The ‘ungodly spending’ behind the creator economy

Behind the unstoppable rise of the online creator economy lie billions of advertising dollars and a vast shadow industry of agencies, managers and technicians competing to monetise the large volumes of content being produced.

Successful creators will receive some cash from platforms such as YouTube, depending on viewer and subscriber numbers, but the big money comes from brands seeking to sponsor or commission content.

Traditional advertising and marketing agencies have formed separate creator arms — WPP owns influencer marketing agencies Obviously and Goat, Publicis this spring bought Fabric Social, which specialises in social and influencer work, and United Talent Agency has UTA Creators. New media groups such as London-based marketing agency Screenshot Media have also sprung up to help brands forge alliances with influencers.

“Advertisers are spending ungodly amounts of money on paid media behind their creator assets,” says Shira Jeczmien, founder and chief executive of Screenshot, which helps brands find the right connections with online creators and influencers. “Creators are now a media distribution engine. They have the reach, they have the channels, they have the content and they have the audience, and you’re just buying space right now.”

The relationship between a brand and a creator is becoming increasingly sophisticated — and the editorial lines increasingly blurred — with multi-episode content agreements stretching over year-long campaign deals. The work ranges from sponsored shows for the creator’s fans to content that looks much more like a traditional ad specifically involving a product.

Brand deals for many creators make up about 80 per cent of their earnings, according to Mae Karwowski, founder of Obviously. “It’s really professionalising [for brands] in a way where it used to be like, oh, five kids who know TikTok.”

The creator economy

This is part of an FT series on the explosive rise of digital creators and social media influencers and the multibillion-dollar infrastructure backing them.

Read the first piece here:

How to make it as a digital creator

Many creators are paid flat fees based on the number of posts, videos or stories they produce rather than performance-based awards, although more sophisticated models of “deliverables” involve metrics around sales and reach. At the upper end of the profession, creators such as Stephen Bartlett have taken stakes in the products they endorse.

Talent agencies and managers represent influencers of sufficient size, agreeing deals across platforms and products, and negotiating rates of pay (typically with an agency fee on top).

“When you get above 100,000 followers is when you start to see people get representation, and so then they have an agent who’s actively negotiating on their behalf. And then you really see rates start to increase pretty dramatically,” says Karwowski.

Generally, the smaller professional influencers will have followers of between 1,000 and 5,000, rising through the micro tier of 10,000 to 50,000 followers, mid-tier of 50,000 to 500,000, macro 500,000 to 1mn and then into the big beasts of 1mn or more.

Payments can be in part defined by audience reach, with creators with fewer than 10,000 followers often commanding just tens or hundreds of dollars per post. This can scale up to tens of thousands of dollars per post for more sophisticated marketing engagements by creators with larger accounts.

However, it does not always make sense for brands to partner with influencers with the largest social media followings. Some seek the more authentic connection that smaller influencers can have with their fans.

“You could have someone who has an incredibly valuable audience, maybe they had 5,000 followers, but every single pro golfer follows this person. You could potentially charge significantly more because you are influential in a way outside of the statistics that you have,” says Karwowski.

She notes the trend is to “work with a pyramid strategy”. “Work with a few very large creators who are going to be true brand ambassadors, then several mid-tier influencers who are talking about specific campaigns . . . And then a lot of micro and nano creators, receiving products, writing reviews.”

Money paid by social media platforms based on viewers and subscribers can be patchy and confusing, according to influencers. In practice, this means a video with 1mn views can generate anywhere from $100 or less to tens of thousands of dollars, depending on the platform, type of creator and content, watch time, search traffic, viewer location, engagement and advertising value.

Broadly speaking, the highest-paying platform with the clearest creator revenue-sharing system is YouTube, where creators earn money through dedicated pools of revenue for each subscription type.

According to a blog post from YouTube chief executive Neal Mohan in January this year, the company’s partner programme, YPP, paid out $100bn between 2022 and 2025. This is distributed among creators based on member watch time and views.

TikTok, Instagram and X may pay less but can provide the enormous reach used to generate serious money through sponsorships, affiliate sales, products and services.

The metrics that define payments for a creator change often, according to marketing executives, with the number of followers no longer always the key measurement on algorithm-driven platforms of fast-scrolling vertical video.

“Average video views are now the king of metrics, rather than how many followers you have or how many subscribers you have,” says Jeczmien.

While many creators start out — and often remain — on their own, any sort of success normally means they need to build a team: a manager and someone to help with the camera work, editing and scripting at least.

Creators also need to work hard to make sure they know about any changes to the algorithms behind social media platforms, which can significantly change their views and their monetisation, as well as tricks to ensure they maximise both.

Actress and fashion and fitness influencer Sarah Jayne Dunn says platforms such as Instagram “are great because, as a professional creator, they give you insights, so you can see what’s working and what’s not working. We all adapt, and we change, and we pivot and we shift.”

But as with any new industry, many creators have stories about poor advice or scammers trying to get a cut from new arrivals. The UK trade body for digital advertising, IAB, has launched a creator qualification training programme designed to help content creators navigate advertising rules, contracts and professional conduct.

From a brand’s perspective, risks around creator collaborations are equally real.

Several brands have already dropped influencers for bad behaviour or a backlash from customers.

Amy Bryant-Jeffries, vice-president of the creators department at The Team, a talent agency, says marketing teams are becoming increasingly adept at learning “to avoid campaigns that look good on paper but don’t translate into meaningful impact.”

“Misaligned partnerships and unclear expectations . . . have the potential to damage both reputation and ROI [return on investment].”