The Vergecast - The dark, uncertain world of creator funds

Episode Date: December 5, 2022

Producer Hadley Robinson reports on the often uncertain world digital creators find themselves in trying to make a living on platforms like TikTok, Instagram, and Facebook. Should platforms pay creators directly? Are creator funds even good? Creators and experts tell us what they have found behind the curtain and what it's like to chase the dream of making a living as a digital creator. Learn more about your ad choices. Visit podcastchoices.com/adchoices

Support for the show comes from Retool. Too many companies run critical operations on duct taped spreadsheets, Slack workflows, and whatever else they could cobble together. Not because they want to, but because building internal tools means weeks of waiting on someone else's backlog. That's where Retool comes in. Build custom internal tools just by describing what you need. Prompts something like,

Build Me a Revenue Dashboard on our Salesforce data. And Retool actually builds it. On your company's data, in your cloud, with enterprise security built in. Go to retool.com slash Vergecast. We all need to retool how we build software. Welcome to the Vergecast, the flagship podcast of dynamically viral videos. I'm your friend David Pierce, and this is the second in our three episode mini-series all about the creator economy, emphasis on economy.

We wanted to look into all the ways that creators make money and where the money comes from and where it goes and how it, works and try to make sense of this whole messy world. For this episode, we sent our producer Hadley Robinson to figure out how creator funds work. We've heard this over and over the years. Facebook, TikTok, YouTube, everybody comes up with this big pot of money and they say, here, creators, have this based on how your videos do. It sounds sort of simple, right?

But the math of who gets what and where it goes and who that money is actually for and how you earn it is very complicated. So we sent Hadley to figure out how it all works and how creators feel about it. Here's what she came back with. We are now 15 years into the whole idea of a platform paying the video creators who make content on their site.

It all started back in 2007 when YouTube launched an ad revenue sharing program to pay their stars for creating content. They agreed to pay creators a majority percentage of the ad revenue made from their videos. The program started with some of the most popular creators of the time. People like Reneto, Happy Slip, and Lonely Girl 15. We're actually getting ready to do an experiment for you. Mentos, Diet Coke, you know that

whole thing? Well, we've got a new twist on it. How many times do I have to tell her it's not quacker, it's Quaker Oats, Quaker Oats? The Purple Monkey Puppet. She doesn't like to know that she's a puppet. Wow, wow. That last one was Hank Green. I like it here on the internet. I feel good about it. Hank's been a YouTuber since 2007. He joined the partner program back then and has been making 55% of the ad revenue on his videos ever since. I have an educational media company. It almost entirely makes its money through online video content. And about a third to 40% of our revenue is that money. It's huge. It's a really big deal for us. So that is really important and created a really healthy economic ecosystem around YouTube content. The partner program

built a dynamic where when YouTube as a platform does better and their numbers and ad revenues go up, creators share in that success. YouTube's partner program remains popular all these years later, and the service has largely carried on in a league of its own. But TikTok's arrival and soaring popularity has threatened YouTube's throne. Recent data shows that people's average watch time is now higher on TikTok than YouTube. TikTok's short form algorithm-driven feed has inspired copycats from Snap, Instagram, and YouTube themselves, and they're all competing for top creators. But TikTok and others have yet to master the whole paying creators thing,

which could be a problem competitively for them. I talked to Professor Casey Feisler, who researches online communities and tech ethics at UC Boulder. I think that YouTube especially has created an expectation that content creators can make a living from this, and that some of that living should probably come from, the people who are making money off of their content. She's talking about the platforms, who indeed are making boatloads of money.

TikTok made an estimated $4 billion in revenue in 2021, and is on track to triple that this year. Instagram made over $47 billion last year. I imagine that TikTok considered whether they could have a similar kind of revenue model to YouTube, but it is more of a challenge because on YouTube, advertisements are directly on specific videos, so an ad share makes a lot of sense. On TikTok, that's not quite how it works. You mean these are short videos, basically, and you can't as easily just slap an ad on it. Right. Well, so if you're scrolling through TikTok, you'll see like video, video, video, video, video, ad, video, video, so where does the revenue from that ad go? And so I imagine they decided

to come up with a different model and the creator fund was what they came up with. TikTok launched its creator fund in July 2020. TikTok is making a billion dollar investment in the creators making a difference on the platform, launching the TikTok creator fund. The project is starting out with $200 million in the U.S. with plans to reach $1 billion. Soon, other platforms marched out their own similar plans. In late 2020, Snap launched Spotlight, offering $1 million a day to creators. In 2021, Meta promised $1 billion in both. bonus programs. And YouTube announced a $100 million fund towards creators of shorts, its answer to TikTok.

