Creator Economy: The Payments Opportunity (#26)
Thoughts on how payments stack can develop as creators become businesses
People have always had passions. Be it writing, painting, playing an instrument, running, or following a random ball for hours. But few put it out to the world and made a living off it. And there have always been reasonable views to stay on the safer side.
But the last decade has forced millions to rethink this. Platforms and businesses have emerged centered around independent content creators and curators. This evolution of a creator economy, or passion economy - as some may call it, has been led by media platforms such as YouTube and Instagram.
Individuals could share a series of videos or images, amass an audience that likes similar content, and monetize his/her viewership. In the early stages, and this is not long ago, monetization would primarily come from advertising. That is, the scale of your network and the reach of your content mattered most. This was the first stage of the internet creator economy.
Few years on, creators have access to more resources and platforms. From teaching to newsletters, merchandise to fan engagement – platforms today are building a differentiated service for each part of the creator’s business lifecycle. Creators are not only reliant on scale today, but also on differentiation of what they are creating – even if, they have only 1000 true fans. This implies that advertisements aside, creators get to monetize their content through users directly.
I will not go into more details about this shift towards passion economy, because you can read people more knowledgeable than me on the topic (Signalfire, Li Jin). But, in addition to the above, I will emphasize points that form the cornerstone of this shift and are relevant to this write-up:
More Monetization Methods: The advertisement-based model worked similar to a gig economy model (think Uber drivers), where the monetization was repeatable, and measurable or proportional to trips / distance covered / viewership. In the more independent creator economy, creators can achieve monetization through subscription services, merchandise sales, donations, among other models and earn more from an existing user base on an ongoing basis.
Direct Engagement: the potential for user engagement, through platforms such as Cameo and Fourthwall, is higher for creators that hope to provide value-added services to their audience. This opens room for direct interaction, for building greater loyalty, and for improving lifetime happiness / value from this relationship.
Mobility of Audience: with the extent of platforms available to creators, the ones that build their audience often leverage that popularity across platforms. That is, you are likely to see someone on Twitter use their following to an gain audience on Substack or vice-verse, and someone on YouTube do the same on Tik Tok. This is possible because the same audience exists across platforms and is likely to become your early adopters on newer ones.
Individuals as Businesses: the shift of creators from a scale-based platform to leading their crafts and interactions is similar to how a business feels moving from Amazon to its storefront at Shopify. This individualism comes at the cost of lower network effects. But, it also allows the creators a separate identity and access to tools to grow & control their business, incl. interactions, to a larger degree.
The last point almost binds it all. It is this shift in focus towards individuals as businesses at scale, instead of as commodities, that should interest us most. Moreover, when we think of payments, this helps us realise that the lines are blurring on how payment providers look at merchants and how they should look at such creators today.
Therefore, for payment providers, it becomes crucial to recognise the change and to understand the specific & evolving payment needs of this 50M+ strong creator economy.
So, how would creators like their payments?
Internet makes the movement of ideas, of content, easier than ever. But similar convenience has not followed for payments, although we have come a long way. The ease of payments is higher the more regional and the more merchant-specific the payments are. This introduces some complications for businesses, and more so for creators that operate as businesses.
A. Borderless Payments
Creators, today, have audiences that are truly borderless. For a top Iranian tutor sharing video lessons on Physics, there is likely to be as much demand from those in India and Japan as it would be from Iranians. Unless served on a platform such as Teachable, these lessons face a big monetization issue. Imagine the professor signing up students for an independent Zoom based course, two questions pop up:
Would acceptance be possible in ten different currencies without the big markup on FX?
Would the creator be able to adjust registration fees as per income standards in different countries? (I mention this because I have seen creators face lower sign-ups from lower-income countries. Mostly because subscription fees are standardized by the creators and platforms.)
Making standalone creator endeavours seamless should be a top priority for payments companies focusing on this domain, and making acceptance of payments across borders easy would be a big leap towards that.
B. Customization in Modes of Acceptance
Creators monetize their content and popularity in more ways than one: advertising, sponsoring content, tips and donations, product placement, digital content and merchandise sales, live and virtual events, and paid subscriptions cover most of such methods.
