Web3 is just normalizing Web2 compensation for creators
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Don’t be naïve. The decentralization dream of Web3 won’t come true any time soon, if ever.
At least not as it was originally conceived. As Moxie Marlinspike, founder of Signal, explained, centralization emerged in the first place because people don’t want to run their own servers. Until running your own server is as accessible as turning on your router, the promise of true decentralization will remain a fairy tale.
In the meantime, venture capitalists will continue to pour colossal amounts of money into Web3 companies like OpenSea and Coinbase for years to come. Investors know the barrier is high for the average user to turn away from the accessibility of centralized platforms, especially when market forces are strengthening our ties to those same third parties.
But does the delusion of decentralization even matter for creators — the artists, musicians, gamers, vloggers, and entrepreneurs who should be fairly compensated for their work?
Probably not. Whether via Web2 or Web3 mechanisms, peer-to-peer transactions between creator and follower are normalizing as we monetize more aspects of our lives.
Nearly every social platform is making it easier for creators to get paid, and more companies that fall outside social media want a cut of the creator economy. Twitch launched their Bits program as far back as 2016. Instagram finally made it possible to pay creators directly with badges in May 2020. Twitter launched a digital tip jar last year. TikTok announced their Creator Next program in December 2021. Even Stripe started expanding their service for creators near the end of last year.
While there are some important differences between on-platform payments and NFTs, for example, what matters more is the behavior Web3 ideology is normalizing: Someone like you or me likes someone else’s digital presence enough to pay them for something they created.
NFT compensation: Dream versus reality
It’s still hit or miss whether NFT artists receive fair payment for their work.
Seneca, lead artist for the Bored Ape Yacht Club, didn’t even know her illustrations were selling for millions of dollars until she Googled the ape drawings months after they launched. In January 2022, Seneca told Rolling Stone that her “experience with the Bored Ape Yacht Club ‘taught [her] a lot of life lessons,’ and she urges aspiring creators to make sure they understand NFTs and smart contracts, ask for royalties, and know the potential.”
LinkedIn senior product manager and TikTok creator Cherie Brooke shared her frustrations with paying gas fees when she uploaded her NFTs to the Ethereum blockchain via OpenSea. (“Gas fees” are transaction fees paid by Web3 users to compensate for the massive amount of environmentally destructive computing energy needed to process and validate transactions on the Ethereum blockchain.)
“As a creator who just wants to get started with Web3, crypto, and NFTs,” Cherie says, “the fact that you have to pay $200 [in upfront gas fees] to see if anything sticks is discouraging. The cost is too high. Luckily I found a way around it with the Polygon blockchain [for other NFTs], but I can see other artists who want to get started with NFTs being really turned off.”
What people aren’t talking about when they talk about NFTs
Despite her initial frustrations, Cherie is optimistic about NFTs. She’s been selling her Stay Hydrated collection as a way to provide access to virtual coaching, events, and a networking community on Discord.
“Whenever someone explains NFTs right now,” Cherie says, “they always default to saying it’s a digital good like a piece of artwork. I think what people miss out on is the utility of the NFT — which is the most special part for creators and artists.”
Cherie says that the artwork for her NFTs is more of a fun representation of her brand than anything of intrinsic value. When someone purchases a Stay Hydrated NFT, it may look like they’re buying a jpeg, but what they’re actually getting is a subscription to one-on-one career mentorship, monthly advice blasts, and professional networking on Discord.
But the real potential of NFTs, Cherie says, is the ability to sell them later on the blockchain after you’ve exhausted their value. “Once someone lands the job they want [through my mentorship],” Cherie says, “they can then sell the NFT and the services it comes with to another person who needs it.”
The idea is that the creator will get a cut of that sale as it’s recorded on the blockchain. This exchange of lifetime value is the linchpin for creators. Utility NFTs — which are redeemable for some type of value other than the media file itself — shifts the NFT conversation from “this JPEG was sold as a scarce commodity when it’s not that” to “this NFT represents a transferable ticket I can exchange for something I value.”
Web2 hyper-monetization behaviors are fueling Web3 potential
Before NFTs can realize their full potential — and move beyond the many scams that plague them — people need to grow even more accustomed to shifting their disposable income from corporate entities to individuals selling something of legitimate value. Ironically, this behavior is what Web2 platforms (TikTok, Instagram, Twitch, etc.) are normalizing.
Every social platform has realized, at varying rates, that they depend almost entirely on creators for their survival in the attention economy. In 2016, Twitch launched Bits, which allowed people to purchase graphic representations of support to “spend” in any given streamer’s live chat. Twitch, however, gets the vast majority of the revenue share, with creators getting only a penny, in most cases, for every Bit purchased for $1 or more.
Instagram realized much later that they should invest in similar “direct” payment behaviors between creators and their followers. In January 2022, Instagram announced that it would be trialing a subscription service wherein followers can pay creators for extra content. In 2020, Instagram launched “badges” for Instagram Live, which allowed followers to spend less than $5 to support their favorite creators during a livestream. But unlike Twitch, the revenue share favors the creator, who gets a 55% cut.
In China, live social shopping is already a behavioral norm that’s projected to grow in revenue to $480 billion in 2022. In the United States, where shoppable livestreams are still a nascent behavior, revenue is still expected to grow to $11 billion this year, with Meta, TikTok, and Pinterest each making their own investments.
Creators will be the ones who fuel live shopping growth as hosts and promoters, as they have been on Amazon Live to relatively little fanfare so far. But it’s not so far a leap to imagine that viewers will start compensating creators in a live format after they get used to making live purchases through Web2 platforms. (Sex workers have already been seeing live compensation through Chaturbate, after all.)
A Web3 bet may just be a trussed up bet on the creator economy
We’re still not used to paying creators directly, though. Pollyanna Ward, head of paid social at Social Chain, told The Drum in January 2022 that “brand partnerships still account for the majority of creator revenue, with 77% of money made being from brand deals, whereas subscriptions and tips make up around 1–3%.”
That percentage is set to grow, however, as payment processors are creating the infrastructure for more peer-to-peer(esque) transactions. In 2021, Stripe analyzed its own data and found that creator businesses earned more than $3 billion that same year through services like Substack, Twitter, Spotify, and Teachable. Stripe has since invested more in a simplified version of its Express Connect service for creators to better be able to handle smaller tips.
Then there’s Linktree, which partnered with PayPal in August 2021 to expand its “Commerce Links” tools for direct payment. The integration allows creators to receive payments from their followers via PayPal, a debit card, or credit card.
If it seems like every company in the world is investing in the shift toward a diluted version of Web3, it’s because they are. Soon those same companies will operate fully on the blockchain. Soon creators will have more revenue streams because centralized third parties bet on the blockchain. Followers will get used to paying creators for the value they create — and VC-backed companies will still get a cut of those sales.
When you take a good, hard look at NFTs beyond the Beanie Baby-esque craze of ape jpegs and the celebrities buying them, they’re almost disappointingly boring. Sure, maybe one day you’ll hang a piece of NFT art in your metaverse bedroom, but then you might sell another as tuition to a course on how to bake bread in the real world.
NFTs are just another thing that gets you to the thing you want.