Why Creator Funds Have Failed
Platforms have invested hundreds of millions into creator funds that have been unsuccessful at moving the needle. What can we learn from these expensive experiments?
In my last post, I wrote about the broader state of the creator economy and why YouTube is positioned to win the battle for creator attention. Given recent reporting that TikTok plans to expand its Creator Fund 2.0 experiments as a way to compete with YouTube ad revenue share, I will explain in this post why previous creator funds have failed and what we can learn from their expensive mistakes.
I joined TikTok a month after the Creator Fund launched and was part of the taskforce set up to fix it. It was an incredibly challenging problem and there’s so much to cover in terms of what went wrong (maybe something we can discuss over coffee). Since then, other platforms have followed with their own funds and those have been equally unsuccessful. I will use the framework outlined below to explain why creator funds fail.
But first: How do we even define success of a creator fund? The leading hypothesis is that creator monetization leads to more content and higher quality content creation. This, in turn, results in DAU growth, which increases creator retention and acquisition, forming the creator monetization flywheel. DAU growth ultimately drives more monetization for the platform.
Now that that’s out of the way, there are three things creators look for in any revenue stream: meaningful, predictable, and achievable income. Over the past few years, I have led research studies that surveyed tens of thousands of creators and I have interviewed and met with hundreds of creators. All the data suggests that these three criteria are essential to building a successful creator monetization product.
At the long-tail, creators don’t really care about earning money. They care about having fun, being creative, and building a community. Once a creator starts to reach 10K or 100K followers, they think more seriously about their content creation efforts and consider doing it as a part-time or full-time job. At this point, making money from their content becomes a priority and, as with any job, finding ways to generate meaningful, predictable, and achievable income becomes essential. Would most people take a job that only pays $100/month? Would most people accept a job that makes it difficult to predict what the payout will be for doing the work? Would most people take a job where they think the likelihood of accomplishing the goal is highly unlikely? The answer to all of these is no. Serious creators don’t want their income to be structured like a game. They want to turn their passion into a living and pursue income streams that help them do that.
Now, let’s discuss why two of the biggest funds have been unsuccessful.
The TikTok Creator Fund:
Earning from the TikTok Creator Fund feels achievable since anyone who is in it can earn from it based on their video views. However, the fund provides neither meaningful nor predictable payouts. Because TikTok only committed $200M to the fund and set very low eligibility criteria, it meant that the funds were spread across too many creators, resulting in very low RPMs. This led to creators earning pennies. What’s worse is that the fund’s earnings are directly tied to video views, which are highly variable on TikTok, so many creators have a difficult time predicting how much they will earn in a given month. As a result, earnings from the TikTok Creator Fund are mostly an afterthought. Creators aren’t in any way motivated by it because the goals are unclear and the outcomes are bad. Even worse, research suggests that low payouts can have a negative impact on creator engagement. Sometimes no money is better than a small amount that makes creators think their content is not worth very much.
The Snap Spotlight Fund:
The Snap Spotlight Fund is probably the worst fund of them all. It was initially structured such that only the very top performing creators in a given day (based on their video views) received a piece of the $1M daily payouts. This meant that one day some creators who went extremely viral could earn hundreds of thousands of dollars in a day, but then might never again earn from the fund if they didn’t make the very top tier of viral content. This made for great headlines for Snap (“creators are earning giant daily payouts”), but resulted in massive creator fatigue and burnout since the vast majority earned nothing at all, even if their content performed well. In theory, this model should have motivated creators to work their hardest and be the best, but since success in the algorithm involves so many variables that are often out of a creator’s control, the program felt more like a crapshoot. Creators described the fund payouts as unpredictable and unachievable, and few were eager to rely on a quasi lottery system for their livelihood. Snap has continued to decrease the size of its fund since it has failed to drive meaningful impact with creators.
I have a lot to say about Meta’s $1B creator commitment, which is not really a fund, but rather a pool of money that product teams can “apply” for and leverage as a way to drive adoption of specific features, based on my conversations with employees. I will skip Meta for now since this piece is focused on funds, but reach out if you want to discuss this in more detail.
So what are the lessons from these very expensive experiments?
Structure a fund such that it offers meaningful, achievable, and predictable payouts to creators. If you are not checking all three boxes, your fund is set up for failure. This lesson can also be applied more broadly to any creator monetization product.
Start with high eligibility criteria (e.g. 100K instead of 10K followers). First, long-tail creators are not incentivized by creator monetization. Second, starting with a smaller pool of creators ensures that you can offer them meaningful payouts. Third, it’s always easier to lower eligibility over time. Unlike other features, increasing eligibility for a monetization feature is almost impossible - few things are harder than taking away money from thousands of people, even if it’s a small amount.
Tie earnings to a predictable metric. Because YouTube views don’t fluctuate as much, it’s easier for a creator to predict their monthly earnings compared to TikTok’s Creator Fund, which is tied to highly variable views. One idea I suggested at TikTok was to focus the Creator Fund on longer-form content, in part because views for longer-form content seemed to fluctuate less (content quality tends to be more consistent). Other approaches are to pay based on output/actions, more similar to Meta bonuses.
Focus on a UI/UX that helps creators set goals and understand their progress. This is extremely important to keep creators motivated and on track (e.g. progress bars, milestone notifications, etc.).
Consider having creators compete only with other similar creators. For example, structure the fund such that there are pools for each creator tier (10K-100K, 100K-500K, etc.) and have creators compete only against other creators in their tier. This helps every creator feel like they have a shot, helps flatten the payout distribution, and helps shift more funds towards the middle tier of creators rather than money accumulating at the top.
That’s all for now. If you are launching creator monetization products, don’t hesitate to reach out.