Now, to allow the acceptance of all these types of payments, creators depend on different payment platforms. For example, a Buy Me A Coffee allows creators to accept tips / donations, while a Patreon allows creators to get subscriptions. But this introduces effort and complexity for creators, who need to guide their subscribers to different payment platforms.
Increasingly then for platforms, to discourage disintermediation of their creators, it should become important to provide the convenience of all these methods under one roof. This would be done likely through API integrations or through the development of infrastructure internally. And platforms that make the experience of choosing amongst one or multiple such payment methods the most convenient would be able to differentiate themselves as other services become standardized.
C. Loyalty of Subscribers
The entire livelihood of thousands of creators depends on maintaining their audience. And a drop in quality, in the popularity of the type of content, or the appeal of the platform are threats for serious content creators.
There is a role to be played here by payments. Card-on-file or subscription services are suited to retain customers. But there remain many conventional payment methods of attaining loyalty that creators remain little exposed to. A couple of them, which I imagine would be interesting, are listed below:
Reward points or cashbacks: Offering reward points based on certain relevant usage metrics for redemption on creator-specific merchandise or on discounted future monthly subscriptions. For example, for a newsletter, a qualifying metric could be the average time-spent by the reader on the newsletter, or it could be the number of shares or referrals made for the page. And customers above a threshold of time spent on the newsletter or referrals made would be awarded higher reward points or discounts. Similarly, cashbacks on subscription or merchandise costs, instead of redeemable reward points, could be an alternative. This would be similar to how airlines or other big merchants build loyalty through miles or store points.
Virtual credit cards: Issuing virtual cards for some membership fees to your subscribers - similar to store-based cards, which can be used to make creator-specific purchases on subscriptions, merchandise, digital arts at discounted rates can be another option. Likewise, using such credit card for spend elsewhere could perhaps unlock points that can be redeemed on the creator products.
Such payment options would help independent creators recognise higher long-term loyalty from their users.
D. Single View of Multiple Platforms
Going back to the point made earlier, creators today build audiences on multiple platforms. For one, this helps them diversify their sources of earnings. Now, if creators accept payments on more than one platform, there is value in providing the users the same payment methods. Not only does it reduce friction for the user, but it also reduces complexity.
I imagine that the most convenient route may be offering a payment option that is tied to the user, is easily shareable on platforms through simple links, and offers a single dashboard view of the revenue statistics arranged by members and by platforms.
This is likely a crude way to put it, but the essence remains that the solution should be creator-first, and not platform-first. A checkout page link made specifically for the creator, for example, would be easily shareable – irrespective of the platform. It would introduce problems of its own, however. But worth exploring, regardless.
Final Few Thoughts
This article was a small thought experiment on how payments can evolve for creators. With the growth that creator platforms are seeing today, it is not tough to imagine the high value one could bring by assembling and offering a creator-specific payments stack. This would likely include the option to offer tiered pricing, accept donations, offer discount codes, issue virtual cards, accept in multiple currencies, and offer a single-view dashboard.
Moreover, the stack would likely have thousands of ready influential adopters. Adopters, who can then encourage hundreds and thousands of others to jump in. A great distribution act, if anything.
What I also imagine would happen eventually, as more creators become high-worth, is that it will not only be a monthly subscription, a one-time donation, or ads that would make money. Instead, content would be broken down and sold into smaller parts. For example, we would be able to unlock one article of a Substack for $10, a ten-second TikTok video for INR 75, or one food recipe for E15.
Increasingly, as payments companies such as Karat, Carbon Payments, VibePay, and Creatoriq close this gap, the pressure increases on platforms to retain the creators through provision of a sophisticated set of payment options.
We must note that, today, we stand at the infancy of creator content monetization, but with platform sophistication, we should expect content to be treated like SKUs, and payments to be linked to the platform and user-specific metrics. For what it could end up be becoming, it is intriguing to imagine the possibilities.
Other interesting reads on the topic:
On Creator Economy Market Map by SignalFire
On shift from Attention to Creator Economy by Clara Lindh for Forbes
On Passion Economy and The Future of Work by Li Jin for Andreessen Horowitz
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