How a potential recession will uniquely affect the creator economy

It seems like everyone is worried about a possible recession. (If you tried recently to buy eggs(Opens in a new window)You are all too aware of the messy state of things.) In a recent survey of economists(Opens in a new window)The World Economic Forum found that nearly two-thirds of respondents believed there would be a recession in 2023, and Surveys of economists(Opens in a new window) and chief Executive Officer(Opens in a new window) indicate the same. Meanwhile, in December, the Federal Reserve increased interest rates(Opens in a new window) in most aggressive fashion(Opens in a new window) since the early 1980s; In theory, if it is more expensive to borrow money, we spend less, demand falls and with it prices. We’ll see what happens next!

However, there is reassuring news: even if we do enter a recession, NPR reports(Opens in a new window) that many analysts assume there will be no repeat of 2008, but “a low-R recession”. And if you’re part of the creator economy, which consists of approx two million full-time creators and 46 million amateurs(Opens in a new window)or the $16.4 billion(Opens in a new window) Influencer marketing industry, maybe you’re not worried at all.

These creators make money in a variety of ways: from sponsored posts (typically around $100 net per 10,000 followers), by selling merch or their own merchandise, by Use of Affiliate Linksor from earn money away from the platforms itself. They don’t make a lot of money — on average, content creators made $48,800 in 2022. according to Glassdoor(Opens in a new window). But creators’ economies are often seen as recession-proof — or recession-resistant — because it’s fueled by audiences’ direct financial support and creators’ ability to connect with fans, which is typically less affected by economic swings .

So is it time to refresh your YouTube channel? Like everything related to economics, it’s complicated.

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Ads may not slow down as much for creators as for others.

During a recession, people Buying behavior changes(Opens in a new window). They are less willing to pay more for products and less likely to click on an ad. But Ali Fazal, vice president of marketing at creator management platform GRIN, told Mashable that people won’t unfollow creators — and they probably won’t stop trusting them either.

“That’s why we think the creator economy is a very recession-proof channel, because in tough economic times, more than ever, people rely on the relationships they build, the parasocial relationships, with the creators,” Fazal said.

Despite the potential – and I can’t stress that word enough – the recession, Data from Retail TouchPoints,(Opens in a new window) the online publishing network for retail executives, shows that US companies are expected to spend $4.6 billion on influencer marketing in 2023, double what it was five years ago. More than 65 percent of brands expect to increase their budget for influencer marketing as well. writing for Fast company,(Opens in a new window) David Steinberg, founder of marketing technology platform Zeta Global Holdings Corp, expects 2023 to see a “major shift toward more effective marketing based on individual consumer needs and intent.” This shift is in part because consumers are more responsive to influencers than they are to brands. Nielsen Consumer Confidence Index(Opens in a new window) reports that 92 percent of consumers trust influencer marketing over traditional advertising. This converts to dollars: A new study shows(Opens in a new window) that 53 percent of people say they are more likely to buy a product if it is recommended to them by a member of a community they belong to, such as B. a content creator. And influencer marketing content delivers 11x better return on investment (ROI) than traditional marketing methods. according to Forbes(Opens in a new window).

For 2023, Steinberg predicts that brands “will begin to view more personalized consumer experiences as content and, after years of focusing on media, will increase investment in creativity,” and that this era will be centered on vertical platforms like Instagram and TikTok. “This immersive, new-age content will be highly engaging and shoppable for consumers, and lead to more direct conversions for brands,” he writes.

Ryan Detert, the founder and CEO of Influential, an influencer marketing company, points out that during the economic downturn, brands are “very careful about the dollars they spend.” Instead of spending big bucks on TV or podcast advertising, they could switch to spending more on influencer marketing as it’s cheaper and proven to work.

“By and large, audiences are savvy enough to realize that these creators are making these videos with incredibly high production value [the audience gets] free to watch is because the creators have a financial relationship with the sponsors,” Dave Wiskus, Founder and CEO of Nebula(Opens in a new window), a streaming service for developers, to Mashable. He adds that viewers help pay the creator by subscribing to or purchasing the products they sponsor. You don’t just get something you want — like makeup or a subscription better help – You also support a creator whose work brings you joy.

However, creators cannot fully rely on ads and sponsorships.

on YouTube’s advertising revenue is around $18 per 1,000 ad views(Opens in a new window), which is not enough for anyone to live on. If they want to earn enough to buy eggs in 2023, they also need to add sponsorship money, but that doesn’t always come on a regular basis — especially when a recession hits and brands decide to cut their marketing budgets. People need to diversify their revenue streams during a potential economic downturn, Wiskus says. Creators who also offer membership programs, merch sales, or digital products may be more resilient to the effects of a recession.

For example, Sarah Renae Clark(Opens in a new window), a YouTuber and content creator, has diversified the way she makes money, generating revenue from ads and sponsored content, but also selling coloring books, planners, paint palettes, and other art supplies related to her artist-centric social circle associated media channels. That’s one of the reasons it’s not overly concerned about a potential recession. In addition to making money from sponsorships, she and her husband have developed products that sell in the hundreds of units a day.

“We have found products that our audience needs. So if there’s a recession, I’m not sitting here panicking,” Clark told Mashable. “People don’t say, ‘Oh, I’m not going to spend this money because it’s a t-shirt and it’s to support your channel.’ They’re not just buying it to support me as a creator, they’re buying it because they want it.”

And even in a recession, people are still buying what they want or need most.

No one is completely safe from a potential economic downturn.

The creator economy is not immune to the effects of a possible economic downturn – it is impossible. During a recession, viewers may have less disposable income to spend on creator content and merchandise. Creators could also face increased competition from other creators as more people turn to creating online content as a source of income, while being forced to work for less or spend more on what they need to create.

While the potential recession is most likely to hit the US, that doesn’t mean creators in other countries are immune to its effects. Many creators have subscribers, fans, and customers in the US, and there are some pretty strong financial ties between the US and the rest of the world.

The Nieman Laboratory(Opens in a new window) reported that many revenue streams for subscription-based content have the potential to slow down during a recession – take Patreon abandoning cryptocurrency payment plans because of the “further economic environment”,(Opens in a new window) and Substack who told the Financial Times(Opens in a new window) Due to a possible economic downturn, it has “abandoned short-term plans to raise further capital to support the business”. Twitch Takes Major Cuts From Subscription Payments; a third of people paying for media subscriptions plan to cut back in 2023; and according to Dealroom data reported by the Financial Times, “Investment in the creator economy sector grew from $1.4 billion in 2020 to $3.3 billion in 2021 – before falling in the fell to $801 million last year, “as investors became increasingly nervous about churning valuations in private technology companies.'”

And yet the creator economy thrives every fourth younger(Opens in a new window) Americans say they want to work as influencers when they grow up. Another report(Opens in a new window) shows that 86 percent of young Americans “are willing to try influencers,” 12 percent of young people said they were already influencers, and 20 percent of young people said they knew an influencer personally.

The creator economy is still in its infancy. Facebook has only been around since 2004, YouTube since 2005, Instagram since 2010, and TikTok since 2016. And given that the creator economy as we know it today hasn’t experienced a recession, it remains to be seen how all of this will play out over time. Until then, scrolling remains free.