of eligible pieces of content.
Youtube is the leader in this space, having paid out $30B to creators over the last 3 years.
Branded partnerships emerged somewhat organically as influencers and creators took off, and in some sense is another form of advertising.
Creators and influencers have developed a captive audience, typically in a certain demographic or niche. By partnering with these creators, brands can directly leverage those creators i) reputation and face and ii) reach their audience to drive awareness of their brand. This industry is typically known as influencer marketing and has grown to $9.7B as of 2020.
Typically, creators charge on a “per-post basis”, and the brands’ willingness to pay depends on how many followers the creator has, the demographics of them, and how engaged these followers are. The exact amounts vary, but a very rough rule of thumb in the industry is 1 cent per follower or $1 per 100 followers, but engagement rate is another key factor.
Initially, the major platforms did not help facilitate these matches and several third-party platforms popped up to help connect brands and influencers (it really felt like every YC batch had at least two). Some of these marketplaces include IZEA and Brybe.
More recently however the platforms have started to make this matching easier. Youtube launched BrandConnect (which was a rebrand of a company they acquired called Famebit) and Tiktok launched its own creator marketplace. The benefit of the first-party platforms is they can leverage their existing brand and influencer bases and streamline the process to provide data around performance to brands.
In some sense, affiliate marketing is a form of brand partnerships or advertising that is more lightweight and outcomes-based.
Essentially, creators use unique URLs when promoting brands and products, and receive a commission per sale generated via their link. Depending on the affiliate program, people typically earn 5-10% as commission on the sales that they drive to the brand (this number is typically higher for digital goods such as content).
This was a very common monetization method in the early days, with a lot of niche websites and bloggers using it to promote products in their niche.
The use of affiliate marketing networks is common so creators have a variety of products to choose from one network rather than having to sign up to say 10+ brands.
One of the largest affiliate programs is run by Amazon, which has reportedly 300,000 affiliates i.e., creators using the platform. A few others include CJ affiliate and Rakuten Advertising (Linkshare) which has over 150K affiliates.
In terms of the platforms where creators tend to be, Twitch has an affiliate program where streamers earn 5% of game sales originated from their channel.
Tipping and Virtual Gifting
I consider tipping to be monetization from fans as a form of patronage where the content is free but they’re tipping any way to support their creator (or get their attention) or receive some digital stickers/avatars/good.
Tipping is still relatively small in the US and most of the western world, but many major platforms have integrated them in. Youtube has an applause feature that allows for tips. Similarly, FB has a Stars feature that allows for micropayments, Tiktok has a live gifting feature where people can send creators digital gifts (which can then be converted by creators into money) and Twitch has bits that allow for the same.
In China, it’s been a commonplace model for over a decade, and some of the numbers are staggering. The overall live streaming virtual gifting market in terms of revenues reached RMB140.0 billion (~$21.5B) in 2019!
On Tencent Music Entertainment (think Spotify for China), 40% of users have tipped artists. In fact, Tencent Music Entertainment makes ~70% of its revenue from tipping related features and only 30% from subscriptions.
Kuaishou (Tiktok competitor in China) is the largest live streaming platform globally in terms of gifting billings and was doing ~50RMB (~$7) per month per average user in live streaming revenue, mostly from gifting. That’s super impressive considering that they have over 300M monthly active users!
Subscriptions and Paywalls
It is funny to suggest that creators making money by receiving it directly from the people who want to pay to see their content is a novel idea, but in some sense, it is a relatively new phenomenon to be done at scale, and we’re finally seeing a large number of creators monetizing via subscriptions across media types, in part thanks to a host of new tools:
People like Ben Thompson have been doing this for almost a decade via a paid newsletter, but the rise of Substack has led to an explosion of paid newsletters in the last few years. For a sense of scale, Substack has over 500K paid subscribers across all newsletters, probably corresponding to ~$40-60M in GMV.
Patreon and others allow fans to subscribe to their favorite creators and give creators an avenue to earn a recurring income directly from their fans (typically tied to paywalled content). Patreon has paid out over $1B to creators so far in its lifetime.
OnlyFans allows adult creators to gate their content for subscribers and is doing ~$2B in GMV, paying out 80% of that to its creators.
