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Creator Economy: The Road to Change in the “Crisis of Legitimacy”

When historians write about the rise of the “ creator economy ,” two moments (a decade apart) are sure to come. The first moment came in the spring of 2007, when YouTube began sharing ad revenue with creators —a decision that arguably set the stage for what we know today as the “creator economy.” The second moment was in the spring of 2017 , when cracks in this foundation became impossible to ignore, and questions about the “legitimation  (also translated as “legitimacy”)  of the platform economy began to emerge .

Spring 2017 marked what is now widely known by creators as the ” Adpocalypse ” YouTube faces a massive churn of advertisers as advertisers worry about their ads appearing next to objectionable content. As a result, the platform completely overhauled its advertising policy. YouTube chose to conduct a more thorough review of the platform’s content, introduced more and more stringent content terms and revenue mechanisms, and adjusted the algorithms for video content classification and recommendation to ensure advertising delivery. ‘s video content is “ad friendly”. As a result, thousands of creators have seen their views and revenue plummet — some by as much as 99%.

A YouTube creator told New York magazine at the time: “Almost everyone’s views have been cut in half. So we’re trying to fight this [YouTube’s] system and new algorithms, and it’s like, how do people rely on this now? Life?”

For many YouTube creators, the Adpocalypse incident  was a wake-up call. This is the first time they realize that their income – in some cases their entire livelihood – comes with strings attached. This is the first time creators have questioned the legitimacy of their agreement with the platform .

But this won’t be the last time. After the first Adpocalypse in 2017, YouTube had its second, third and fourth Adpocalypse in 2018 and 2019. YouTube isn’t the only platform experiencing tension with creators. Facebook faced revolt in 2016 when Facebook made changes to Instagram’s algorithmic feed that affected creator engagement on the platform. When OnlyFans announced changes to its content policies in the summer of 2021, the backlash from creators was so rapid that the platform was forced to suspend the changes almost immediately.

If this pattern sounds familiar—that is, a group of people who oppose the policies that govern them and demand better conditions from the powers that make them—it’s no accident. The change in the platform’s profit policy, besides being a form of taxation that has not gained user support, what else could it be? If creators are not a new type of labor seeking protection for an emerging type of work that has never existed before, what are creators?

Like feudalism and theocracy before it, the creator economy (at least in its current highly centralized form) is going through legitimacy crisis Creators are questioning the terms that govern their relationship with the platforms they regularly use, and the platform’s right to set those terms in the first place. How the ecosystem responds —that is, what alternatives are proposed, who will build them, and how— will determine the next phase of the creator economy .

What is legitimacy? Where does it come from?

Legitimacy  is like air quality, we don’t usually think about it until something goes wrong. We are all involved in a wide variety of political, economic and social institutions—government, schools, workplaces—that govern our behavior. When we think these systems are fair, we believe they are “orthodox”. We think it’s “unorthodox” when we think it’s unfair and we deserve better.

Therefore, when enough people within a system question the fairness of the system, it threatens the ability of the system to continue to operate, and it faces legitimacy crisis .

Ethereum co-founder Vitalik Buterin wrote: “Orthodoxy is a higher-order mode of acceptance. If people in a certain social context widely accept and play their part in formulating that outcome, and everyone’s reason for Do it because they want everyone else to do the same, then the outcome is orthodox in a certain social context.”

The term “crisis of legitimacy” was coined by the sociologist Jurgen Habermas in the 1970s. But for centuries, philosophers and social thinkers have pondered orthodoxy—who owns it, where did it come from, and how did it disappear.

For example, the ancient philosopher Aristotle proposed that political legitimacy rests on “the legitimacy of reward” – a just system in which everyone benefits according to his own virtues . Two thousand years later, the political philosopher Jean-Jacques Rousseau argued that the legitimacy of government depends on the public will and the common good (as opposed to individual interests such as a monarch or a few elites). A century after Rousseau, the German sociologist Max Weber proposed three basic sources of legitimacy:

  1. Traditional legitimacy – essentially, rule by the status quo. “Follow me, because it’s always been that way.”
  2. Charismatic orthodoxy —in other words, the domination of the cult of personality. “Follow me because I’m charismatic and persuasive.” (The rise to power of many authoritarian leaders follows this pattern.)
  3. Rational – legitimate legitimacy – in other words, rule by reason. “Follow me, because the rules and legal systems I’ve built are clear and objectively make society work better.”

At the end of the day, legitimacy comes from trust : trust that the ruling order is just, trust that the actors who create and enforce it do so for the benefit of the majority. When this trust is eroded, a crisis of legitimacy occurs —when the governed no longer believe that those in power are exercising power for the collective good.

The concept of orthodoxy is not limited to political institutions Economic systems and powers can also have legitimacy, or they can lose legitimacy . In Europe, for example, when laborers – made scarce and therefore valuable due to the devastation of the Black Death – gained greater bargaining power, and used this power to ensure greater individual autonomy and (eventually) greater economic freedom, feudalism loses its legitimacy as an economic system. This eventually led to urbanization and the creation of a merchant class. The Industrial Revolution and the ensuing Gilded Age led to a crisis of legitimacy between factories and workers, as workers demanded better working conditions, child labor laws, and weekends, and the American middle class was born.

