The Creator Economy: Why Attention Is the New Currency

Attention is valuable.  Whenever a medium has drawn people’s eyes or ears, it has also drawn advertisers looking to put messages and appeals in front of those people.  From newspaper ads to radio ads to television commercials to billboards on the side of the highway, businesses will pay to get their goods and services in front of potential customers.  The newest thing that attracts millions of viewers is social media.  Since the early 2000s, consumers have evolved to spend more time on social media than watching TV and movies. 

The last twenty-five years have given us reality TV and social media, replacing the professional actor with the energetic amateur.  We want our content to be more organic, which shifts the ways firms advertise.  Instead of clear-cut commercials, firms use product placement to get their goods in front of viewers with a degree of subtlety.  Consumers tend to respond more receptively to product placement, where the specific good appears in a television show as something used by cast members, than commercials that interrupt the show.

Of course, product placement has been around for a while and existed before contemporary reality TV.  Despite many casual observers considering sci-fi blockbuster E.T. (1982) to be the first use of product placement, the practice actually began as early as 1896.  Using product placement in reality TV shows adds an element of realism that may attract consumers.  After all, if cast members are enjoying a product on a reality TV show, aren’t they enjoying it in reality?  Actors enjoying a product on a TV show are being paid to do so, making it a less impactful endorsement.

Monetizing Views

Whether it’s reality TV or scripted TV, product placement is still being designed and ordered by a seller.  A new development in advertisement is monetized views on social media, where companies pay money to popular social media profiles and users who promote their products.  Internet celebrities, famous for everything from make-up tutorials to travel blogs to silly dance videos, can make real cash by promoting goods and services.  To have a chance at attracting brand partnerships, however, you need to be considered a true influencer.  This typically means at least a thousand dedicated followers.

Influencers are social media users who can affect, or influence, the purchasing decisions of viewers.  They are usually considered an authority in their niche, be it fashion and style, fitness and health, arts and crafts, cooking, interior decorating, etc.  Viewers want to be like these influencers, often for aesthetic reasons, and so will purchase at least some of the items these influencers recommend.  Mega-influencers, with a million followers or more, can earn tens of thousands of dollars per post or video that recommends a product.

How Do Influencers Make Money?

The most popular influencers are approached directly by firms that want advertising, and the firm offers a pay structure based on the influencers’ followers, follower engagement, and type of post/video/messaging to be done.  In some communities, follower engagement can be significant and allow influencers with fewer followers to earn the same amount as influencers with more numerous, but less engaged, followers.  Influencers who make an energetic, passionate video promoting a product will be paid more for that post than those who only mention the product or write a short blurb on a blog or social media post.  This would be considered active income, because the influencer has to perform some work for each post.

While some influencers promote products directly, others are paid for allowing digital ads to appear on their popular channels.  YouTube allows users with at least 1,000 followers and 4,000 annual watch hours to begin earning money through AdSense (owned by Google).  Popular influencers can also link AdSense to their own websites to earn money for allowing advertising on those websites.  The more attention your social media posts and personal websites receive, the more advertising revenue you can make for hosting ads.  This would be considered passive income, because the influencer only has to allow advertising on his or her channel or website, not create any ads.

Increased Difficulty of Becoming a Paid Influencer

Low Barriers to Entry

Many people, especially young people, dream of becoming a paid influencer.  It seems like easy work, after all: get paid to mention products that you enjoy using!  Unfortunately for aspiring influencers, the social media market is oversaturated with content creators.  There are virtually zero barriers to entry to becoming a digital content creator, especially since most consumers own a smartphone for personal use.  Today’s smartphones and social media apps contain all of the tools needed to become a content creator.  

Content Creation: A Perfectly Competitive Market?

What makes it easy for you to do makes it easy for everyone else to do, creating a situation akin to perfect competition.  Thousands of similar substitutes reduce the demand for any single one, driving down the market price.  Firms don’t have to offer much advertising pay to any one influencer, because there are so many to choose from.  If one influencer demands more money, the advertiser can easily find a close substitute.

The market is not perfectly competitive, however, because some influencers have specific traits that make them more attractive to consumers.  This can be a combination of physical and personality traits, intelligence, sense of humor, and ability to improvise.  In the real world, some influencers will be able to attract larger audiences because they are more appealing than most substitutes.  However, this can be difficult over the long term, as some content creators may struggle to avoid repetition.

Labor Market Implications

Are lots of young people becoming paid influencers?  If so, will this affect labor markets as people turn away from traditional jobs to pursue lives of digital content creation?  This can be difficult to determine, as most influencers and content creators are not full-time and work other jobs.  One 2023 report suggested that up to 12 million people, or 7 percent of the United States labor force, were engaged in paid content creation.  This report was quickly criticized for appearing erroneous, such as using self-reported survey data from people who were more likely to be frequently online…and thus engaged in content creation.

Financially, relatively few people are likely to be able to exit the traditional labor market thanks to content creation and influencing.  It is estimated that less than 5 percent of content creators make any money from it, and more than three-quarters of those who do make less than they can live on.  This suggests, at most, that about 1 percent of social media users, who are probably most of the population in developed countries, could make a living through content creation.  This is not a significant labor market disruption, especially since it is probable that at least some of this 1 percent would keep a day job to provide content for their posts and videos.  

Ultimately, the world’s employers have little to fear in regard to not finding enough young people to apply to their job postings.  Most of us love our social media apps, and even creating digital content for followers, but have to clock in to work on Monday mornings to pay the bills.