Monetization in Web3
Monetization has always been a top priority for Creators.
After they discovered from 00' to 10's they could monetize their audience through Web2 platforms and that it was possible to earn a living from their passion, Creators then realized from 10' to 20 they could actually BE the brand, BE the product, and could do for them what they were doing for others.
Indeed, the emergence of new technologies cumulated to a paradigm shift in how GenZs see the Work has led us to a new era for creators.
Crypto, and tokens specifically, seem to be the path to help these creators achieve financial freedom and live from their passion, creating content online. Even major Creator-focused Web2 companies already understood. Tokens can revolutionize how creators make money online. Patreon is already looking into crypto tokens as another way for creators to monetize communities.
So how and why tokens, through Ownership and direct value creation, will replace the old ads/brand sponsorship monetization framework? And how will creators leverage this technology and monetize their audience compared to the traditional way? That's what we're going to find out in this essay. Let's get into it. 🔥
1- The current Monetization model in Web2
The Creator Economy results from a complete paradigm shift in the way more people, and GenZs specifically, are seeing the Work. It's indeed more and more common to post on the internet, share photos, join forums, curate articles and make money out of it. The internet levels the playing field, and anyone can use their hustle and savvy to amass a following and monetize that following.
However, there are still two major problems for creators today: Ownership and Monetization.
Creators don't have Ownership because of the ads-driven business model most Web2 social platforms, where creators build their audience, are using. Indeed, in Web2, the process of monetization for platform usually goes something like this:
- Company launches an app
- It onboards as many users as possible
- Then it monetizes its user base
But this outdated business model forces current social networks to keep a walled garden around their content. Indeed, opening their data would mean killing their business model. Their main way to monetize is to sell those data to for-profit companies to target specific audiences. This business model gives users and creators no choice but to continue using these apps as they have already created an audience on these platforms. On top of that, this business model creates a situation where creators who actually produce the content are underpaid, under-monetized, and don't fully capture the value they are making.
With this broken ads-driven Business Model, creators don't have much choice but to rent the audience they don't really own to brands keen to pay a lot of money to access it. As you can imagine, this model is unsustainable for creators, and we need to give them back Ownership over their content and ways to monetize it more efficiently.
2 - The first era of monetization in Web3.
There's a famous essay written by Kevin Kelly called "1,000 True Fans," predicting that the internet would allow more people to make a living off their creations. Rather than pursuing widespread celebrity, he argued, creators only needed to engage a modest base of "true fans"—those who will "buy anything you produce"—to the tune of $100 per fan per year (for a total annual income of $100,000). Li Jin later argued creators would eventually need only 100 true fans to make a living off their passion.
I believe Li Jin is right. New crypto technologies allow creators to monetize their content more efficiently. In recent months, and with creators becoming increasingly aware of Web3's capabilities, we saw more of them experimenting with new monetization models and earning life-changing money.
While there are many ways for creators to leverage the crypto technology , it seems there are two main ways for them to monetize more efficiently their content:
- Creating a Token that gives access to premium content - Fans (or community members) can buy a token and get access to content in advance, access token-gated content such as private channels in a Discord or the "Close Friends" on Instagram. The Token allows to limit access at scale and provide recognition and status for the biggest fans within the community.
- Allowing fans to invest in the Creator through a Token - With the Creator becoming more famous, more people want to buy the Token to get access to exclusive content, and the token increases in value. Fans can redeem coins, treating them as an investment, and creators can eventually use the liquidity to buy new materials, create better quality content and augment its distribution. In this case, the Token serves as a way to crowdfund the creator.
Mainstream creators are today mostly using Non-fungible Tokens (aka NFTs) to monetize their content as they are allowing many new use-cases (explained just above). NFTs also come with status, scarcity, and belonging within the community.
With these new tokens (NFTs) that creators can now create easily, comes the concept of Ownership for fans and creators. As Jesse Walden says in his essay The Ownership Economy: Crypto & The Next Frontier of Consumer Software: "Rather than a platform's inner circle of founders and investors taking home the value, users can earn the majority of value generated from their collective contributions." It allows creators to monetize their content while involving their community and aligning incentives. Fans can purchase tokens which allow creators to don’t rely exclusively on the revenue generated by Web2 platforms (Youtube ads for example), and creators, through the token, give ownership to fans by sharing with them the upsides of their content. That's the magic of Ownership. When creators give real Ownership to their community, community members start to take care of it, and engagement often follows. Aligning incentives is everything.
By creating a token and leveraging Web3 tools, creators can more easily foster a sustainable community (less spam), ensures members have skin in the game (not only passive members or commenters), and incentivizes community members to make the overall community desirable to join over the long-term (the more desirable the community, the more value the Token will gain).
Putting these new technologies in the hands of creators is a great step forward over Ownership. Indeed, while in Web2, creators needed engagement to attract ad revenue, in Web3, monetization and engagement happen at the same time. Users engage in Web3 with their capital by buying an NFT for example. Since day one, it allows creators to get revenue, allowing them to monetize their content more easily even without a large audience and to bring their audience out of Web2 platforms.
By purchasing the Creator's Token, fans further commit to their favorite creators and build a positive feedback loop that nurtures healthy fan communities built around a shared passion. In the end, tokens provide a way for super fans to show their loyalty and provide initial liquidity for creators.
