"What Happened to the Creator Economy? 'Play-to-Earn' Gaming and the Evolution of Work in Web3"

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Jul 29, 2023

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"What Happened to the Creator Economy? 'Play-to-Earn' Gaming and the Evolution of Work in Web3"

In May of 2022, there were discussions about the future of the creator economy and whether it was headed for a winter. It was argued that only the top 1% of creators were making significant money, and startups would need to find innovative ways to capture revenue from these top creators or cater to the long tail of part-time creators.

However, the creator economy funding took a hit, with a drastic 86% decrease in dollars invested, leading to layoffs at major platforms like Patreon, Linktree, Cameo, and Substack. This downturn could be attributed to a fundamental misunderstanding of the risks associated with the creator economy. Investors failed to grasp the nuances of the media industry, the needs of creators, and the vertical SaaS nature of this market.

Creators, as small businesses and media companies, have distinct advantages. They have low costs of goods sold and operating costs since they create their products themselves using minimal resources. Additionally, the marginal transaction costs for creators are almost negligible, allowing them to grow their audience without incurring significant expenses. Furthermore, creators benefit from free algorithmic distribution through popular web platforms like YouTube, Facebook, and TikTok. Finally, consumers often prefer individual creators over brands, creating a unique advantage for creators in building a loyal following.

However, despite these advantages, the creator economy still faces challenges. A study by Linktree revealed that only 12% of full-time creators make more than $50,000 per year, while 46% make less than $1,000 per year. The real winners in the creator economy are the attention and advertising aggregators like YouTube, which generated more revenue in 2022 than Pinterest, Snapchat, Twitter, and all creator economy startups combined. The major tech companies that provide distribution and monetization tools or creation technology are the ones capturing the majority of the value.

OnlyFans emerged as a successful creator economy startup by providing a platform for adult entertainers to monetize their work. Similarly, Substack gained traction by allowing writers to easily charge for newsletters. These companies succeeded by catering to niche markets that major platforms overlooked. Startups attempting to do everything else and compete directly with existing horizontal SMB SaaS solutions have struggled to find their footing in the creator economy.

On the other hand, the emergence of "play-to-earn" gaming in the Web3 space has created new opportunities for work and income generation. Axie Infinity, a popular blockchain-based game, has generated over $3 billion in total sales since its launch in 2018. The game allowed players to earn tradable tokens by accumulating experience points, which were later tokenized. Players even created a liquidity pool for these tokens on Uniswap, a decentralized exchange.

Axie Infinity gained significant traction in the Philippines, where people affected by economic hardships during the lockdown sought alternative sources of income. The game's creators introduced the concept of guilds and scholarship programs to scale the play-to-earn movement and provide access to players worldwide. Filipinos, known for being early adopters of social networks and platforms like Facebook, embraced the idea of retaining value within the community.

By removing traditional intermediaries, such as game publishers who usually take a significant cut of revenue, Axie Infinity redistributed the value back to the community. The game's long-term success relies on creating a fun and engaging experience for players, fostering social connections, and providing opportunities for value exchanges beyond monetary gains. The challenge lies in managing the capital and token supply within these metaverses.

Axie Infinity's community has played a crucial role in educating and onboarding new users, with 80% of users joining through referrals. The game has seen a substantial increase in daily active users, reaching 2.4 million after the launch of Ronin, a scaling solution. This growth showcases the strong emotional connection and the belief that the game offers more than just financial rewards.

Looking ahead, the blending of work and play will continue to evolve, with cryptocurrencies becoming a means of exchanging value. Traditional games may transform into immersive social networks and nations, creating deeper economic and social relationships among players. However, it is essential to address the challenges of capital flows and maintain a balance between fun and financial incentives.

In conclusion, the creator economy faced setbacks due to investor misunderstandings and the dominance of attention and advertising aggregators. Startups that succeeded in the creator economy focused on niche markets and addressed specific needs. Meanwhile, "play-to-earn" gaming in the Web3 space, exemplified by Axie Infinity, has opened up new opportunities for work and income generation. The game's success lies in retaining value within the community, fostering social connections, and creating an engaging experience for players. To thrive in the creator economy and Web3, it is crucial to understand the unique advantages and challenges faced by creators and leverage emerging trends and technologies.

Three actionable advice for creators and startups in the creator economy and Web3:

  • 1. Identify and cater to niche markets: Rather than trying to compete directly with major platforms, focus on addressing specific needs and overlooked segments of creators.
  • 2. Embrace decentralized models: Explore the possibilities of Web3 and blockchain technology to empower creators and redistribute value within communities.
  • 3. Foster strong community engagement: Build a loyal and dedicated community by prioritizing user experience, providing opportunities for value exchanges beyond monetary gains, and leveraging referrals for growth.

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