#9 The state of the creator economy

Mapping the terrain between Patreon and Onlyfans

Sep 20, 2020

Welcome readers old and new. This is one of Thomas Hollands’ notes in his search for ideas which are surprisingly general, or generally surprising. The first issue explains the project, and you can find all past issues here.

Something different this week. A work-in-progress analysis of what I’m for now calling the personal brand economy. What is it, who is in it, and how big is it?

Summary

What is the personal brand economy? (PBE)

Anyone who uses internet platforms to directly monetise their audience. A YouTuber selling exclusive content on Patreon is in the PBE, a YouTuber merely making money off ads isn't. An Instagram model selling pictures on OnlyFans is in the PBE, an Instagram model selling product placement on Instagram isn't. A Substack newsletter writer is in the PBE, a New York Times columnist isn't.

Trends:

Direct payments enable a direct, authentic creator/subscriber relationship. This makes subscribers happier, creators more fulfilled, and allows subscribers to more quickly influence content creation.
Demand and supply are growing at breakneck pace. Onlyfans had to cut referral bonuses because too many people signed up (over 150k every day). A-list celebrities like Bella Thorne and Tyga now have Onlyfans accounts.
People are worried about saying the wrong thing on social media, but owning your audience relationship makes you uncancellable. Mainstream journalists like Andrew Sullivan and Bari Weiss are leaving big institutions like New York magazine and the New York Times to write directly for their audience under their own personal brand

Players:

This is a huge market with space for many big, sustainable players.

Patreon were valued post-money series C at $450m. They just raised another $60m series D. They have over 3m paying patrons with creators ranging from podcast hosts to visual artists.
Onlyfans have over 13m active users and are growing fast, are probably already worth over 1m dollars and capturing hundreds of millions in marketplace value.
Some companies, like Substack, own a clear vertical (they focus only on newsletters). Others own a kind of monetisation strategy (like buymeacoffee, which is centred around the gratitude/reward economy). Companies like Cameo (gifting influencer micro-videos) have broken into the mainstream

Market Size:

The market for direct payments to Instagram influencers alone is worth at minimum $5bn today. It is likely worth billions more, and is growing fast. (See market sizing below for more info)
The total personal brand monetisation economy is made up of influencers from all platforms. That includes Youtube, Twitter, Snapchat, Tiktok, Twitch, Soundcloud, Spotify, all of which have millions of influencers and tens or hundreds of millions of currently un-monetised fans.

The Economy

What is the personal brand economy? (PBE)

The supply side is composed of influencers who create content on various online media / social media platforms. The demand side is composed of their followers.

Personal brands can be monetised in several ways:

The oldest way to monetise a personal brand is through advertising. In exchange for a fee, influencers promote other products. This can be done through the platform (which is how Youtube, Instagram, Facebook, make their money), or it can be done directly within the influencer's content (like classic product placement within movies or TV shows).

For big accounts, advertising is highly lucrative. But it is also highly impersonal. Fans like their influencers to be authentic and untainted by big brands. Many influencers who capitalise on their fame by promoting products and selling ads are accused of selling out.

This leads some influencers to produce their own products. Fans love supporting their influencers by buying products - it lets them show their support in public and makes them feel like they’re getting something special.

Companies like Teespring and Shopify have made it easier than ever to design your own clothes and start an online store. But creating physical products is high effort and low return. Many of influencers are great video producers or fitness fanatics, but aren't t-shirt designers. Since fans live all around the world, shipping costs eat into an influencer's margins. Unless you're a big account (when you have more lucrative options anyway) selling product is more trouble than it's worth.

There is an option for influencers who want to reward their most loyal fans and make some money, without having to "sell out" by spamming ads, or learn a time-consuming new skill like designing t-shirts. Direct monetisation.

Direct monetisation is when fans themselves pay influencers directly. They usually pay to get access to some kind of exclusive content, and often they can pay to get access to an exclusive community too.

A notorious example of direct monetisation at the moment is Onlyfans. On Onlyfans, pornstars, fitness models and Instagram influencers post exclusive content (usually nude photos) not available on their other platforms. But Onlyfans is only the most viral part of a much larger audience monetisation economy.

There are many kinds of influencers who can monetise their audience through direct payments. Writers on Substack host newsletters, with a free version for regular subscribers and an exclusive one for paying subscribers. Podcasters often have a free ad-heavy feed, and an exclusive, paid ad-free feed. Youtube stars often post exclusive videos on their Patreon, where they share more of their lives with their audience.

An ecosystem of competitors

2x2 of players within the personal brand monetisation economy.

