Cam Mulvey
May 8, 2023
As the world continues to change, so must the Creator Economy. Once considered a fledgling industry, it has now cemented its place as a staple in the American economy.
But as economic challenges persist, it's time for creators to shift their focus from just gaining followers to building sustainable business models.
We can draw parallels to the startup space - the zero interest rate environment led to a deep focus on growth for startups, typically measured by users, not by profits. Now, companies and creators alike are forced to adapt. In this next phase, those who successfully build a thriving business will separate themselves from the pack.
In this blog, we’ll give creators:
The only strategy that’s guaranteed to check all of these boxes over the long-term is a direct monetization strategy. This means that creators must consider ways to earn income directly from their fans.
Consider a high-profile example. Mr. Beast certainly earns significant income from sponsorships on his YouTube business, but he successfully diversified with Feastables and Mr. Beast Burger, where his fans became the income source.
Here’s a demonstration of how powerful a sustainable, direct monetization business can be:
When executed correctly, we've seen creators with subscriptions earn an average of 20 times more than those without them.
Let's say you're an average creator who earns $1,000 per month by posting two sponsored posts per month, earning approximately $500 per post to your 100,000 followers.
Our data suggests that creators with a premium offering can typically expect 1.5% of their free followers to upgrade. So, to achieve 20 times your earnings on your 1,500 upgraders, we need to earn $20,000 per month. We advise creators to introduce at least two subscription tiers:
And you now have $20,000 per month - $240,000 per year - that’s recurring for you every year, allowing you to focus on other areas, or creating higher quality content. Of course, we’re oversimplifying by removing payment processing fees, platform fees, annual-pay discounts, but you can see how powerful directly monetizing your true fans can be.
This math can be adjusted too. Let’s say you provide a more personalized, highly engaged service, where even 1.5% would be too much to ask. Make it 0.25%:
With only 250 subscribers, we can still grow your revenue by an order of magnitude, provided your fans are passionate enough and you are delivering enough value.
There two key implications from this simple math:
New monetization opportunities are exciting, but creators shouldn’t accept every opportunity that comes their way. According to ConvertKit, even full-time creators have an average of only 2.7 income streams.
Here’s a few questions to help you evaluate new opportunities.
Venture Capitalist Li Jin uses a formula to standardize earnings opportunities for ease of comparison:
She essentially says that all benefits should be considered against the costs required to achieve success.
I would also advise creators, particularly in this macroeconomic backdrop, to consider sustainability. By now, you can see the value of sustainable business models for creators. Even low-effort earnings opportunities may not be sustainable over the long term. It's essential to identify recurring and scalable opportunities that allow creators to focus on long-term growth and success.
Currently, sponsorships reign supreme, with almost 70% of creators reporting it as their primary income source. However, this source of income is also the most precarious. Sponsorship earnings rely on influencer marketing budgets, which can be cut off easily and without warning.
Sponsored content may come with limitations on creative control, as companies may have rigid expectations for their brand's portrayal, hindering a creator's potential. As we forecasted in our 2023 Creator Economy Predictions, it's improbable that sponsorships will maintain their dominance in the future.
Physical products are another viable option for creators. These include anything from hats and t-shirts, to your favorite fitness influencer’s protein powder or Mr. Beast’s Feastables.
While physical products are a lucrative option for creators, not all creators have a seamless way to introduce them. Those who focus on soft skills may find it challenging to come up with unique product ideas. Additionally, producing and distributing physical products can be straining for a solo content-preneur. However, with enough support, products excel in their ability to scale and promote your brand.
Here I’m talking about… and don’t crucify me… NFTs. I know, I know, we already tried this, and, for the most part, it didn’t really work. But I don’t believe NFTs are completely a thing of the past, but they certainly won’t be as widespread as they were in 2021.
However, digital products can still be a lucrative option for creators, especially when they provide value beyond a mere JPEG file. Oftentimes the purchase of a digital product is merely a gateway to another service offering (so called token-gating). For NFTs to remain relevant, creators must prioritize delivering genuine value with the token.
In addition to our previous example, we did a whole blog on subscriptions for creators. At Sute, it’s no secret that we believe subscriptions are the way of the future for creators. They are a sustainable revenue source due to their recurring nature, and they encourage creators to be more thoughtful about their content, making it more valuable for their audience.
However, subscriptions are not for everyone. The creator must decide which content should be free and which should be behind a paywall, and there must be an appetite for subscriptions from their true fans.
AdShare is a widely used form of monetization, but it's a passive income source that creators have little control over. While it may seem convenient to set it and forget it, relying on algorithms and lacking control over the content may lead to instability in the future.
However, it does meet the scalability and reliability requirements of our sustainability definition. With 7.28% of creators prioritizing AdShare, it’s clear that this model offers strong potential.
Affiliate links are another prevalent monetization option, especially among fashion influencers. However, in some cases, these links may compete with the creator's own physical products. By promoting affiliate links, creators are effectively encouraging their audience to spend money on someone else's products. Why not have them spend their money on your services instead?
Additionally, like sponsorships, affiliate links are dependent on someone else; someone who could take away your income source at the drop of a hat.
Though there are examples of incredibly generous fans, tipping creators $40k or buying them a car, these options cannot be considered a sustainable business model.
Tips in the creator economy are unpredictable and unreliable, so it’s difficult to see a path where these are the primary business model for creators. Instead, these should be considered a bonus - awesome when you get them, but not alarming when you don’t.
Course platforms like Kajabi and Teach:able have exploded in popularity from creators in recent years. These platforms enable creators to share their expertise through courses and charge a one-time access fee.
While some creators have been incredibly successful with courses, this is not really an option for many creators. It’s basically not an option for purely entertainment creators, but popular among edu-creators.
Courses require a very different approach to content, where you have to measure your audience’s progress and sequence content in an intuitive way. However, when done right, courses provide a natural path for creators to monetize their fans directly and build for the long-term.
I have yet to find a single creator with a positive experience from creator funds. While the premise sounds great, the process by which payments are decided is often a black box, which can lead to questions about fairness and transparency. They incentivize the creator to make the platform more successful, but the incentives decrease over time, resulting in an untenable earnings source for creators.
As creators evolve, they must closely consider their path for success. To succeed, creators must build a manageable and sustainable business model that emphasizes predictability, reliability, scalability, and alignment.
To learn more about building a successful and sustainable business, download our success guide today.
And if you’re an edu-creator in the fields of entrepreneurship, career development, or financial literacy, apply now to build your sustainable content business with Sute!
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