From viral videos to a $250B empire: the rise and future of the creator economy
by Laetitia Exertier, Summer Intern at Reference Capital | Originally published on 🔥 Reference Newsflash.
Guest post by Laetitia Exertier, Summer Intern at Reference Capital | Originally published on 🔥 Reference Newsflash.
The first video ever published on YouTube documented a visit to the zoo, with YouTube co-founder Jawed Karim talking about elephants. This key video kicked off what is now a $250 billion creator economy. The rapid growth of the creator economy in the past 10 years has sparked the interest of investors and policymakers around the world. In August, President Biden held the first creator economy conference at the White House, inviting 100 influencers and reinforcing the growing legitimacy of this industry. Social media has revolutionized media and entertainment as we know it, with immense hype surrounding the subject during the pandemic years. Yet, now that this hype is beginning to fade, is there anything substantiating the claim that the creator economy will reach almost half a trillion dollars by 2027, as anticipated by Goldman Sachs, or will it be a fleeting gimmick driven by a frenzy of Gen Zs?
❓What is The Creator Economy & Why is it Relevant?
The creator economy allows individuals to use digital platforms to produce, distribute, and monetize content while building interactive communities. Unlike traditional media, creators rely on relatability and viewer engagement, making them more accessible than Hollywood celebrities. This shift has democratized information, with the decentralized content economy promoting greater transparency. Social media also addresses issues like pay transparency, and startups like "F*ck You Pay Me" empower creators to share brand deal payments, promoting fairness in the workplace.
📹 From Dinner Party to Digital Empire: How YouTube Ignited a Creative Revolution
Content creation began in 2005 with YouTube, originally for sharing videos among friends, and quickly grew to 25 million users by 2006. In 2007, YouTube’s Partner Program enabled creators to earn revenue, transforming hobbies into jobs. By 2021, 57% of Gen Z aspired to be content creators. The creator economy surged during the pandemic, growing at a 22% CAGR and producing 17 unicorns between 2020 and 2022. While investment dropped from $10 billion in 2021 to $1.7 billion in 2023, funding in 2024 is already outpacing 2023, reflecting social media's vast impact on culture and business.
🍭 A Lingering Addiction
The content on platforms like TikTok is not just engaging—it’s addictive. Wall Street analysts compare TikTok’s algorithm to crack cocaine, triggering endorphin releases every 15 seconds by serving viral videos.
In the U.S:
Daily mobile usage is 3 hours 30 minutes, with time on TikTok rising from 27 minutes in 2019 to 58 minutes in 2024, as teens now spend 2 hours a day on the platform, compared to 40 minutes on YouTube and less on others.
Reels account for 25% of Instagram time, while YouTube Shorts has 2 billion users.
Social media is replacing traditional news for younger users who prefer quick, digestible content. In the U.S., more people under 35 seek financial advice from "finfluencers" than traditional professionals, as knowledge that once had high barriers is now widely accessible. This can lead to misinformation and reduced critical thinking, as important information is condensed into 15-second recaps without sources or fact-checking. This digital addiction also affects academics and mental health, with students struggling to focus and experiencing increased stress, cognitive fatigue, and a higher risk of anxiety and burnout.
🔎 Reference Capital Creator Economy Landscape
The creator economy's growth and global influence present numerous opportunities to leverage its potential.
After analyzing hundreds of creator economy startups, we identified 215 promising companies across key verticals, providing a full overview of the creative process, tools, services, and technologies from creator to consumer. The journey, mapped from left to right, starts with content creation and editing, moves through publishing and engagement, and leads to community building. As creators gain traction, intermediaries offer services or connect them with brands for monetization, supported by operational tools that keep the creator economy running.
Note that although major social platforms like Instagram, YouTube, TikTok, and Twitch are central to the creator economy, we have excluded them from our mapping to focus on emerging players that could be acquisition targets for these giants, as exemplified by Spotify's acquisition of Chartable and Podsights in 2022 and Adobe's purchase of ContentCal in 2021.
Here are the key takeaways from the mapping for each category:
Content Creation: Content editing and creation form the foundation of the creator economy, with many established companies supporting this space, even if not exclusively targeting creators. AI is increasingly used to generate media, translate content, and convert text into visuals. Virtual influencers, like Lu do Magalu who earns $33,000 per post, highlight AI’s role, though it cannot replace the authenticity of human creators.
Community Building: Startups focused on fan engagement attract less investment, as monetization tools are prioritized. However, building strong audience connections is critical for long-term success.
Intermediary: Intermediaries help creators secure brand deals, with 70% of creator income stemming from brand partnerships.
Off-Platform Monetization: Monetization avenues include both on-platform earnings and off-platform revenue. In terms of on-platform revenue, YouTube offers a 45-55 revenue split, allowing creators to earn $2-$12 per 1,000 views. Top creators, like Mr. Beast, reported $82M in revenue last year. Additionally, creators with over 50,000 followers can charge upwards of $3,000 per post. Brands see a return on investment of $6.50 for every dollar spent on influencer marketing, compared to $2 per dollar spent on Google Ads. Due to less favorable payout terms and the challenges of monetizing short-form content, many creators are shifting their focus to off-platform revenue streams for more stable and predictable income. Off-platform monetization includes earnings from auxiliary platforms like purchasable content, commerce, and fan-driven revenue. Expanding off-platform monetization is key to stabilizing the creator economy and attracting further investment.
💸 Where's the Money Going?
After a funding peak in 2021 and a sharp drop in 2022-2023, the creator economy is rebounding in 2024, with more invested capital in the first half than all of 2023. Notable startups include:
Dude Perfect, raising $100M from Highmount Capital to expand its media presence.
Duetti, raising $83M from Nyca Partners to help small music creators monetize by buying catalog rights.
Beehiiv, a newsletter platform, raising $29M in Q2 2024, reaching a $200M valuation led by NEA.
🚧 Challenges for the Creator Economy
Monetization Challenges: Monetization for creators is often unstable, with income reliant on multiple fragmented streams like platform payouts, brand deals, and fan contributions. Changes in platform policies or a decline in audience engagement can lead to inconsistent earnings, making it difficult for creators to achieve long-term financial stability.
Content Turnover: The industry's fast pace and unpredictable algorithms render trends and success fleeting, often reliant on timing. Social capital can vanish quickly, as seen with Shane Dawson in 2020. Creators typically remain relevant for only 5-7 years, and startups like Poparazzi and Vine demonstrate the short-lived nature of success.
Attracting Big Creators: Startups depend on major creators to attract others, but losing them or facing cancellations can significantly impact the business.
Simplicity of Tools: Easy-to-use platforms are essential, as many creators lack technical expertise. Simple tools foster loyalty and reduce competition.
Legal Framework: The potential 2025 TikTok ban and misinformation concerns highlight the need for regulations to protect consumers, especially younger audiences.
🔮 Reference Viewpoint & Expectations
The creator economy, once seen as a gimmick for teens, has rapidly grown and diversified, becoming a major industry across all demographics. Its democratization of information and low barriers to entry have shifted the landscape from traditional media. Now that the initial hype has faded, investments in the sector are evolving.
Success depends on attracting creators organically, meaning only startups addressing critical needs will survive. While investment trends show promise, the industry faces challenges like social capital volatility, short-lived viral content, and sustaining long-term creator revenue.
By providing robust financial infrastructure—including fiscal services, targeted investments, and diversified monetization pathways—the creator economy can stabilize, attract further investments, and mitigate the volatility often associated with the sector.