All of the creator funds work slightly differently and have various requirements to join. For U.S.-based TikTokers to get your hands on some of that fund money, you have to be over 18, have over 10,000 followers and over 100,000 views in the past 30 days. All this money in the creator fund seemed like good news to a lot of TikTok creators who rushed to join as soon as they could. So when I hit 10,000 followers, at that point, I was at the fashion company that I was working for, I was making 40K. And I was like, I could use any extra penny that I can get. So I joined the creator fund instantly. That's 26-year-old Philadelphia-based creator Brandon Edelman.

Commonly known as Brand Flay, I create like a lot of off-the-rip chaotic content. Mostly videos of me talking to the camera, telling stories, a lot of party content. I tell people that I'm a lifestyle creator, but my lifestyle is like crazy, partying chaos. Kind of like Jersey Shore and the TikTok creator. Brandon started making TikTok videos in January 2021, mainly just for his friends. And then June 2021, the vaccine had just come out. So I was like going out all the time. Like the world was just like in a fun, happy place.

It was summer. And I was just doing so many things. And I kept posting on TikTok and I started like blowing up a little bit. And then I had like 10,000 followers in July of 2021. And now, like, a year and some change later, I'm at 330,000. When he became eligible for the creator fund, Brandon wanted to see how much he could make. But he says he was a little skeptical because a lot of people he knew reported a drop in views after they joined the creator fund. TikTok denies this happens, but it is something lots of TikTok creators have complained about.

But Brandon himself saw no dip in his numbers after joining. July and August of 2021, like all my videos were getting like between 80 to like 350,000 views. I was making like probably $4 to $500 a month off the creator fund. So for me, that was great. I was paying my utilities every month. How does it work? Like exactly, do you do you know how many views you need? This is like another thing that TikTok's never explicitly confirmed.

I think a ratio that's not obviously perfect, but I think it's pretty on the money is you get like four cents. per 1,000 views. But that is your views for the whole day. I have 800 videos on my channel. So, like, if you post a video today that goes viral and a bunch of people start clicking your profile and they watch other ones, that all counts. If I post a video today and it gets a million views,

I'll probably get $20 for that day. See, TikTok hasn't laid out a formula for exactly what it takes to earn money. They don't say, if you get a million views a day, you'll get $20. Instead, creators are left doing their own math, and some have taken a TikTok to share their earnings. So I joined the TikTok Creator Fund on January 28th of this year. And in that time, I've only made $17.

Not that good at all. I was getting $20, $30 a day. You can see that I'm making a few dollars each day. I get paid anywhere from $30 to $150. The numbers are all over the place, and so are people's feelings about it. people said it felt like free money for doing nothing. Others thought they should be earning a lot more, considering how much energy they put into producing content. I asked Brandon if he wishes TikTok were more transparent about how to make money from the fund. I do. Yeah, like I wish it was like a system,

but like also I don't really like know how helpful that would be because TikTok is random. When you go on TikTok, on every page you have a following and then a for you. TikTok puts your for you page first. So you could follow somebody and never see their videos. They might never come up on your 4U page. So even if they said like, oh, if you get 30,000 views a day, you're going to get $5,000, I can do my best to make a video that I think will get 30,000 views, but it could get $3 million. It could get $3 million.

You never know. Like, there are videos that sometimes that I post, I'm like, this is so funny. My followers are going to love this. And they flop. And then there's other videos that, like, like, the other day, I took a five second video of me eating Chick-fil-A in a parking lot with my friend. I was like, oh, if you had a mental breakdown today, eat Chick-fil-Lay in the parking lot with your friend. I'm like, oh, this is going to get like 15,000 views.

890,000 views. You never know. So would it be helpful? Would it be nice if they were transparent? Yes. But I don't really know how that would, like, help motivate people as a creator because, I mean, at the end of the day, it's very random. Brandon's right.

He can't really control what the algorithm is going to do. Despite some creators' best efforts to game the algorithms, they're dealing with two secret black boxes controlled by the platform here. one, how the algorithm works to make their content go viral or not, and two, how the creator fund is calculating payments. They don't know either of these things. And that's a precarious dynamic for content creators who want to make money. TikTok is almost 100% recommendation. If the recommendation algorithm on TikTok pushes out your content, you make more money. If it does not push out your content, you do not make money. And that is nothing that you have. control over. The hundreds of videos that Brandon has posted since July 2021 when he joined the

creator fund has netted him a bit over $8,000. Not enough to live on. But luckily, the creator fund isn't all Brandon's got. It's just one small revenue stream behind the other ways he's figured out how to make money on TikTok and Instagram. This past July, Brandon realized he could earn enough as a creator to go out at it full time, mainly through brand deals and ads. So he quit his nine to five job. I think people get confused when they're like, oh, like your full-time job is TikTok. My yearly salary is not $8,000. That is passive income. It's literally a third source of income that I can like rely on, like just for like, like I said, utilities. It pays my electricity, my water bill. That's it. I've signed brand deals with ad agencies that are $10,000 for one video.

