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Creator Economy

  • 5.5 mins

The Problem with Creator Funds

Cam Mulvey

July 3, 2023

At Sute, we partner closely with content creators in the fields of entrepreneurship, career development, and financial literacy, so we’ve had a front row seat to all the innovations that have disrupted the Creator Economy. There is one innovation, the Creator Fund, that was launched with good intentions, but actually really hurts creators. 

The History of Creator Monetization 

To fully grasp how creator funds harm creators, it’s important to understand some of the basics behind creator monetization. 

Mr. Beast, the first YouTuber billionaire, has also found Creator Funds to be unsustainably low earnings
How did Mr. Beast become the first YouTuber billionaire?

​​In the early days of the internet, there was no way for people uploading content online to get rewarded for it. This all changed in 2007, when YouTube launched the YouTube Partner Program. Under the program, people who uploaded videos to YouTube would receive 55% of the revenue that YouTube generated from the ads that were run on that video. 

For the first time, people that were producing content online could get paid for it! 

But YouTube is a bit unique, as it’s the only platform where ads run directly on a single piece of content. When you scroll Twitter, it doesn’t go Tweet, ad, Tweet, ad. The “For You” page on TikTok doesn’t show an ad in between every TikTok. But ads on YouTube are attached directly to individual videos. 

This makes it much harder for other platforms to attribute ad revenue to an individual creator. For a long time, platforms couldn’t really figure out how to pay creators directly for their content, so they just didn’t. 

Instead, creators relied on all kinds of sources for monetization: 

Third-party sources 

  • Sponsored posts 
  • Affiliate links (why promote Jeff Bezos, when you could promote your own swag?) 

Fan sources (sometimes called “direct monetization”)

  • Subscriptions (the best 😎) 
  • Products (physical or digital) 
  • Tipping (how much can you really expect?) 

The Advent of Creator Funds 

TikTok was the first company to launch a Creator Fund, which they did in 2020. It is a $200 million dollar fund that pays qualified creators based on a few factors (read: watch time). 

This kicked off a domino effect of a few platforms, like Instagram, Snapchat, and Spotify, launching their own creator funds. Each platform implemented their fund a bit differently, but fundamentally they all created a static pool of cash that would be distributed to creators based on metrics determined by the platform. 

The TikTok Creator Fund 

Let’s illustrate this with an oversimplified example: 

  • TikTok’s fund is $200M per year 
  • This means they’re effectively distributing $550,000 to creators every day ($200M ➗ 365 days per year = $550,000 per day) 
  • So if there’s only one creator in the fund, and they own 100% of the views on a given day, the most they can earn is $550k 
  • If there were 10 creators participating in the Creator Fund on the day it launched, those 10 creators were splitting that $550k 
  • But a year later, if there were 100 creators participating, they would be sharing the same $550k - even though the platform has grown 10X since day one
  • Of course, there are thousands of creators in the fund, and the number of participants grows with each day

…and I don’t need to tell you how much TikTok has grown over the last three years. Creators who were early adopters saw their earnings dwindle over time, and they made sure TikTok heard their feedback. Hank Green released a viral YouTube video detailing his complaints. Initially, he was earning about 5 cents per 1000 views. Only a few months later, that had dropped to 2 cents.

Other creators joined the chorus as well, taking to Twitter to post their earnings from the Creator Fund: 

A Tweet from Safwan AhmedMia complaining about the measly TikTok Creator Fund
A reply-Tweet from MrBeast complaining about the measly TikTok Creator Fund

The Snapchat Spotlight Fund 

Snapchat first released their short-form video TikTok competitor, Spotlight, in 2020. This launch was accompanied by the Spotlight Fund, which committed to paying out $1M per day. Obviously, this is much more than TikTok’s total payout and is spread amongst a smaller number of creators. As a result 5,400 creators earned a total of $130M and some creators earned over $1M in just over one month. 

