FV-120 | Democratizing the Creator Economy
Research Topic
The creator economy could reach half a trillion dollars by 2027. Creators have
stronger, more personal connections with their followers than firms do with
customers. To leverage this, firms began paying creators for brand endorsements,
making paid endorsements the primary income source for creators today. But
creators are making a pivot, which may disrupt the creator economy. Many creators
are launching and endorsing their own brands, which appears more authentic than
promoting other firms. Already one in ten creators has started an own brand, with
half considering it as their top income source. In the past three years, creator brand
income has grown 82% year-over-year, three times faster than paid endorsements.
Macro-creators (>1M followers; 0.16% of creators) lead with successful creator brands.
For example, Kylie Jenner—with over 400M followers—launched a cosmetic brand
and a second skincare brand. Her skincare brand alone generates an estimated
$140 million annually, attracting 750k monthly website visitors with less than
$5k monthly spent on advertising. The shift from paid endorsements to creator
brands presents two key challenges for firms. First, creator brands become new
competitors with low customer acquisition costs due to their strong communitybuilding
and direct customer access. Second, this shift cuts off a crucial marketing
channel for firms to reach engaged audiences. Firms can manage such competition
and regain customer access by helping micro-creators (10k-1M followers; 23% of
creators) launch their own brands. Unlike macro-creators, micro-creators cannot
overcome the high operational and investment barriers alone. Firms could support
them with operations-as-a-service, democratizing the creator economy, and brand
launches in particular, while securing revenue through partnerships.
Description of the Problem
Micro-creators are a larger and more diverse group than macro-creators. To
democratize creator brand launches, firms need clear criteria to identify microcreators
with the motivation, business acumen, and community support for success.
Unlike entrepreneurs, who start with a product and are extensively covered by
the academic literature, creators begin by building a community, often without
commercial intent. Shifting from paid endorsements to launching a creator brand
requires creators to have conviction in their brand’s success. What characteristics
predict a micro-creator’s potential to launch a successful creator brand?
The opportunity cost creators face when pivoting from paid endorsements to
launching their own brand challenges firms to make attractive offers. Creators
seek customization to make a product their own and for preserving authenticity,
while firms prioritize standardization and economies of scale, especially with small
order sizes. What tradeoffs will micro-creators accept between customization and
potential earnings?
Objectives
In this research with Boas Bamberger, we want to (1) investigate what micro-creator
characteristics predict their brand success and (2) how firms can manage the
tradeoff between mass customization and potential earnings.
Importance, Usefulness and Novelty of the Project
Creators are pivoting from paid endorsements to launching their own brands,
threatening firms’ access to customers and creating new competition. Funding
this project will generate insights to help managers balance promoting a firm’s
brand with democratizing creator brand launches while securing revenue through
partnerships (e.g., white-label production in the nutrition and supplements space).