[Issue 26] Fixing the Creator Model (Part 2)
How thinking bigger can make your creator business more resilient
[Photo by Pedro Sanz on Unsplash]
The Odysseus Files, Issue 26
Playing Your Own Game, Part 4
The Three Primary Revenue Models Within the Creator Business
[Note: this is Part 4 of a miniseries within the broader Odysseus Files called “Playing Your Own Game.” These miniseries will group broad topics thematically, helping you connect the dots between them more easily.]
TL;DR - Skip to the end for takeaways!
Last week, we began an exploration of the creator business model. We broke down some of the problems in the industry and highlighted the financial constraints many creators run into. Finally, we ended on a positive note, emphasizing that the opportunity for creators is to lean into their ability to harness attention, but then go one step further.
This week, we go deeper into what this opportunity looks like.
To start, we can broadly sort the creator business model into three buckets, based on what you sell, who you sell it to, and how you get paid.
Service Model
First, you have the service model. This, as the name implies, includes coaching, consulting, freelancing, etcetera. It’s a one-to-one model, requiring very little audience building. On your own, it’s not super scalable and is limited to trading your time for dollars.
If you want to build leverage using this model, your track will be to build an agency, hiring others to do the hands-on work.
Attention Model
Second, the attention model is based on building a large audience with the purpose of selling the attention you’ve gathered to someone else. This includes brand sponsorships, advertising, affiliate revenue, etcetera. Doing this well is based on being an entertainer - think celebrities or influencers leveraging their audiences’ attention to command fees for appearing in a brand’s promotional material.
While you only need a small, targeted audience with the service model, this one is all about audience growth and engagement. Leverage comes from size.
Content Model
The final model is the premium content one. As per the description, this one involves selling premium versions of the content you create, including books, courses, memberships, and any other format. This model is more profitable and detaches your time from your earnings. Like the attention model, it’s one-to-many (or possibly many-to-many if you run a community).
Financial success still stems from you showing up and continuing to create new content. But instead of optimizing for audience growth, if you are targeted enough you can make a good living serving a small audience. This gives you the space to focus on creating a quality experience for that audience.
The highest source of leverage in this model is to license or franchise your IP (intellectual property). This provides ongoing revenue, whether or not you show up. (It can also provide leverage to service providers, who develop a repeatable framework and offer certification to others to deliver that framework.)
In all of these cases, revenue is derived directly from the content you create: to build authority to sell your services, to gather and deliver attention to other brands, to sell directly.
(Exception: services delivered where you don’t rely on creating content to bring in new clients. If this is all you do, and you have no aspirations to shift into more of a content creator role, then you likely don’t identify as a creator anyway, leaving this whole conversation somewhat irrelevant to you.)
But revenue driven by content is inherently limited. To understand why, it’s helpful to turn to the media industry.
Content as Media
Media’s greatest weakness is that content/information by itself just isn’t worth that much. Transformation is, if it can be delivered; but, apart from skill training, most information doesn’t necessarily provide this.
Media has gone through two basic forms of monetization:
The older model is ad sales. But, as with many things, the companies that got rich from advertising were the ones providing the platforms to deliver the ads. Advertisers and media publishers don’t come out as well. And, as all the changes in online advertising make most forms of digital paid media more expensive and less effective, this model will only continue to degrade as a sustainable source of revenue.
The newer model is subscriptions (along with the notorious paywalled content). Problem is, consumers are awash in subscriptions. Even though they remain popular, streaming services have done a good job of helping consumers to associate a certain price ceiling with subscriptions, making it hard to move higher than roughly $15-$20/month. (SaaS and B2B being exceptions, of course.) So once again you arrive at a volume calculation: significant audience growth is required to maximize the revenue potential here. But that audience growth is harder than ever.
These traditional monetization paths help to understand the limitations of content alone. But what’s been missing from the equation so far is media’s greatest strength:
Influence.
(Ok, this may feel a little detached from reality in today’s legacy media environment. But, arguably, the severe lack of trust today is a reflection of the influence that once existed, and that remains to some extent.)
Whether we’re talking about legacy media, the entertainment industry, or content creation, the greatest tool delivered by media used correctly is influence. (A caveat to note that “used correctly” is a statement of effective use, not moral use - e.g., some forms of propaganda.)
To leverage this strength, however, media must build trust.
Trust is built on reputation. The larger the audience, the more sprawling and complex the media empire. And the larger the empire, the harder it gets to not screw up that reputation.
In contrast, the more niche the audience, and therefore the smaller it is, the easier it is to A) get attention, B) stand out, and C) build trust. But, in traditional, content-driven revenue models, the smaller the audience, the lower the revenue potential.
And thus, we hit an impasse.
Leveraging Influence
We need to move beyond the media itself - instead, monetizing what’s behind it.
This leverages its strength - influence - by selling something other than the media itself.
Of course, if you deliver the media as a sales vehicle openly, you’ll kill trust. (A perfect example: legacy media.) Influence is a softer, more indirect touch. It’s also a long game - trust, reputation, and influence are earned, not bought.
For a long game to work, whatever the media sells must be valuable enough to fund the media front end.
We’ve established that the creator model operates much like the media: revenue largely hinges on the content itself. Either by selling the attention collected or the content itself.
What many creators excel at, even better than the media (or most brands, for that matter), is creating trust by building relationships with their audiences. This brings us full circle back to where we left off last week, with the comment that:
“Many brands recognize the opportunity better than creators do: they have the product that the creator doesn’t have, and the creator can attract the attention that they struggle to on their own.”
