Will the Creator Economy Drive the Next Bull Cycle?
VYSYN Weekly Release #112: Web3 is revolutionizing the paradigm of content creation
The creator economy has flourished and evolved in the past year, largely due to a major shift in consumer behavior. Creators can now monetize their work in various ways with the existing business model. But there are problems the digital asset industry seeks to solve. The increasing interest in the new decentralized creator economy model could spark the next bull cycle for the industry.
The latest edition of the VYSYN Release will give a comprehensive overview of the current Web2 creator economy and the problems it faces. We will also analyze how Web3 solutions seek to revolutionize the creator economy and what this can mean for the digital asset industry.
History of the creator economy
Over the past centuries, we have witnessed several major economic and social development shifts. The agrarian economy gave way to the industrial revolution in the 18th century. The industrial economy was replaced by the consumer economy. In the early 1990s, the consumer economy shifted to its digitization phase. Then, the creator economy was born as part of digitization.
The transition to the creator economy was aimed at allowing consumers to participate, interact, and add value rather than simply buying what was offered. The creator economy attempts to empower online creators by providing them with digital marketing tools and eliminating any barriers or discrimination.
The creator economy implies no entry barriers as everyone with a smart device and an internet connection can become a content creator. Users sign up with big tech platforms like YouTube, Facebook, and Google. These platforms provide creators with multiple tools for content creation and distribution.
The creator economy also unlocked a plethora of ways creators can monetize their work - in addition to the conventional means of earning. Creators can earn huge sums of money from tipping, brand sponsorships, ad revenue, affiliate links, and much more. A recent survey conducted by NeoReach valued the creator economy at over $100 billion, with more than 50 million content creators worldwide.
(Source: NeoReach Creator Earnings Report 2022)
However, despite the benefits content creators receive, the current Web2 creator economy is still laden with problems. These are undermining the potential of this new economic paradigm. The barriers the Web2 creator economy claims to eliminate, including participation fees and limits to creators' earnings, are still present but in a different form.
Decentralization revolutionizes the creator economy
The current Web2 creator economy model is powered by social networks owned by large tech companies, including YouTube, Facebook, Instagram, TikTok, and more. While these platforms offer content creators access to a large global audience, it comes with a price.
Creators are forced to give up a huge percentage of their revenue to these platforms that host their content and build their audiences. An a16z report revealed that Meta currently has nearly 100% take rates on its social media platforms.
The advent of Web3 technology offers a new way for the creator economy to blossom. Crypto integrations, Metaverse, and decentralized platforms are introducing alternative pathways for creators to make money.
This new model is empowering content creators to become the sole owners of their content and engage directly with the audiences, eliminating the monopoly of Web2 platforms. Creators no longer have to worry about the ever-changing algorithms or the extremely high take rates. They can decide when and how to engage with audiences directly to make money.
Leading this revolution are the Metaverse and non-fungible token (NFT) sectors. Over the past year, interest in Metaverse-related projects has skyrocketed, with the industry attracting both individuals and institutions alike. One niche that has garnered impressive attention recently is Metaverse gaming platforms. Blockchain gaming has solidified its position as one of the fastest-growing sectors of the digital asset industry, with creators generating massive revenue from their products. A recent report revealed that the top five creators on the Metaverse platform, Decentraland, generated over $21 million in total sales of Metaverse wearables.
Much like the Metaverse, NFTs are another innovation that is shaping the creator economy. NFTs have opened a wide array of opportunities for creators to monetize their work. Despite the decreased interest in NFTs as of now, analysts predict that the market will reach over $230 billion by 2030. Currently, the NFT-based crypto art market is now worth over $1.8 billion despite the general market downturn.
We are still at the beginning
Support for a fully decentralized creator economy is steadily growing, especially in light of fresh moves by big tech companies within the Metaverse. As interest in the virtual economy continues to thrive, large institutional investors, including Nike, Meta, and others, are establishing their brands on the Metaverse to boost engagement and increase revenue.
While some Web3 enthusiasts are excited about the prospect of large institutional capital flowing into the sector, some industry experts have warned that the influx of these big tech companies could undermine decentralization. These fears were recently confirmed when Meta recently announced sky-high creator fees. These could be up to 47.5%, for the sale of digital assets on its Metaverse platform Horizon Worlds.
Web3 solutions, including the Metaverse, NFTs, and more, were built on the premise of decentralization, allowing creators to have control over their content monetization. However, with more big tech firms entering the Metaverse and setting exorbitant take rates, it will not be surprising if independent artists and content creators turn away from the Metaverse entirely. Creators want a way to prevent excessive fees, determine their royalty structures, and maintain control over their intellectual property and fan base.
There is also the issue of lack of interoperability between multiple Metaverse platforms. All of these platforms run on different blockchain networks, with different frameworks to navigate. The lack of interoperability among these different platforms makes it difficult to bridge content from one platform to the other. It is difficult for the average content creator to have the capacity to create projects on each platform, as dozens of Metaverses are popping up. Therefore, the industry must focus on developing interoperability solutions to improve the interaction between existing Metaverses.
Nonetheless, it is vital to remember that the intersection of Web3 and the creator economy is still nascent and its future is uncertain. This new Web3 paradigm of the creator economy will continue to evolve, providing several new earning opportunities for creators. While the mainstream adoption and growth of this new model will not be a light-switch moment, it is moving at a fast pace. We are poised to enter a new era of wealth generation that can drive the next bull cycle and increase global acceptance of the digital asset industry.
About VYSYN Ventures
VYSYN Ventures is a longstanding venture capital company that specializes in funding and supporting disruptive startups in the blockchain and cryptocurrency industry. We have provided early-stage support to several projects that have grown USD market capitalizations of hundreds of millions and even billions. Our incubation program focuses on providing capital allocation, versatile marketing support, and tech assistance.