While mainstream creators minting NFTs for their community is insanely exciting, I feel like creators can go even further and completely reinvent how they see monetization. Instead of adapting old models to fit the Web3 space, creators could try completely new monetization models that Web3 allows.
By leveraging fungible tokens (aka Social tokens or Community tokens) and reinventing what it means to be a Creator, I think there is a possible future where anyone could live from their passion, owning 100% of their content and making what they love.
3 - The second era of monetization in Web3.
While, until now, the term "Creator" (or before that "influencers") was mostly tied to people creating content online, it seems like Web3 allows a whole new class of Creators to emerge. These new creators are people who share their vision through content online rather than creating content as an end goal. A Web3 creator's definition could be:
"Anyone pushing ideas, and a vision, through content on the internet and leveraging the new Web3 tools at their disposal."
This broader definition includes more people under the term "creator" and reflects more on these individuals' actions. These "Creators 2.0" might be the one that benefits the most from the Web3 revolution. A great example of a Creator 2.0 is Jeff Kauffman Jr. Jeff, which might not be considered as a creator in a traditional sense, has created a thriving community around advertising and marketing in Web3. He's pushing his ideas and vision through essays and podcasts, gathering a strong community keen to help him achieve his high ambition goals. Creating content is not its end goal. Its end goal is to share its vision and gather a community around it.
These Creators 2.0 are not trying to move their already existing audience into Web3 to monetize it better. They are creating new communities using Web3 tools and leveraging their previous following. And there's a huge difference between an audience and a community.
In 2021, we've already seen many thriving communities led by Creators 2.0. For example, I can think of Carlos Gomes that has created Forefront, a community that recently raised $2.1M to Build the "Port of Entry" to Web3 Social Clubs & Digital Cities. Another great example is Friends With Benefits, led by the Creator Trevor McFedries, which recently finalized its $10M fundraise at a $100M valuation led by Andreessen Horowitz.
These creators are not monetizing their audience in a Web2 way. They are building tokenized communities to create projects that bring real value and then monetize this project. To do so, they are leveraging Web3 tools such as Coinvise, a platform that allow them to create and manage their Tokens by providing features such as Airdrops, Quests or Vesting Schedule.
Today, to build a startup, someone needs money in order to hire people and support themselves. They usually raise this money from VC firms and give away a percentage of the company. This investment introduces misaligned incentives, and even if the company succeeds, it will take a long time for anyone involved to realize any real return on investment.
A contrario, with Social tokens, these Creators 2.0 can build solid projects and incentivize their audience to participate in investing money or time in it from day one, avoiding raising money from investors. With Social Tokens as equities, fans will put in some work and get rewarded with Tokens, letting them redeem perks in the project's virtual economy or by selling them for USD later if the project succeeds.
Even if the project needs to raise proper money, it can do it through the community. Stakeholders can then use their tokens to vote on future strategic decisions, and the people who helped build the project can sell some of their holdings to make money after the tokens have been released. People who believe in the project can buy and hold Ownership, and people who think the project is headed in the wrong direction can signal this by selling their stakes. Anyway, purchasers have complete transparency over what is happening as everything is on-chain.
In Web3, community members own a part of the Creator's content and success through tokens. As they benefit directly from the growth of the Creator, they are incentivized to provide help.
Social Tokens, in the end, allow to align interests, get workforce from day one, facilitate collaboration with community members, and monetize more efficiently.
4 - The problems we still have to overcome.
But no solution is perfect, and there are still a lot of improvements that can be made to improve monetization in Web3 through Tokens.
When monetizing through tokens, creators have to make their content appealing to fans, not brands. They have to produce much better quality content to delight the fans, as they are the ones spending the money. Monetizing via attention, which is what creators in Web2 are doing, means producing a lot of lower-quality content, prioritizing quantity over quality (more videos > more ads> more revenues). On the other end, monetizing from super fans is a much higher barrier to entry to starting earning as creators always have to be innovative and create better quality content. Marketing for money, not attention, completely changes how creators are producing content.
The second problem is the Discoverability Dilemma. Do creators want to be discovered by a larger audience and let their content for free, or do they prefer to token-gate their content, driving revenue but losing visibility? Web2 platforms, which have a large user-base and control discoverability, will always be the place for casual creators (the mass majority) who are simply looking to monetize the attention they generate. To make the tokens a long-term viable way to monetize content, we have to introduce a new way to drive attention for creators without relying on centralized platforms. Building decentralized Social Networks might be a solution to explore. Incentivizing the biggest fans to share the content by rewarding them with Token could be another way to tackle the discoverability dilemma, while it doesn't have the scale of millions of users' platforms for now.
Lastly, how do Creators get liquidity from their Tokens? Currently, there is nothing in place for them to "take salary" without selling their coin, which seems not aligned with long-term community interests. Likewise for contributors, which have to trash the coin to get their salary when contributing to the community, lose voting power in the process. To improve monetization through tokens, we need to implement new tools or mechanisms to help the creators and community members' get paid' without selling their coins. One potential solution could be to create two tokens, one for paying salaries and rewarding community members, the other for governance power and perks within the community.
Through this essay, we saw that Web3 could help Creators 1.0 and Creators 2.0 monetize their content more efficiently. While there is no perfect solution yet, more and more creators are leveraging crypto mechanisms and are building thriving communities. To allow the next million creators to live from their passion, we’ll have to think together about creating efficient monetization models. Building Web3 tools seem to be the more promising path for now.