I read an article last week in New York Magazine that made me chuckle a bit. Titled “The Influencer Recession”, it described the trials and tribulations of the influencer economy, told through the lens of a lifestyle influencer who has found herself moving through multiple different content strategies and formats as attention (and the algorithms) forced her to reconsider her output, her positioning, and her sales strategy. Those format changes, coupled with advertisers shifting from buying reach to buying performance, were framed as the dawn of a new era of influencer economics, which I thought was incredibly amusing to read on a digital media website that was recently sold at a value much lower than its peak due to the same exact set of forces that played out 5 years earlier. 

It’s been a busy summer for the influencer / creator economy - by all accounts, they took over Cannes, they got $250M from CAA/TPG, they got banned from a small basket weaving shop in Nantucket. Call them influencers, call them creators, but I call them what they are: media companies, with a very visible boss. To every influencer and creator I say congratulations: you’re a media CEO. You have not changed the media business model itself; you have changed the distribution channel. 

The upside to that reality is that there are no new lessons, only old lessons with new (#gifted) clothing. I’ve spent a fair amount of time working with creator businesses, but I would not call myself an expert in the space. However, I am an expert in their direct predecessor, the digital media boom era. I worked at VICE from 2016 to 2021 (peak to trough!) and I saw firsthand the forces that changed our business. The lessons we learned; about formats, advertising, measurement, and capital structure are just as relevant to today’s creators. So here’s a few of those lessons, from someone who learned them the hard way: 

Whenever a new format emerges, there is a golden moment where advanced measurement is absent (or light) and novelty and simple measurement like scale is prioritized. In these moments, inventory sellers (content and media businesses) are able to capture excess margin on their format –but eventually, buyers (advertisers) catch up, more robust measurement is established, and rates come down. In digital media, everyone got by on impressions, unique visitors, and vibes for a few glorious years. In those years, scale was paramount as ad dollars were tied directly to the amount of eyes you could claim they reached. But one moment you’re selling vibes, and the next moment you have a 40 person ad ops team tracking CTR, conversion, and deliverability.

Vibes always end up as ROAS, eventually.

The influencer economy is having the same transformation. The article cites several influencers who got their Coachella trips revoked (gasp) because they were no longer viewed as “performing”, and advertisers who want to see link conversion rates before buying placements. Measurement is good; it demonstrates the maturity of a market and makes it easier to transact. It also inherently commoditizes inventory and puts downward pressure on rates. Buyers become focused on performance and suppliers become interchangeable. 

The lesson from digital media is simple: compressed pricing forces operational discipline. If a piece of content generates less revenue than it used to, it has to cost less to produce. Otherwise your margin disappears. For the creator, this means tracking the economics of content more carefully. (and that the $90 lobster salad at Duryeas is inherently more expensive than it used to be). 

The article cites its protagonist’s journey from blog, to static photos, to video, to video content about other topics, to her agent recommending she start a blog again on substack. Anyone who lived digital media 2.0 will remember the similar text → video → social reckoning from 2015-2020 (and I personally find it amusing that in my career i’ve lived through not one but two pivots to video). However more formats = more complexity = more cost; whether that's an extra edit, or the time cost of writing a substack vs taking photos. 

The lesson from digital media: actually understand your audience, and go where they are (and only where they are). This saves you from having to try a new format every time the algorithm changes. Not every creator needs to be on instagram and youtube; not every tiktoker needs a stubstack. At some point the extra cost is not worth it; which is why you should: 

If you know your audience, you need to own your audience. A mistake of digital media 2.0 was the failure to recognize the wolf at the door when the platforms came knocking, offering scale but trading direct audience connection. The entire creator economy has been built on the back of those same platforms, and until creators create a way to directly interact without being completely reliant on the algorithmic funnel, you’re one algorithm change away from losing a significant portion of your business. Every business eventually discovers the difference between renting an audience and owning one. So figure out a way, any way, to create a direct, monetizable connection with your audience. Which leads us to: 

Most successful creators have an ancillary business, whether they are brand studios, product lines, or something else. As maturity in the “media” parts of the business likely pushes margin down, ancillary businesses become a way to capture more value from an audience than traditional brand dollars alone. Many creators are running all three of our business models in some format. However, creators need to be honest with themselves about the scalability and profitability of those business models. An audience business is significantly more scalable (in theory and in practice) than a services business, or than an events business. Each of those businesses has a fundamentally different margin profile. To create a sustainable company in the long term, each piece needs to figure out a way to get profitable (or have a true strategic reason to not be profitable), and not simply chase revenue expansion. 

Which brings us to: 

The biggest failing of digital media 2.0 was letting a bunch of guys from silicon valley convince us all that media had a similar business model to software, and that they could support the huge capital raises that the companies were taking to buy scale at all costs. Many of the poor decisions that were made - sacrificing audiences to platforms, over extending on formats, building shallow ancillary businesses etc - were made in the service of chasing unprofitable revenue growth that the capital demanded and the business model couldn’t support. In the process, we built large organizations that became too big to turn nimbly, and cap tables that became too f*cked to incentivize literally anyone - employees, investors, or buyers. 

Today’s influencers and creators should recognize that what they are running are inherently media businesses that need a different type of capital. They have the potential to be strong cash flow companies that can and should have the opportunity to attract investment; but all capital is not created equally. CAA & TPG announcing their creator fund was a big signal to the market that the segment had reached a maturity level that constituted its own pool of capital; but the devil is in the details. That the press release repeatedly called the capital “patient” tells me TPG may have learned a thing or two from the first time around.

Creator businesses today have the benefit of hindsight. The media industry has been inventing and reinventing itself for hundreds of years. And for those banking that creators are its final format: well, buddy, do i have a story for you. In ten years, we'll be here talking about some new way advertisers reach audiences through some new content format.

The conversations will largely be the same. We'll still be talking about formats, margins, measurement, and capital structure. That's good news. It means creators don't have to invent a new business model—they can learn from the people who already paid for the lessons.