The argument here is clear: rather than relying on the old funding model (ads-driven, which is in some ways technically at odds with the desired trust) or the newer one (content purchases, which has a price ceiling), creators should be leveraging their earned trust to create influence.
But to influence what, exactly?
A Different Approach to Building Creator Businesses
How to Remove the Income Ceiling from Your Business
Nathan Barry, founder of ConvertKit, and Rachel Rodgers, founder of HelloSeven, co-launched Billion Dollar Creator, a podcast centered around a single premise:
If you had to scale your creator business to $50 million+, what would you do differently?
A quick note, before we go further: please hear me out here - the dollar amount is NOT the point. It doesn’t matter whether your ambition is to build a low 6-figure business to support a laid back lifestyle or a multimillion dollar empire.
The idea here is, what foundational principles, business model, and structure would you need to have in place to build whatever you want - regardless of size - and to not be constrained by external limitations? (Such as algorithms, 3rd-party tech platforms, perceived price ceilings, etcetera.)
The alignment between this concept and the values that The Odysseus Files has espoused should be clear:
What do you need to do in order to build a financially sustainable business that is resilient to outside threats and that expands your potential for impact?
The team behind Billion Dollar Creator lay out three rules that are critical to building this way:
Rule #1: It must be a business brand, not a personal brand.
A personal brand is not an asset. It cannot be sold. It has no value beyond your own career.
Which also means, when you’re not on the go, your brand isn’t present or visible. (Sure, your content lives on for a while, but we all know the timespan between your last contact with followers or subscribers and the point where they forget about you is getting shorter.)
If you’re going to shift gears beyond the limitations of the creator business model, it comes down to owning equity in assets that sit outside of yourself.
From here, you can leverage the attention, trust, and influence you’ve earned to sell those assets.
Rule #2: You have to sell your own products.
Yes, digital/content products count, which is why of the three variations of the creator model we discussed above the content model tends to have the highest profitability.
But this rule goes a level beyond the traditional creator digital products. We’ll come back to this.
Rule #3: The products should be consumable in some way.
This could be subscription-based. Or just something that someone uses up and needs to buy more of.
(Subscriptions do, of course, tend to have price ceilings, as mentioned earlier. But that doesn’t mean there aren’t ways to build them into a larger ecosystem of products, where they shore up your finances with recurring revenue.)
Combined, these three rules allow you to pair the creator’s attention-winning and trust-building skills with a brand’s product creation skills. It’s a potent combination.
(To hear Nathan and Rachel expound on these rules, including a number of examples of them in action, watch this episode of Billion Dollar Creator, especially from the 11:37 mark.)
In this model, the media (or content) trains people to think or feel a certain way, resulting in them desiring a lifestyle inspired or enabled by your products.
(Translation: your content becomes your marketing. You know, like how content marketing was originally designed to work.)
Some of the most common examples of this in action now can be found where celebrities turn their status into product-driven brands that are a separate entity from themselves. Ryan Reynolds with Aviator Gin and Mint Mobile, Reese Witherspoon’s book club, and countless other names who have built brands in alcohol, beauty/skincare, etcetera. In each case, they’ve leveraged their strength (attention) into an asset (a product brand).
The Brand Model - The Natural Evolution of the Creator Model
Through consumption of your product, transformation occurs on a more subconscious level.
This creates a sort of pyramid effect. At the top are the rare few who achieve transformation of their own accord, by following the advice in your content. (I say “rare” because, let’s face it, most people buying books and courses aren’t completing them, much less putting them into action and getting results.)
The next level are those who achieve transformation thanks to your direct help (including done-for-you options). This includes your coaching, consulting, or freelancing clients. At this level, a higher ratio of your customers will get the transformation they’re looking for, because they hire you to help implement that transformation.
At the lowest level, you have a large number of people who, even if they buy some of your content products, are not going to experience any transformation. They’re not action takers.
For a lot of content creators, these people come in, buy one or two things, maybe ask for a refund, then never come back.
These are the people that most coaches or consultants today would advise you to intentionally stay away from. You know, focus on the 20% of customers that deliver 80% of your results, etcetera. And that’s all valid. These people will likely be terrible customers.
But if you could tap into a way to enable some form of transformation to take place on a subconscious level, you could find a way to still include these people in your brand universe. Even if they don’t experience transformation the same way others do, spending time on the outskirts of your world can deliver its own form of transformation. And in such a way that allows you to significantly expand your revenue potential.
These passive consumers will value your brand enough to keep coming back to it - if you provide a way to do so that doesn’t require higher levels of transformation.
Meanwhile, of course, you’re adding more avenues for your biggest fans - those who have bought and experienced transformation from your other content products - to go deeper into your world.
Think of it like the merch sales around popular movies. The movie serves to essentially market the merchandise. By extending the number of revenue streams, merchandise can add a significant percentage of revenue to the movie’s bottom line. And it serves as a way to keep the movie’s biggest fans engaged long after the cinema doors close.
But the key to this is that it’s driven by the brand. If someone buys your course, but there’s no meat to your brand, chances are that’s your only sale to them.
But if you have a robust brand universe, one that gets them excited to keep coming back to it, regardless of whether or not they actually use your content, you’ll benefit from having them in your world (and they’ll benefit from being there).
Wrapping Up
Let’s tie this altogether.
If you’re a creator, you’re probably good at getting attention. Stopping there, though, puts constraints around what you can do with your business. (And how sustainable it really is.)
Instead, just like a number of household name celebrities have done, if you direct that attention towards an asset you own (whether a product or another business), you have far greater revenue potential.
And while it’s not about the money, removing constraints that are inherent in the creator business model does enable you to build something more sustainable (regardless of how big you end up wanting it to be).