Supercast provides a way for podcasters to earn subscription revenue directly from their fans by gating their podcast (or episodes of it) to subscribers.
Circle allows creators to operate a community of their (typically paying) fans.
The big platforms have also followed suit.
Youtube offers paid memberships via Channel Memberships, available to creators who have more than 1000 channel subscribers.
Facebook offers fan subscriptions for creators to gate certain content to paying subscribers
Courses and Events
Courses are another form of a paywall where certain content is packaged and made available only to members / paying users. It allows for an even stronger form of price discrimination than subscriptions. Rather than receiving $5/mo from a small set of users for content, creators can receive hundreds or thousands from the small minority who are “super fans” (over the course of one course or multiple live classes)
The use of courses isn’t entirely new. After all, fitness influencers were selling programs such as P90X and Insanity in the DVD days.
What is relatively new is that with the rise of tools for easy payment collection, recording and editing, course building, and live streaming and videoconferencing, any creator can offer courses or live classes without lots of upfront capital.
Zoom and some tools around it including OnZoom have made running and finding live classes and events simple. In addition, virtual event platforms such as Hopin have gained a lot of traction, and while slightly more geared towards businesses can also be used by individual creators.
TryVirtually and a few others have made it simple for creators to run cohort-based courses which combine the best elements of online-learning with communities. Creators such as Tiago Forte and David Perrell have had great success with their cohort-based courses.
Merchandising is another common revenue stream and involves creators making specific lines of products to sell directly to their audience.
The beauty of merchandising (and NFTs which follows) is that it allows creators “super fans” to show their fandom without say the casual fans losing out on content as they might in the subscription route.
I think of merchandising as taking two forms: physical merchandising and digital merchandising.
On the physical merchandising front, it’s becoming easier and easier for creators to set up an online storefront and sell things, without having to get involved in manufacturing at all. Some commonly used solutions include Printful, Spring, and Teespring, which allow for creating merchandise ranging from t-shirts to mugs to posters.
On the digital merchandising front, Teespring also allows selling digital merchandise such as stickers and filters. Additionally, Cameo which allows fans to buy customized shoutouts from their favorite creators is essentially another form of digital merchandise and is did $100M in GMV in 2020.
Some creators and influencers can even use their audience to directly start a new brand that operates independently. We’ve seen this with Kylie Cosmetics started by Kylie Jenner which is worth $1.2B, and Glossier which began as Into the Gloss and is now worth over $1B.
NFTs are still relatively new and the use cases are still emerging and evolving, but in its essence, NFTs, which stand for non-fungible tokens, allow to make digital things that are typically infinitely reproducible scarce (I’ve written more about them here.)
The use case for creators is that they can sell limited editions or “originals” of their digital content in a similar way to selling limited edition CDs or first edition books.
Another use case that may emerge is creators leveraging it to raise money by say selling a specific track as an NFT, where the holder is entitled to a share of the income stream that track generates.
They’re similar to merchandise above in that selling something as an NFT doesn’t detract from the experience of the casual fans much, but the super fans can have a sense of ownership of limited edition or original works, or even invest in future income streams of creators, as the case may be.
The hidden secret in early-stage investing is that it is all about access: who has access to deals and who can get onto cap tables.
Given that for most consumer businesses distribution is one of the biggest challenges, influencers given their audience and reputation have a strong value proposition to get themselves onto cap tables.
We know that JayZ, Snoop, Nas and have done well angel investing, but increasingly many more Youtube and Tiktok influencers are realizing that investing in startups could be a way for them to convert their millions of followers into millions of dollars.
Josh Richards who has 22 million followers is an angel investor in Triller and now a venture partner at Remus Capital.
Charlie D’Amelio, who has over 100M followers on Tiktok has also made a few select investments, including a banking app for teens.
The thread below outlines some ways influencers and creators can benefit companies, including knowing their demographic well, having an audience, and providing access.
Also, through Rolling Funds and Syndicates, arguably AngelList allows influencers and creators who have access and the ability to add value but perhaps not enough capital to leverage their audiences and access to get into deals and raise money from them.
An earlier piece I wrote on The Monetization of Digital Content on price discrimination and willingness to pay
Chris Dixon’s NFTs and a Thousand True Fans
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