Patreon

Patreon is the biggest and most mature player in the personal brand economy. They recently raised a $90m series E round at a valuation of more than $500m and were originally built by and for Youtube influencers. Today Patreon is platform agnostic, with podcasters, photographers, visual artists and Youtubers among its top 20 accounts. There are several Patreon accounts making millions of dollars a year.

Patreon is trying to be an all-in-one membership platform for "mid-tail influencers". The idea here is that creators with sizeable audiences are underserved small businesses, with similar needs. Absent advertising revenue, these businesses make their money from a small die-hard subset of their audience, and Patreon helps their creators more effectively target these fans. They describe it "like teaching artists business".

They've done over $2bn in marketplace value, and are set to do $1bn next year.

Onlyfans

Onlyfans has surged into the gap in the market left when Patreon walked back its NSFW content policy in 2016. It is now a household name, and has become the main place creators go to host their nude photos and videos.

Onlyfans is a powerhouse, with over 30m active users, most of whom subscribe to at least one of hundreds of thousands of creators. It takes a 20% platform fee, which net of processing means they probably collect around 15% of their marketplace value.

After taking off this year, they have already enabled over $600m in marketplace value, and A-list celebrities like Tyga, Bella Thorne, and Cardi B have accounts on the platform.

Histogram of Onlyfans creators monthly revenue. Most marketplace value is driven by the big accounts.

It is run by a couple of sons of bankers, one of whom used to run a porn cam site.

Its success hasn’t gone unnoticed - and it has drawn various copycats including hutt.co, and justfor.fans. It has also drawn controversy — people are interested in the shady history of the founders, and are confused about their tax situation.

Buymeacoffee

Along a different theme is a fast growing site called buymeacoffee. It is an easy way for influencers to try to monetise their audiences (I set a page up in less than 3 minutes). They have over 100k creators already signed up, and were recently backed by Y-Combinator.

One great feature they have is to make it easy to sell extras like 1-to-1 consultations and personalised art. They are really going after long-tail independent creators who are doing unusual things.

They have a larger Asia-based competitor, Kofi, which has over 700k registered creators.

Substack

The biggest site for influencers who sell thinking and perspectives directly to their audience is Substack. Substack recently raised a $15.3m series A led by a16z (and was also YC backed), and has over 50,000 subscribers paying their writers direct through the website. They have made it so easy to write a newsletter that in some circles every single person has one.

They've recently been in the news too. Due to culture war battles in the mainstream media, A-list journalists like Andrew Sullivan and Bari Weiss have left columns at New York magazine and the New York Times respectively to write on Substack. As the newspaper and legacy media business becomes less profitable, journalists with established audiences will go independent on places like Substack.

Cameo

Cameo allows celebrities to sell personalised micro-videos of themselves to paying consumers. Usually these videos are gifts — For a few hundred dollars you can pay for Snoop Dog to wish someone a happy birthday. It's a kind of tech-levered, for-profit make-a-wish foundation, and is probably the earliest company in the personal brand economy to break into the mainstream. Videos range in price from $5 to $2,500 (Caitlin Jenner) and it has gotten a lot of favourable press since it was started in 2016.

It is a worse business model than the other players mentioned, because it requires continuous purchases to drive revenue instead of one-off subscriptions. But it points to a fundamentally different transaction than these other companies — people buying gifts for others.

There is a key supply-side advantage here too — sending people positive messages is really fun.

Trends

Direct payments enable a direct, authentic creator/subscriber relationship. This makes subscribers happier, creators more fulfilled, and allows subscribers to more quickly influence content creation.
Trusting people not platforms. An influencer's audience is far more likely to trust content sanctioned by their influencer instead of their influencer's platform.
40% of memberships on buymeacoffee are yearly. Audiences with "normal jobs" often have far more disposable income than the creatives they love to watch in their free time.
Onlyfans cutting referral bonuses because too many people have signed up
Mainstream journalists like Andrew Sullivan leaving big institutions to write directly for their audience under their own personal brand

Example: I'd rather pay $10 per month to support a director I love like Christopher Nolan, than $6.99 to Netflix, a faceless organisation which hosts Nolan's movies but mostly produces things I dislike.

How big is the market?