Snap wasn’t growing nearly as quickly, and the $1M a day proved unsustainable, so the initial iteration of the Spotlight Fund was shut down in May, 2021. To this day, Snap is still known for generous payouts to creators (anyone seen David Dobrik’s marathon Snapchat stories? Now you know why) as the company is fiercely competing with Reels, TikTok, and YouTube Shorts for short-form video dominance. 

The Instagram Reels Play Bonus Program 

The Instagram Reels Play Bonus Program was launched in November 2021. Instagram’s main objective was to offer creators generous incentives to post on Reels. Basically, they were buying market share away from TikTok with some serious cash payments. 

Instagram’s Reels payouts were based on challenges, getting creators to follow certain themes for their videos. This provided a bit more transparency into the payments process, which creators definitely appreciated, and Reels has become a viable alternative to TikTok. 

However, the Reels Play Bonus Program was closed for new challenges in March of this year, cutting off a potentially sizable (though maybe not reliable) earnings source for creators. 

The TikTok Creativity Program 

The TikTok Creativity Program was released in beta in February 2023 to select creators, then launched in May for all eligible creators. To be eligible, you had to be a US-based account, with 100k views in the past 30 days and 10k followers - a lower bar than the initial Creator Fund, except that it was now only for US creators. This program also has a much bigger price tag: $1 billion. 

Over the first few days, creators were reporting earnings of close to a dollar per thousand views, much higher than the 2 cents they were taking in off the original Creator Fund. However, TikTok hasn’t provided any details on how this is any different from the original fund. Reading between the lies, it doesn’t look like anything other than a larger creator fund with fewer participating creators. 

To make matters worse, there’s more restrictions and less transparency over video-eligibility: 

  • Payouts are determined based on authentic views, which means not all the views on your viral TikTok are eligible 
  • TikTok reserves the right to disqualify an individual video from the Creativity Program for seemingly arbitrary reasons  
  • All eligible videos have to be over 1 minute 

So the top line number will result in a higher RPM (revenue per thousand views), but that doesn’t mean the aggregate earnings will be that different, especially when participation inevitably increases. 

A quick summary 

  • A static pool doesn’t reward the creator ecosystem for growing the platform 
  • The metrics used to determine payouts are often opaque and seemingly arbitrary 
  • Creators can deliver unlimited value to the platforms, but could never earn more than the daily payout amount 

The Creator <> Platform Relationship 

In our Creator Economy Predictions for 2023, we predicted that the Creator Fund trend would die off. It only took a few weeks for Instagram to prove us right (cue the victory lap, team 🎉), but there is an underlying reason that impacts creators more generally. That reason is the misaligned relationship between creators and social platforms. 

Most major social media platforms make their money on advertising. Unless they’re able to copy and paste the YouTube Partner Program, creators will never be able to sustainably earn directly from Facebook, Instagram, Twitter, or TikTok. 

Creators have lots of different goals, but you’d be hard pressed to find a creator who says their goal is to grow the platform itself. Their goals are different from the goals of platforms. 

Now it’s ok for creators and platforms to have different goals, as long as the relationship remains symbiotic - where they continue to help each other. Creators will always be essential to platforms as they’re the ones that keep us coming back to our favorite apps. The creator brings entertainment value to the platform. It’s their job to bring views, engagement, and good content. 

The platform’s job should be to support their endeavors in doing so. They accomplish this partially just by their mere existence, providing the place where the creator can upload their “entertainment value.” But platforms should bring support across all facets, including and especially monetization. 

As more and more alternatives emerge for creators, each individual platform becomes less essential. This is why you’re seeing link-in-bios fill up with secondary platforms that empower creators to engage deeper with their true fans, often with a more sustainable monetization option. 

Creator monetization is very important to me, my company, and to all creators. That’s why we started Sute - a platform committed to helping creators focused on entrepreneurship, career development, and financial literacy earn sustainable subscription income from their community. 

We’re working with the best creators in these fields to deliver world class, empowering communities. If this describes you, apply now to launch your community!