Our understanding of legitimacy, and where it comes from, is constantly changing. In fact, a shift in orthodoxy is often the driving force behind a crisis of legitimacy : 400 years ago, it was more or less believed that the legitimacy of government came from the divine right of the sovereign; The concept of “power should come from the consent of the governed” became popular during the Enlightenment, when democracy replaced the monarchy as the only orthodox government structure in much of the world.

All of this brings us to the conflict in the current platform economy More and more creators no longer trust the platform’s decisions to be in the collective interest, and no longer trust that the outcome of the platform’s decisions will give fair rewards to all participants.

Not so long ago, the legitimacy of these platforms—their centrality to the creator and attention economy, their role as the primary intermediaries in 21st-century commerce—was largely unchallenged. Understanding how these platforms gain legitimacy—and how they lose legitimacy—is important to understanding what needs to happen in order to address this legitimacy crisis.

How do platforms gain legitimacy and then lose legitimacy?

Originally, the legitimacy of these platforms came from the three sources Max Weber listed above: charismatic legitimacy, traditional legitimacy, and rational-legal legitimacy.

In the early days, platform legitimacy was largely charismatic legitimacy : founders like Mark Zuckerberg (Facebook founder) and Jeff Bezos (Amazon founder), by portraying them A convincing vision of the future that might be realized by his creation, casting himself as the king of technological geniuses and philosophers. Platform orthodoxy also has a strong traditional bias platforms are free to build and manage products as they see fit, because they are private companies, often with founders controlling boards, and traditionally private companies build as they see fit And the right to govern one’s own domain is unchallenged .

However, most of these platforms establish their legitimacy through “reasonable-legal” means —that is, through rules and legal systems that everyone understands and agrees to. Through terms of service and content moderation policies, “objective” algorithms, and “unbiased” oversight committees, the creators of platforms have built what amounts to their own legal system . These systems are built to protect everyone and maintain the best possible community for all.

But over time, the flaws in the social contract between platforms and creators began to show . Platform policy changes similar to those implemented during YouTube’s Adpocalypse (Advertising Armageddon) reveal the extent to which platforms’ policies and practices are designed to protect and advance their interests, regardless of their impact on creators.

Algorithms can be tuned to allow platforms to give or take away traffic from creators depending on whether the content keeps viewers engaged and generates a steady stream of revenue for the platform Data ownership policies lock creators and their audiences into a specific platform , making the platform the intermediary and regulator of the relationship between the two, with the platform having the right to unilaterally decide what to charge.

As a result, platforms exercise near-authoritarian control over creators who frequent their platforms. YouTube can ban well-known creators at will; TikTok can ban its biggest stars indefinitely; Apple can decide who gets listed on its App Store, and OnlyFans can decide the ethics of its creators to appease their paid partners and investments By.

As creators begin to define themselves as a distinct category and gain recognition—such as as skilled professionals, as artisans, as partners that provide value to the platforms they regularly use—they are increasingly Ask yourself questions about the field in which they work, and come to the conclusion that the establishment of this system is not in their favor . Each subsequent monetization change or policy failure further eroded creators’ trust in the platform — not unlike a series of colonial-era congressional acts that ended with the United States’ Declaration of Independence.

This brings us to today, and the current state of the social contract between platforms, creators, and the platform ecosystem . Today, platform legitimacy is largely determined by traditional legitimacy — arguably the weakest of the three sources of legitimacy mentioned above , and the most abused . That is, platforms make their own rules, which in turn set the terms of the creator economy, because that’s what has always been done, and because no one has come up with meaningful alternatives to the status quo.

Fortunately, this is starting to change.

How the crisis of legitimacy in the creator economy ended

The crisis of legitimacy can resolve itself in two ways : one is that the regime re-establishes legitimacy by adjusting its rule in relation to social interests and norms (as industrial age factories did by enacting fairer work policies); Or, the system is overthrown and a new one is created that better connects people’s relationships of values ​​and incentives with power .

These platforms have used the first route in an effort to regain the recognition of creators by increasing the variety of monetization channels available on the platform. Both Twitter and YouTube have added tipping features to their sites. Facebook recently announced that it plans to pay creators $1 billion in “bonuses” by 2022. But these realignment efforts reveal the extent to which platforms are unable or unwilling to truly change their relationship with creators. For example, Facebook’s bonuses will only be available to select creators and will be tied to specific “milestones” related to product and growth goals set by Facebook.

Clearly, if the crisis of orthodoxy in the platform economy is to be resolved, a second option will be required: the emergence of genuine, credible platform challengers that offer a more democratic and decentralized alternative to the current Build the platform economy.

The first generation of such companies has emerged Products like Patreon Cameo , and Substack have gained traction over the past few years by targeting the monetization issues traditional platforms have for creators, offering creators a way to earn revenue directly from their audience , rather than relying solely on platform control advertising revenue.

But as we’ve seen, monetization is only one facet of the crisis in platform legitimacy . It’s not just about money: it’s about agency and autonomy, and the opportunity to participate in decisions that directly affect your livelihood, and it’s about breaking down the unilateral power that platforms hold as centralized points of control in ecosystems .

