This was a well-timed moved from Twitter, which has seen renewed competition lately from both newcomers (like Mastadon, Bluesky, Post.News), as well as Instagram Threads (which shot up to 100M signups in five days). Though Threads has its own problems (notably a lack of product-market fit from having been built as an “everything for everyone” product), Twitter is under a lot of pressure to keep their market share and in particular, retain their top creators who create all the network effects to bring in consumers.
This is a big moment for creators, and what I believe is part of a larger trend of content platforms launching revenue sharing programs to incentivize creators to stay on their platforms. In this article, we’ll talk about:
- Why certain platforms need to care more about creators
- The beginning and end of the creator funds era
- Why creator funds don’t scale
- How content platforms are pivoting to revenue sharing models
Before we dive into how creators are compensated, let’s start with understanding why that matters for content platforms. If you remember the categorization for different types of platforms from last week’s article, not all content platforms are equal — they can be sliced based on user motivation (enabling you to be more social or catering to your curiosity/interest) and type of format (text, photos or video).
The products that primarily cater to users’ social motivations have been relatively uncontentious. These products basically have two stakeholders (users and the platform), and some form of quid pro quo has been established between users and the platforms over time:
- Apple gives you iMessage as a free product because you bought an iPhone
- Meta gives out Messenger, Whatsapp for free because most users also have a Facebook, Instagram account which Meta is able to monetize + keep people in their ecosystem (and not let users go to competitor products)
- Meta gives you Facebook social feed, Instagram Stories for free and in exchange, all data derived from your engagement is fair game for Meta’s advertising
However, things get messier with the curiosity / interest-based products. Unlike social products, curiosity / interest-based products have three set of stakeholders (creators, users and the platform), primarily due to the 1–9–90 nature of these content platforms:
In most online communities, 90% of users are lurkers who never contribute, 9% of users contribute a little, and 1% of users account for almost all the action.
As creators started building content on these platforms, they came up with new experimental ways to generate money / livelihood off of content creation like creating courses, sending users to affiliate links, and brand partnerships (if they got large enough), but the quid pro quo between creators and the platform was never clearly established. The only major platform that had figured out creator monetization was YouTube (the YouTube Partner Program was launched in 2007 and has generally been very successful).
In July 2020, TikTok came to the scene and announced a $200M creator fund for US creators. This initiative sparked a race among other platforms to establish their own funds in an attempt to both acquire and retain creators.
Several another announcements followed — YouTube announced a $100M fund for creators on YouTube Shorts (their TikTok-esque product for short-form videos). Snap started paying creators ~$1M per day for content that got selected to appear in Snap’s Spotlights feature. Instagram launched a Reels Bonus program that would pay creators up to $10,000 per reel (the total amount allocated to the program is unknown).
These funds provided creators with some pathway to make money (better than no pathways), and it got the platforms much-needed positive PR — TikTok announced their fund around the time the Trump administration was calling for a ban on the app.
However, these creator funds have not played out well. Notably, Meta killed their Reels Bonus program earlier this year, and TikTok is attempting to revamp their fund after criticism from creators.
The creator funds have not scaled as these platforms have grown. In hindsight, the reasons are not that surprising — this TechCrunch article lays out the argument for why creator funds have not worked.
First, every fund is a fixed pool of money and creators receive their share of this pool. The funds typically don’t grow in size (at least not at the pace at which engagement on these platforms grows), which results in creators making less money per engagement (eg. revenue per view) as the platform grows. For example, as the TechCrunch article points out, Hank Green (a popular YouTube creator) saw his TikTok earnings go from 5 cents per thousand views to 2 cents per thousand views over the span of a year. This is a direct consequence of divvying up a fixed fund based on some engagement metric (like views) which is growing fast year over year.
Second, the way some of these programs select creators who can participate is arbitrary. For example, Snap creators need to be submit their stories for consideration to be included in Snap’s Spotlights product and the fund is primarily designed to pay for content that shows up in the Spotlights product.
Third, as you might have arrived at the conclusion by now, the platforms’ success is monetarily not aligned with creators’ success, i.e. when a platform’s engagement grows, the money creators make does not grow proportionally.
Creator funds not scaling is not a critique on how platforms have approached paying creators in the past. In a lot of situations, it makes sense to start with a simpler solution like a pool of money which is distributed to creators (creator funds), especially if your product and business are not mature enough that you can commit to a revenue sharing program.
However, given the drawbacks of creator funds, there is increasing momentum towards shifting to a revenue sharing model. A few different types of revenue sharing models have emerged, primarily determined by how well or not can ads be directly injected into creators’ content. Let’s zoom in on three models.
1. Direct revenue share for injected ads
The first type of revenue sharing model relies on the integration of ads into (typically) long-form content. It is most commonly found on platforms like YouTube and Twitch, where creators have the capacity to deliver lengthy pieces that can house multiple ad placements. Given these are long-form, there is higher tolerance among users for interruptions and YouTube’s success is evidence of that.