So in that sense, it doesn't pay you shit. It sounds like the creator fund is not the thing that made you quit your day job. No, definitely. I don't think anyone could solely live off the creator fund, except for maybe like celebrities. I talked to Hank Green about what it is that TikTok does give creators. It is very good at giving videos a chance. And so you might end up with a video, an account that has zero followers and has uploaded 20 videos and like their 20th video is actually really good. Or it's like something exceptionally funny happened and then that video gets 10 million views. So TikTok's not giving a ton of money, but it does give sort of virality. Attention. And especially early in a creator's career, that's the most valuable thing. And then you have to

figure out how to turn that attention into something that's going to be sort of a more long-lived fuel in the tank. And Brandon's an example of somebody who's been able to do just that. Turn his virality on TikTok into a career. I mean, it definitely is a hustle. But, But I've never been more busy. I've never worked harder. But I've also never been so successful. So it's all, you take the go with the bat. TikTok's creator fund is just one model.

When Snap got into the paying creators game, they handed out big, big checks. We'll have that after the break. Support for this show comes from Shopify. Starting something new isn't just hard. It can be really scary, too. So much work goes into this thing that you're not entirely sure, will even work. But here's a better thought. What if it did all work? What if your instincts were actually right all along? Shopify wants to help you get there. They're the commerce platform

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You can go to shopify.com slash vergecast. That's Shopify.com slash vergecast. Snaps foray into paying their creators for short-form videos went a different direction than TikTok. Snap's program was a lesson in how to make creators rich, drive growth, and help bump your stock price, at least temporarily. I talked with Mike Metzler, a social and streaming analytics researcher whose side hustle is making corgi content.

Okay, it's not all corgi content, but that's how we first got going on Snapchat back in 2014. I started on Snapchat because I knew that there was probably money to be made, and I've always approached a lot of these platforms, is this a way to make money in my free time? And it's more possible than ever to do that. Mike made some money early on with Snap through brand partnerships, but he said that had dried up for him when Snap announced Spotlight in November 2020.

Spotlight is a feature that looks a lot like TikTok or Instagram Reels. Instead of seeing snaps from your friends, there's a general entertainment feed of Snap selected content. And anybody can submit their stories to be featured there. those who got picked were initially capable of getting a piece of the $1 million per day that Snap was offering to creators back then. So I started posting on Snapchat spot like the day it came out. Yeah.

I posted for about a month and then I got a notification that was like, hey, you've made some money, but it didn't tell you how much it was. I got a notification two or three weeks later that I was getting $25,000. Whoa. And then I posted some more and I got a notification. another notification that was like, all right, now you've made $37,000. Do you remember what your video was about that was the most profitable there? I was trying to make a, here's how to open a pomegranate.

And I opened it up and it was completely rotted on the inside. So it was kind of one of those videos where, you know, you get hooked in something different happens than what you're expecting. And so it was honestly a good internet type video. Mike wasn't the only one making life-changing amounts of cash from Spotlight. there were people, many of them teenagers, making over a million dollars in a matter of months. But like TikTok's creator fund, nobody knew exactly what it took to get featured and paid out on Spotlight. So creators banded together to try and figure it out.

I've been in a lot of different creator communities. So we started talking immediately and trying to figure out what's the minimum threshold for what it's going to take to get a payout. And for Snapchat Spotlight, it was kind of arbitrary. Whenever it started, you could probably qualify with like a 50,000 views on a video now. it's between 300 and 400,000 to get like a $300 payout. Part of why it got harder to earn money was added competition. As soon as the word was out that people were making literally millions of dollars, it became extremely competitive and the landscape changed almost overnight.

And that's one of the biggest critiques of creator funds. Hank Green points out that when you have a fixed amount of money set aside and more and more people qualify to join, that money is going to spread around much more, and the payouts to an individual creator are going to go down. It's just a pretty simple math problem. You're dividing the same number by a bigger number. In general, as a platform succeeds more, the creators actually make less, and that seems quite wrong. For Snap, it wasn't just the added competition of more creators on the platform. It also stopped pouring so much cash into its fund. In 2021, the company announced they were shrinking the pot of money from $1 million per dollar,

day to an unspecified millions per month. And then just in October, they announced another reduction to millions per year. Mike said for all these reasons, he stopped seeing any traction on Spotlight and started focusing on other platforms. I kind of moved towards Facebook Reels and Instagram Reels, which was more profitable use of my time. Okay. So you move that way because it seemed like that's where the money was going? There was still money to be made on Spotlight, but I wasn't willing to put into the effort that it was going to take for me to do that. that. Facebook and Instagram Reels, I wasn't making nearly as much money as I was making on Snapchat Spotlight, but it was easier and, you know, I'm cool with an extra 400 to 500 bucks a month, you know,

just posting videos on social. It's almost passive income. And I think that creators are getting a lot more savvy. You see creators jumping in between these platforms for where they can make the most money, where the best opportunity is. There's obviously a lot of downsides such as, you know, big inconsistencies and the platforms being able to change, you know, the rules at any given time. Right. For Facebook Reels, for example, in August of this year, they were paying two bucks for a thousand views. And then they dropped it by more than half. Then it was 40 cents for a thousand views.

