Web3 Has Failed the Creator Economy

You’ve probably heard of the creator economy – it’s been quite the buzz about town. It’s estimated to be worth around $100 billion, according to Forbes. At least it was.

Now some of that bright shiny lustre is fading with investment in the space down around 60% from the highs of 2021. Then again, wasn’t everything just mad in 2021? It seems bewildering to think today, but there was a thing called the coronavirus pandemic and everyone was stuck indoors, bored out of their brains and desperate to find alternative ways of earning a living.

Robin Schmidt recently left The Defiant, where he led its multimedia team, to build the metaverse brand BasedAF. This article is part of CoinDesk's "Trading Week."

This precipitated an unprecedented rise in the number of people just creating, for themselves or entrepreneurially. On the Web3 side of the world, non-fungible tokens (NFT) captured the imagination with their promise of royalties in perpetuity and an audience ready to speculate on literally anything. Hello to you, Mr. Kevin.

The creator economy is something of a two-headed beast featuring the eponymous creators on one side, gamely fighting the evil platforms and their pesky algorithms alongside a slew of service providers like Karat, Stir and Fourthwall specifically designed to cater to the very specific specifics of being a creator.

I’ve been a kind of pseudo-creator for the last two years in my time at The Defiant, bending crypto stories to my will and refusing to back away from a weak punchline in the service of entertaining the audience while teaching them some stuff, too. I was blessed not to have to rely on the success of that content to pay the bills. Because that is where things really hurt for creators.

It’s another two-headed beast. Build an audience. Monetize that audience. In other words, get known and then sell stuff. It can really mangle your head chasing that sweet clout cocaine. Which is why I’m happy we never really did it at The Defiant.

But now I’m forging a new path on my own as BasedAF and I will be at the mercy of the social media algorithm. My audience must be large and my monetization must be monstrous, otherwise I will be a failure.

You’ll notice that I haven’t mentioned Web3 yet. And that’s because I don’t think this space has done a very good job at creating value for creators. Let me be clear, YouTube, et al., are definitely not perfect, but the toob in particular has done an unreal job of onboarding successive generations of new talent and allowing it to thrive.

No Web3 platform has come close to enabling people to create like Google has. At least not yet. I’ve seen innumerable platforms lamenting the control the inscrutable algorithm has over creators and claiming to return power back to them. But that’s assuming creators want that power. I’d wager the vast majority don’t, and that’s why so many Web3 media projects have failed.

Then there’s the “just add a token” model. ‘Scuse me while I reach for the sick bag. Why would you voluntarily put the success of your brand in the hands of traders? The value you create should reside in the brand, not in an empty token you just issued because it’s cheap and easy to do that rather than creating anything substantive.

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Tokens cannot create sustainable value when their fortunes are as much at the mercy of bitcoin’s volatility as they are in your own talent. Using a token for a longterm create endeavor is idiotic.

However, looking at the models of big YouTubers and the general “creator industry” chatter, everything is geared towards enabling creators to be better business people and maximize profit. It’s somewhat off-putting, and all but ensures the audience gets a bad deal. OK, this is an exaggeration.

There are tons of great courses out there run by creators and maybe I do want to own a hoodie or a T-shirt but the narrative is increasingly leaning towards "This creator made $100k in a single day selling courses" with everything geared towards extracting maximum value from your audience which is exactly the gripe gamers had about AAA publishers adding NFTs to their titles.

This is why my mental map of being a Creator has gone full Cerberus, adding a third head to the beast.

1. Build an audience

2. Monetize that audience

3. Share the spoils

And now you’re wondering how on Earth you share the spoils while doing the Texas two-step around the Howey test and without adding a useless token. It turns out you can, and it revolves around porting the idea of yield farming back into Web2. Like, really. Social platforms are a lot like exchanges. They thrive on volume. And that volume creates a yield. So if your content is good then you will generate yield. And the best thing is, that yield is legit. It’s ... whisper it … real yield.

This entails giving an audience ownership of your success from the get-go but with real yield and not Ponzinomic BS. Thing is … this only works at scale, like big, big scale. Our big challenge here at BasedAF is to create content that a lot of people want to consume. Then it might just actually work.

We’re channeling this through, what else, our own PFP (profile pic) collection, that represents and is sold to what we hope will become our SuperFans. Back in November of last year, Blake Robbins wrote a Twitter thread with a line that has refused to shake out of my brain cavity: “In the future, people can be: Full-Time Fans.”

I don’t know if we’ve cracked that but we’re baking that concept of fandom into the project. Because we can. And if we succeed then others will follow because of that third pillar. Honestly, that’s the juiciest, richest one of the three. This is where I think Web3 has a genuine role to play. Disrupting YouTube … not so much.

So one last thought on royalties on non-fungible tokens (NFT) because it’s a hot topic and also a source of monetization for many projects. If royalties are by default dead, then you can’t fight it. But there are options. One is to be your own market maker on Sudoswap. Set up a buy/sell pool and take the swap fees. We’re considering this as a launch strategy for BasedAF. But there’s another idea – the paid reveal. Sell a token for, let’s say, 1.2 ETH but discount it by 50%. This gets you the token but only the token. If you want to reveal the artwork and gain access to the full range of perks or utility offered by a project then you have to pay the balance.

Traders can flip to their hearts content while those who want to go further can opt to reveal. If the token is sold or moved to another wallet it reverts back to its unrevealed state. Separate the trading from the cultural component and allow both sides to play the game they way they want to.

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This can be managed using multi-resource assets such as those created by RMRK. No marketplace required, just a simple mechanic for balancing the realities of the market with the longer term desires of the project. Just a thought … but we do our best thinking in the bear, right?