How Creator Platforms Are Eroding Their Most Important Resource

By CreatorStack · 1 month ago
How Creator Platforms Are Eroding Their Most Important Resource

When historians write the story of the rise of the Creator Economy, there are two moments, ten years apart, that are guaranteed to appear. The first, in Spring 2007, is when YouTube started sharing advertising revenue with creators—a decision that arguably laid the foundation for the “Creator Economy” as we know it today. The second, in Spring 2017, is when the cracks in that foundation became impossible to ignore, and questions about the legitimacy of the platform economy started to emerge.

Spring 2017 marks what is now popularly known among creators as “Adpocalypse.” YouTube faced a mass exodus of advertisers due to concerns about their ads being featured next to objectionable content. The platform overhauled its advertising policy, and thousands of creators saw their views and earnings plummet as a result—some by as much as 99%.

For many YouTube creators, Adpocalypse was a wake-up call. It was the first time they realized that their revenue—in some cases, their entire livelihood—came with strings attached. It was the first time that creators questioned the legitimacy of the bargain that they’d made with the platform.

But it wouldn’t be the last. The first Adpocalypse in 2017 was followed by Adpocalypses two, three, and four in 2018 and 2019. And YouTube isn’t the only platform to have faced tension with its creators. In 2016, Facebook faced pushback after it made changes to Instagram’s algorithmic feed that impacted creators’ engagement on the platform. When OnlyFans announced changes to its content policy in summer 2021, the backlash from creators was so immediate, the platform was forced to suspend the changes almost immediately.

Like feudalism and divine right monarchy before it, the creator economy (at least, in its current, highly centralized form) is experiencing a legitimacy crisis. Creators are questioning the terms that govern their relationship with the platforms they frequent—and the right of the platforms to set those terms in the first place. How the ecosystem responds—what alternatives are proposed, who builds them, and how—will shape the next phase of the Creator Economy.

There are two ways that a legitimacy crisis can resolve itself: either the regime re-establishes legitimacy by realigning their rule with the interests and norms of the community (as factories in the Industrial era did by instituting fairer work policies); or, the system is overthrown, and a new one is put in place that better aligns the values and incentives between people and the nexus of power.

The platforms have made efforts to regain legitimacy with creators via the first route, by increasing the variety of monetization avenues available through their platforms. Twitter and YouTube have both added tipping functions to their sites. Facebook recently announced plans to pay $1B in “bonuses” to creators through 2022. But these efforts at realignment reveal the extent to which the platforms are either unable or unwilling to truly change the terms of their relationship with creators.

It seems clear that if there is going to be a resolution to the legitimacy crisis in the platform economy, it is going to come in the form of the second option: the emergence of genuine, credible challengers to the platforms that offer a more democratic, decentralized alternative to the platform economy as it is currently constructed.

The first generation of these companies is already on the scene. Products like Patreon, Cameo and Substack have gained traction over the past several years by zeroing in on the monetization component of the problem, offering creators pathways to generating revenue directly from their audiences rather than relying solely on platform-controlled advertising revenue.

But as we’ve seen, monetization is only one dimension to the platform legitimacy crisis. It’s not just about money: it’s about agency and autonomy, and having the opportunity to participate in decisions that directly impact your livelihood.

Fortunately, many of the innovations being pursued by founders building in Web3 are aimed at introducing exactly the kind of corrections that the platform ecosystem needs to resolve the current crisis. There are three areas in particular where founders looking to power the next generation of the platform economy should focus their efforts: ownership and portability of data, participatory decision making and cooperative business models, and decentralization via crypto and open-source protocols.

Ownership and portability of data

In contrast to the current closed paradigm of building consumer platforms, decentralized networks (cryptonetworks) are built on open data (stored on public blockchains), enabling users to have transparency and control over what is happening. This dynamic means that creators can operate outside of specific platforms, and can move to other networks and services that better align with their needs and values. True creator consent, and legitimacy, occurs when creators are able to participate in systems from a place of freedom of choice rather than data-driven lock-in.

Decentralized building via open-source development

The proprietary product development of the platforms is a major reason they’re able to maintain control over their ecosystems. With open-source development, this dynamic could be disrupted. Instead of features being chosen based on what has the potential to unlock more ad revenue or keep users from leaving the platform, features would be chosen based on what makes the most sense for the community as a whole.

Participatory decision-making and cooperative business models

Crypto networks are decentralized networks that utilize crypto tokens to incentivize and reward participation; Bitcoin and Ethereum are early examples of crypto networks that were bootstrapped by rewarding participants with their native tokens, which represent ownership in the network. Decentralized autonomous organizations (DAOs) are online communities that are owned and operated by their members, via a token.

While crypto tokens offer the strongest form of distributing ownership to the community, smaller-scale outcomes can be achieved by inviting creators into the business as shareholders or advisors, which would also give creators the opportunity to participate actively in the decisions that impact the business, and better align incentives between creators and platforms. One example of this is Airbnb’s Host Advisory Board, composed of 18 hosts who regularly convene with company leadership.

Throughout history, legitimacy crises have often resolved into new, more representative forms of governance. That is the opportunity I see in the platform economy today. It’s not a foregone conclusion, however: like all change, the outcome is contingent on who takes the lead and the choices they make. But if the next generation of networks can optimize for creator ownership and autonomy and more representative decision-making, we will be that much closer to realizing the promise of a truly liberated future of work.