YouTube Partner Program, which lets creators inject ads into long-form videos lets creators keep 55% of ad revenue generated from their content. Twitch also provides creators with 55% of ad revenue if they agree to showing more than 3 mins of ads every hour. In essence, the longer the content, the more opportunities there are for ad placements, directly increasing the potential for creators to earn.
While there is still some dissatisfaction among creators about the share of revenue they get to keep (some Twitch streamers don’t want to show 3 mins/hour of ads, others don’t like that Twitch is sunsetting 70–30 revenue share), the >50% revenue share is leaps beyond what most creators can make from creator funds.
Here’s some quick math to back that up with TikTok as an example:
- Top TikTok creators are making 2–5 cents per 1,000 views
- Advertising cost per impressions on platforms like Tiktok/Meta is $8-$14 per 1,000 views. Say creators get 50% revenue share => $4-$7 per 1,000 views. Adjust for the fact that ads are not injected in TikTok reels, i.e. there might only be 1 ad say every 4 reels => Creators would make $1-$1.75 per 1,000 views if they received a 50% revenue share
- i.e. Creators’ 50% rev share from Reels revenue is ~35–50x what they would make from a creator fund
The math is not perfect and you can poke holes at the assumptions but the directional takeaway is — a healthy revenue share model (which by design is also transparent) is much more beneficial to creators than a creator fund model (which by design is opaque).
2. Revenue share based on performance metrics
The second model comes into play when it’s not feasible to directly inject ads into content — like 30-second short-form videos where user tolerance for interruptions is low.
There has been hesitation from platforms to roll out revenue share programs for these formats. Because you cannot directly inject ads, the argument goes, it is difficult to have a revenue share program because we don’t know which short-form video enabled an ad to be shown (before or after the video). This is a pretty flimsy argument, especially given the large number of complicated ad measurement products that have been built today to enable advertisers measure value generated from ads, i.e. platforms can solve this with a well thought-out math equation.
YouTube, that has been ahead of the curve with revenue sharing models, did exact that earlier this year. They took their Partner Program that was created for long-form content and extended that program to introduce a revenue sharing model for YouTube Shorts. Given Shorts is all short-form videos (similar to TikTok), it is difficult to inject ads within the content. So, YouTube came up with relatively simple math to attribute revenue to specific creators:
- They would take all ad revenue generated from YouTube Shorts and add it to a creator revenue pool
- They split the revenue pool among creators based on number of views each creator generated
- If a Shorts view used music, that view’s revenue is split 50–50 between the creator and the music’s copyright holder
- Creators will keep 45% of their allocated revenue
Meta is experimenting with a similar approach with Instagram Reels monetization where they would use performance metrics like views to determine how much a creator should earn. What percent of revenue Meta shares with creators is undisclosed but given YouTube Shorts’ transparency around the revenue share percentage, it’s unlikely that Meta can get away by being opaque about it.
In the world of text content, one early adopter of this model has been Medium. They run the Medium Partner Program that:
- Takes Medium’s total subscription revenue (which is $35M–$40M based on couple of estimates)
- Allocates an undisclosed percentage of that revenue to paying creators (I’d estimate it at 60–70% of their revenue based on the $24M/year writer payout estimate)
- Divvies it among writers based on total number of reader minutes spent on their content
Twitter’s model is still evolving — they are currently providing creators a “share in ad revenue starting in the replies to their posts”, which is essentially ads injected into creators’ content (model #1 above). They have some fairly large limitations now — the biggest one being that creators are only paid for ads shown to verified users, which as one Twitter user points out only encompasses ads shown to a very small subset of Twitter users (1M out of potentially 300M monthly active users).
Even assuming these kinks get worked out, Twitter has so far only conveyed intent to extend this to ads on profile views (still injected ads, i.e. model #1) — we will have to wait and watch to see if this gets extended to beyond injected ads (i.e. to model #2). The most likely scenario in which that would happen is if Meta forced Twitter’s hand by announcing an equivalent revenue sharing program.
Nevertheless, this model of revenue sharing based on some sort of performance metrics has seen the most momentum lately, particularly with products that are not suited for direct ad injection, and we will continue to see more action here.
3. Experimentation with overlay ads
The third model is more experimental and involves infusing ads into non-ad friendly formats. Snap announced that they would be testing mid-roll ads in content generated by their top creators aka Snap Stars. Meta has been experimenting with overlay ads on top of Reels, which in my personal experience have been a fairly annoying and irrelevant intrusion on top of fairly short video content.
The secret sauce here would be figuring out an experience that is non-disruptive for users and at the same time performant for advertisers. Though the success of these initiatives is uncertain, it’s encouraging to see experiments especially since these could open up a new revenue stream for creators.
In an environment where competition among curiosity / interest-based platforms is increasing, creators are in an increasingly advantageous position and are starting to see more revenue sharing programs pop up, especially for short-form content. While some of the larger technological changes like generative AI can create an explosion of new content and potentially have a deflationary effect on creator revenue, now is a great time for creators to find their niche and double down on what makes their content special, and get paid in the process.