The so-called “creator economy” has mushroomed and is expected to grow even more in the coming years, according to Goldman Sachs Research.
Individual people with their own brands and online audiences have emerged as one of the biggest developments of the digital age. The ecosystem is expanding for a number of reasons, including the increase in digital media consumption and the advent of technology that has lowered barriers to content creation, Eric Sheridan, senior equity research analyst covering the U.S. Internet sector, writes in the team’s report. New platforms such as TikTok have emerged, while legacy platforms like Facebook and YouTube have also introduced new formats for sharing short-form video, live streaming channels and other forms of user-generated content.
As the ecosystem grows, the total addressable market of the creator economy could roughly double in size over the next five years to $480 billion by 2027 from $250 billion today, Sheridan writes. That growth is roughly in line with the team’s estimates for growth in global digital advertising spend over that period. The analysts expect spending on influencer marketing and platform payouts fueled by the monetization of short-form video platforms via advertising to be the primary growth drivers of the creator economy.
Goldman Sachs Research expects the 50 million global creators to grow at a 10-20% compound annual growth rate during the next five years. Creators earn income primarily through direct branding deals to pitch products as an influencer; via a share of advertising revenues with the host platform; and through subscriptions, donations and other forms of direct payment from followers. Brand deals are the main source of revenue at about 70%, according to survey data.
Only about 4% of global creators are deemed professionals, meaning they pull in more than $100,000 a year. Goldman Sachs Research expects their share of the creator universe to stay steady even as the overall ecosystem expands.
Which companies will benefit the most from the ongoing growth of the creator economy? The platforms that are best positioned to attract both influential creators and a larger share of the total spending are those that will offer multiple forms of monetization, according to Goldman Sachs Research. But the analysts also cite six key enablers for creating a “flywheel effect” in which small gains build on each other over time and create further growth momentum:
1. Scale: a large, global user base with diversified interests
2. Capital: access to large pools of capital to fund monetization, either through a diversified revenue base and/or as part of a larger parent company
3. Strong AI-powered recommendation engines: for surfacing relevant content and matching creators with interested users
4. Effective monetization tools: a variety of product offerings/payout structures for creators to diversify their income streams
5. Robust data and analytics: for providing transparency on engagement, retention, conversion and other metrics
6. E-commerce options: the ability to shop is integrated into the core user experience
At least at this point, the report points to the large incumbent platforms as being in the driver’s seat. Goldman Sachs Research sees more creators moving to these platforms as competition heats up for their content and audiences, particularly as macroeconomic uncertainty impacts brand spending and as rising interest rates pressure funding for emerging platforms. “As a result, we expect some element of a ‘flight to quality’ whereby creators will prioritize platforms with stability, scale and monetization potential,” Sheridan writes.
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