Issue #13 - Creator Advertising

Why creators will start to pay to advertise themselves

One of the things I like about driving down Sunset Ave in LA is the billboards. Historically 95% of the billboards have been for movies about to come out. In the last few years it’s become all the new Netflix and Hulu series. A drive down Sunset is a really nice way of reminding myself about all the new shows I should binge watch.

Recently though I’ve spotted a trend towards billboards for individual creators and influencers promoting themselves. The most notorious of these was when Steve-O duct taped himself to a billboard - causing the police and media to show up.

That’s a fireman getting him down ^.

Today, you’re more likely to see this type of billboard from @meganpormer than an ad for The Handmaid’s Tale.

So it struck a chord with me when, last week, the most innovative company in the creator economy (aka TikTok) confirmed it was running some tests to allow creators to pay to promote themselves on the FYP.

Similarly, a few weeks ago, we mentioned a story about Etsy’s advertising feature that promotes sellers’ stores in exchange for CPA payments on any sales it drives.

Spotify of course has been letting artists promote their own songs for a while now, and Instagram has their still very nascent creator whitelisting ad product. To boot, any forward thinking creator could use Facebook, Instagram, Twitter or YouTube ads. So what’s happening here and will this continue?

Some thoughts:

• I love this. The more tools you give creators to experiment with audience growth the better. Audience growth is by far the hardest part of a creator’s job every day. The best of them will figure out if and how much they can grow audience with these tools.

• The best creators are starting to look at themselves as a small (and hopefully becoming big) businesses. One of the table stakes activities of any SMB is figuring out your customer acquisition cost (CAC) and lifetime value (LTV) of a customer (audience member). Once you know this, it’s easy to figure out how much you can spend to acquire more audience.

• The blogger / publisher world went through a very intense version of this ten years ago. Every publisher became obsessed with page RPM rates (revenue per thousand visitors) and a whole host of products came online to help them push that RPM up. A previous company I co-founded called VigLink helped publishers grow RPM through affiliate links. We sold that company to SOVRN which is one of the biggest publisher monetization companies now.

• This hasn’t happened until now as it was unlikely that the math ever worked out for creators to acquire audience members when their primary form of monetization was CPM as CPM rates have been so low.

• As creators diversify their revenue streams into different product formats, some of them have much better economics. By definition the 1000 True Fans model says each True Fan is worth $100/yr. Let’s assume a 50% yearly churn rate and you still have $150 LTV. That’s a lot of CPA to work with when it comes to paid media.

• The problem with acquired users from paid media is that they don’t necessarily come through a content marketing funnel (to compare traditional paid advertising versus content marketing). I would guess the conversion rate into long term audience members would be a lot lower from paid media acquisition but the is something the best creators will overcome.

• Creators will start to experiment with where in their own funnels they want to direct paid media traffic. @meganpormer’s billboard is going for the very top of the funnel. At 2M followers, perhaps branding is the best move for her. For smaller creators, they might want to direct paid ads into their community product or even directly into a digital goods or merch offering they have.

• As my co-founder Ryan says, the velocity of money is only just now picking up in the creator economy. What he means is that the number of creators who are making $100 a month is increasing very quickly. This turns into a large pool of users who can spend up to $100/mo on tools that might help them turn that into $200/mo. While you might start by springing for $6 for a link in bio tool (e.g. Linktree, Snipfeed), at some point paid ads might get some of that money. At scale this is a lot of money sitting on the sidelines right now that will be unlocked.

Its early days for creator advertising but I’d watch this segment closely as it’s going to heat up.

Have a great weekend everyone!

Niel