And that just happened overnight. And then you're like, oh, well, it suddenly just got much harder. Platforms can use these funds to play Puppet Master a little bit. By dangling cash, they incentivize people to make a certain type of content on their app, in the hopes of keeping the platform competitive. And you see this happen again and again. Meta has been pushing reels on Instagram and Facebook, not just by putting them in users' feeds,

but also by paying creators to make them. So if you're Instagram, you want people to create reels, you create a fund and you say you can make money if you create reels. I did make a bunch of money, especially during the early stages when they were paying a lot. And then they sort of like cranked it down as they're like, okay, people are coming in. I despise that.

That's like the ultimate not treating creators as partners, but instead treating them as like, an asset to be manipulated. Like, how do we get this tree to grow in this place so that we can harvest it at the right time? That's what it feels like. No one had a thought about, like, the soul of the tree. They're just trying to get it to, like, I feel like a crop that is being fertilized

rather than, I don't know, a person with a business, like working with another business trying to mutually grow our businesses. It may be tough for creators to keep up with the platform's constant changes. But for platforms, throwing money at the type of content they want can definitely pan out. In Snapchat's case, it worked. After they released Spotlight, everybody flooded to the app. They had record user growth. Their stock price hit some new highs.

Now everything is going down. And now they announced yesterday that they're cutting that. So it's not working. But for some of these other platforms, it is retaining users to keep them posting content on there. And maybe that's all you can. really hope for is we need our best creators to continue to post content if we want people to stay on this app. These funds and these bonuses and stuff, do they drive you to want to make more videos? Absolutely. It creates, you know, a lot of opportunity for creators, but you really have to put

in that grind, which is, for me, I have a full-time job. You know, it's a fun hobby. If my full-time income was related to these creator funds, I would be stressed all the time. Just two years after the creator fund trend began. It's showing signs of decline. In addition to Snap announcing a decrease in funding, YouTube said that it's shifting its shorts towards a revenue sharing model, and meta has introduced a new music revenue sharing model for reals. Revenue sharing might mean less random, easy money for those creators who cashed out on that, but it also means creators could grow more as the platform grows. It's a really different model than creator funds, where more growth on the platform can lead to diminishing returns for creators. It's a gift instead of a partnership with

YouTube, our content is the thing you sell the ad on. Like, without my video, you didn't sell that ad. That's the fundamental nature of it. So let's share that revenue. Whereas with TikTok, it's like, you created TikTok videos. Here's a present from us. It's a hundred bucks. It's not shared revenue. It's an amount of money they've allocated to creators. Hink says the platforms are having to navigate the balance between providing a great user experience versus a profitable experience for creators? TikTok really is a very user-first experience where it's designed to be the best experience for the person viewing the content and to really lower the friction for the people creating the content, like to allow creation to be very easy, but not to be, certainly isn't the best

experience as a creator. You know, it's very uncertain. People get their accounts banned all the time. You don't make very much money. And YouTube was kind of like this for a while too. It was really user experience focused. And then there were more and more and more ads and that value to the YouTube and the value to YouTube creators got higher and higher, but the value to the user got lower and somebody who comes in and takes that space. That makes sense to me. And then like TikTok's going to have to sort of like make the user experience worse and worse in order to make more and more money because that's what you're trying to do.

And then maybe something else takes that space or maybe YouTube takes it in the chin and meta takes it in the chin to make a product that's going to cost them a lot of money and not make them very much so that they can compete instead of becoming block. It's a tricky little world, but ultimately these platforms are optimizing for user experience, which is meaning not optimizing for revenue. And I want them to optimize for user experience. I want them to compete. I want them to get eyeballs on my videos.

But that really does mean that I'm making not very much money per view. And creators have to be really innovative to figure out how to make that money back, which, honestly, over the last 10 years, they've been pretty innovative. TikTok, for one, hasn't yet announced any move away from its creator fund. But it's just a matter of time before the platform will have to figure out better tools to pay creators to keep churning content. After all, viral hits don't last. And TikTok can only be the hot new thing for so long. This episode was produced by me, Hadley Robinson, with mixing by Andrew Marino.

Liam James is our lead producer and Brooke Minters is our editorial director. The Verge cast is a Verge production and part of the Vox Media Podcast Network.