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Creator funds are even more bullshit than we realized

Back in early 2022, the education creator Hank Green published a YouTube video titled “So...TikTok Sucks.” While it was ostensibly about the ByteDance-owned platform, the video really took aim at so-called “creator funds.” For the uninitiated, creator funds are chunks of money specifically set aside to reward creators for their content. Nearly every major platform from Facebook to Instagram to TikTok to Snapchat to YouTube Shorts has launched a creator fund of some kind. 

Green’s chief complaint is that these funds are disguised as revenue sharing when instead they’re anything but. Because they’re not pegged as a percentage of a platform’s overall revenue, they remain completely arbitrary in size. And because they often stay at a fixed amount — TikTok’s last announced creator fund was $2 billion — then individual creators start seeing a smaller and smaller share of the fund as the platform becomes more successful. In just about every interview with a TikTok star in which they talk about how they make money, they dismiss the fund as virtually worthless to their business because it generates such paltry revenue.

But it turns out that these funds are even more bullshit than Green ever could have imagined. Sean Kim, the former head of product for TikTok’s U.S. operations, appeared on a SXSW panel and was unusually forthcoming about his time at the company. According to The Hollywood Reporter, Kim started out by mocking the idea that TikTok truly cared about creator monetization. “Platforms don’t really care if you are successful at monetization. I’ll be completely honest,” he said. “The reason why is because their metrics and north-star metrics are 100 percent focused on retention, [daily active users], publish rates, active days. Monetization of creators is not even on there. It’s like way, way, way down here. It’s like a little afterthought.”

What came next was an even more incredible admission:

During his SXSW panel, Kim talked about the lack of transparency for such creator funds. “If you see a $2 billion creator fund, who’s actually checking if we paid $2 billion? Nobody. Nobody could check,” he said. When asked by the creator and fellow panelist Cassey Ho (aka Blogilates) if TikTok paid out the $2 billion, Kim responded, “No.”

Think about that for a second: TikTok announced its $2 billion to great fanfare and lots of free press. It undoubtedly played a key role in attracting talented creators that helped build the platform into the behemoth that it is today. And it couldn’t even ensure that it was paying out the amount it had promised?

That’s not the only creator fund to be exposed as a complete sham recently. You may remember that last year Spotify found itself in a bit of hot water due to Joe Rogan’s controversial statements around vaccinations and other issues. As more and more artists were threatening to boycott the platform, it announced a $100 million “creator equity fund” to distribute to diverse musicians and podcasters. This week, Bloomberg reported that, of the $100 million, only 10% has actually been distributed:  

The initiative got off to a slow start hiring staff and has suffered from shifting priorities, according to people familiar with the effort who asked not be identified discussing an internal matter. At the start of the year, the fund was still finalizing its 2023 budget and had yet to determine its priority projects …

… The money was designed to be used over three years, according to the people Bloomberg News spoke with, but the streaming service lacked a well-structured, clear system for vetting and approving projects or allocating money.

Again, the announcement of that fund generated lots of free press and was used specifically to generate positive PR at a time when Spotify was receiving a lot of negative coverage. 

Creator funds operate like state lotteries, which tend to draw more people in when they have eye-popping payouts to promote; when that payout reaches some ridiculous number, then a greater number of casual players are lured into buying lottery tickets. No sane person would build a business around the lottery because it’s so unpredictable, and creator funds are similarly capricious in how they dole out money. The announcements are often sufficiently vague in describing how these funds will be administered, and there’s absolutely no accountability as to whether the platforms actually pay them out to completion. 

Creators themselves are becoming more aware of how bad these funds are for their businesses, and they’re reallocating their efforts accordingly. Both Instagram and TikTok have announced restructuring of their funds recently, a clear indication that they’re not having their intended effect. And Snapchat wound down its fund, choosing instead to roll out a more robust revenue sharing system. So far, the response from creators has been positive. 

Collectively, the major social media platforms generate billions of dollars in revenue, and their businesses are built entirely on the backs of their content creators. And as the Creator Economy matures, those creators are gaining an increasingly sophisticated understanding of the value they bring to those platforms. Without meaningful revenue sharing, no company is safe from losing its star talent, especially when better monetization platforms are just a click away. 

What do you think?

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How Matt Navarra turned his marketing newsletter into a six-figure business

Before the major social platforms launch a new product, they’ll often run small experiments within a subset of their users to test it out. More often than not, the first person to spot these new products is a guy named Matt Navarra, and his mini scoops have been cited in thousands of news articles over the years.

Matt got his career start running the digital communications for the UK government and then later became the director of social media for The Next Web. In 2018, he struck off his own and launched a marketing consultancy.

It was that same year that he began writing Geekout, a weekly newsletter that curates emerging news and information around the marketing industry. Within a few months it amassed thousands of subscribers, and today it drives six figures in revenue, mostly through sponsorships.

In my interview with Matt, we talked about where he gets his product scoops, his audience growth strategies, and how he built a six figure newsletter business as basically a side hustle.

Our interview is embedded below:

Embeds not work in your inbox? Find the video over here.

Let's talk to Dan Oshinsky about newsletter growth

When it comes to running a successful editorial newsletter, there’s probably no better authority than Dan Oshinsky. In 2012, he joined BuzzFeed to launch its entire newsletter operations. In 2017, he was hired away by The New Yorker to build and grow its newsletters.

Today, Dan runs Inbox Collective, a consultancy that works with news organizations, non-profits, and brands to grow audiences, build relationships, and convert readers to subscribers, members, donors, or customers via email. He’s kindly agreed to join us for a Zoom call to share his expertise and answer our questions.

Want to join the call? You can find the login details over here.

Quick hits

"If you’re a subscriber, and on any given week, you engage with both news and games, the likelihood that you’re going to retain [your subscription] over a long period of time is much higher.” [Digiday]

"It’s fascinating to me that TikTok videos get so many views, but most creators’ goal is to end up on YouTube because they know that’s where the majority of the revenue is ... The retention and the audience you can build [on YouTube] is much deeper." [Passionfruit]

"Even at peak hype, Vice attracted fewer millennials than The New York Times. The idea that a cable channel was going to be the path of youth media was a tell. Turns out nobody watched." [The Rebooting]

Would Bob Iger have the same legacy today if he had succeeded in blowing $3.5 billion on Vice? [Insider]

Mother Jones has done a great job of generating reader revenue without locking anything behind a paywall. [Press Gazette]

I made it onto a list of best media podcasts! [The Fix] Also, I appeared on a podcast last week where I spent a lot of time assessing the current state of media. [Making Media]

ICYMI: How investment newsletter The Daily Upside reached 300,000 subscribers

Founder Patrick Trousdale explained his growth and monetization strategies.

Substack just launched a new chat feature

So a few months ago Substack began testing a new chat product that’s sort of a mixture between Facebook Groups and Slack. I was eager to try it out, but it was only available on the Substack mobile app at the time and I didn’t want to be locked into the company’s walled garden.

But this past week Substack rolled out a web version of chat, so I’ve begun posting regularly to it. You can find my chat threads over here. I’ll be dipping into the community multiple times a day to share and discuss industry news, so feel free to join me!