Fortunately, the innovations that many founders are pursuing in Web3 are precisely to introduce the corrections the platform ecosystem needs to address the current crisis. Founders who want to drive the next-generation platform economy should focus on three areas in particular ownership and portability of data , participatory decision-making and collaborative business models , and decentralization through Crypto and open source protocols .

1) Ownership and portability of data

In the current platform economy, one of the most important sources of conflict is how data is controlled and delivered . Platforms own the data created on their platforms — including identity, content, interactions, and engagement — which, by extension, enables platforms to control the relationship between creators and viewers. In this model, creators are basically captive, and they cannot leave a platform without losing their users and business.

An important step in retooling the social contract in the platform economy will be to change this dynamic, empowering creators to own and transfer data relevant to their business .

Next-generation platforms have begun to move to models with greater data portability . For example, Substack gives authors full ownership of their readers, allowing them to take their subscribed email lists with them if they decide to leave the platform; furthermore, authors use their own Stripe accounts, which means that the subscription relationship does not Is bound to the Substack platform. More and more creators are turning to building their own independent properties, monetizing directly from users through tools like Stripe and Venmo.

In contrast to the current closed paradigm of building consumer platforms, decentralized networks (encrypted networks) are built on open data (stored on a public blockchain) giving users transparency and control over what is happening . For example, creators can mint NFTs (non-fungible tokens) and sell them through many different platforms, with no single market “owning” the NFT. This dynamic means creators can operate outside of a specific platform and move to other networks and services that better match their needs and values. True creator consent and legitimacy arises when creators are able to participate in the system from a place of their free choice (rather than a data-driven lock-in).

2) Decentralized construction through open source development

Open source protocols played a key role in developing early web infrastructure, including email. Over time, open source has largely been crowded out by a more proprietary model, as companies build centralized networks that far exceed the capabilities of open source protocols (contrast Facebook and email). As the current crisis of legitimacy resolves itself and the platform economy shifts to a more democratic and representative model, open source protocols will once again play a central role .

The platform’s proprietary product development is a major reason why they are able to maintain control over their ecosystem. Platform owners and internal teams decide what features to develop, what integrations are available, to whom they can be provided, and on what terms, conditions that creators must accept if they want to participate in the platform. This, in turn, has the effect of creators being locked into a particular platform and prioritizing platform monetization over creator autonomy and empowerment.

With open source development, this dynamic can be broken. Platform features will be chosen based on what makes the most sense to the community as a whole, not on unlocking more ad revenue or preventing users from leaving the platform.

3) Participatory Decision Making & Collaborative Business Model

I’ve written before that I believe true creator empowerment includes more than data ownership. In a platform economy that truly empowers creators, creators will own the platforms themselves .

From this perspective, crypto tokens represent one of the most promising innovations, enabling ownership to be distributed and transferred over the Internet as easily as information.

Cryptonetworks are decentralized networks that utilize cryptographic tokens to incentivize and reward user participation ; Bitcoin and Ethereum were early examples of cryptonetworks that started by rewarding participants with native tokens (representing ownership in the network). A DAO (Decentralized Autonomous Organization) is an online community owned and operated by its members through tokens. I’ve previously likened DAOs to “crypto-native cooperatives.” In a DAO, decisions about the direction of the community are made by its members. It is conceivable that in a future , decisions about monetization, algorithmic priorities and other unilateral decisions made by platforms in the past will be made by creators and users themselves .

An example of this model is the crypto-native content distribution platform Mirror . On Mirror, the WRITE token will allow users to become members of the Mirror DAO, where they will collectively decide how to allocate their treasury funds and product development.

While crypto tokens provide the strongest form of distributing ownership to the community , smaller-scale results can also be achieved by inviting creators to the platform as shareholders or advisors , which will also give creators the opportunity to actively participate in decisions affecting the platform , and better align incentives between creators and platforms. One example is Airbnb’s Host Advisory Board, which consists of 18 hosts who meet regularly with company leadership.

Towards a bright future for the platform economy

A few years ago, when I first became interested in the Passion Economy  (that is, creators produce certain content and products through their passions and preferences, and fans pay for their output)  , what attracted me was, These platforms seem to promise creators a new, more personal and autonomous way of earning a living outside the traditional workplace .

The more time I spend in this ecosystem, talking to creators and watching the dynamics between them and the platforms they use, the more I realize that there is still a lot of work to be done to deliver on this promise . The current platform economy—highly centralized, highly mediated, with a few people making key decisions—has the potential to replicate the same problems in the traditional economy that have led to widespread worker burnout, financial instability in the traditional economy and the erosion of workers’ rights.

Throughout history, crises of legitimacy have often been resolved with new, more collectively representative forms of governance . That’s the opportunity I see in today’s platform economy. However, this is not a foregone conclusion: like all changes, the outcome depends on who takes the lead and the choices they make. But if next-generation networks can optimize creator ownership and autonomy, as well as more representative decision-making, we will be closer to realizing the promise of a truly free future of work .