Very Conservative - just use Instagram

Instagram has over 1bn individual active users
21.5% of accounts have over 10k subscribers. 5.6% have over 50k subs. This implies a conservative influencer pool of around 56m accounts, and a larger pool of 215m accounts (which to be conservative we won't consider for now).
Let's say 10% of these creators would consider direct payments (this number will rise over time as it becomes normalised and easier. It's also conservative: most people who can make money on Insta do make money). That leaves a pool of 5.6m creators with at least 50k subscribers each (we will use 50k but the real number is much higher, probably more than double)
Let's say 0.2% of these subscribers are willing to pay to reward their influencer, or for some kind of exclusive content. (highly conservative, could easily be 1% or even 2%). That means an account with 50k subscribers has 100 people who would be willing to pay. Accounts with 10k followers easily sell hundreds of t-shirts, so this is again extremely reasonable.
100x5.6m accounts is 56m subscribers willing to pay (OnlyFans alone has 13m active subscribers, Patreon has 3m patrons)
Suppose each subscriber is willing to pay for only 1 account, at a subscription fee of only $10 per month. (Real fees can be far higher, there are examples of people who have paid $800 per month on Onlyfans accounts. My Onlyfans analysis found an average sub price of $8.7, including free subscriptions). $10x12months = $120 per year per subscriber. Round down to $100 to be conservative.
This leaves a total marketplace value of $5bn. And this is only from Instagram.

Conservative - use Instagram and Youtube

Add to this the additional 160k Youtube accounts with over 100k subscribers. All of these people are full-time and would consider direct payments if they were easy enough. But to be conservative let's say only 100k of the accounts would. We'll also use an average of only 100k subs, even though the true average is much higher.
Again, 0.2% of 100k subscribers is 200 paying fans per account.
If each fan pays $10 per month, that's $120 per fan per year, rounded down to $100 to be conservative. 200x100 = $20,000 per account. (This is a really low estimate!)
$20,000x100k accounts is another $2bn in marketplace value.
This is only using the accounts with over 100k subscribers. There are another 950k accounts with between 10k and 100k subscribers, and it is easy to show there is (at least) another couple of billion dollars in value locked in this segment too.
So a conservative estimate of the current market size is around $5bn + $2bn = $7bn.

Why is this so conservative?

Because there are so many other platforms not yet taken into account. People love to make music on Soundcloud and Spotify, and both of these companies have over 100m users (Spotify also has over 100m paying subscribers!). Direct payments here are easily monetisable.

Streaming is another huge market I haven't even touched on. Twitch has 2.2m broadcasters and 15m daily active users. Finally, this analysis ignores potentially the biggest market of all: Tiktok, which has over 800m daily active users.

I've chosen to present the numbers this way because they’re easy to understand. But they're highly pessimistic. The real marketplace value of the personal brand monetisation economy will reach the hundreds of billions.

Growth potential

Direct payments are now only being used for porn, nudes, podcasts & newsletters, and other niche internet creators that cannot easily be monetised other ways. But this is quickly changing.

In the near future, mainstream influencers who have built their personal brands via conventional (aka legacy) means will want to own their customer relationships via direct payments. Thanks to the culture war, this is already happening now with writers, as A-list journalists like Andrew Sullivan and Bari Weiss move to Substack. A-listers like Tyga and Bella Thorne have dipped their toe in the Onlyfans pool too. It will happen in the future with models, actors, musicians and other mainstream influencers.

Back-of-envelope mature market size

Approximately half a billion paying subscribers, each paying for only one subscription at $10 per month.
Takes you to a marketplace value of $60+bn.

Other marketplace trends

These trends are strong indicators both that there is willingness to sell via direct payments, and willingness to buy

Supply-side trends increasing the pool of creators:

Biggest recession since the Great Depression, automation putting extreme pressure on service sector jobs - creating a bigger pool of potential creators
With more information coming at us than ever before, creators need to become more authentic in order to stand out. This pushes them away from product placement and towards direct monetisation.
When you poll kids in school, the number one most desirable profession is "influencer"
Culture war - It is becoming harder to say things in public without being cancelled. People want to own their revenue streams so they’re uncancellable

Demand-side trends increasing the pool of fans:

Mobile is reaching saturation in the developed world - increasing pool of fans
Subscription business models are a pillar of internet culture - from Amazon Prime to Spotify. People are used to subscribing to services they love - and like to do it!
Social distancing and the loneliness epidemic means people are spending less time in-person with friends, and more time seeking companionship online

Where next?

This is a massive marketplace with loads of room. There is space between the porn-focused Onlyfans, to the Youtube/desktop focused Patreon, to the long-tail, gift-economy focused buymeacoffee.

I will write more about this market in the future, and will eventually publish a complete version of this essay on my blog. If you made it to the bottom, let me know what you think! Is there anything you’d like to hear more about?

Between the cracks

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