As you browsed the World Wide Web, you would have certainly encountered the infamous 404 error, signifying that a web page is ‘not found’. What you have not seen is a similar code 402, which actually stands for ‘payment required’. This was the piece that Tim Berners-Lee and his team left unfinished when they were fashioning the Web decades back. The original intention was that every visitor had to pay something to view a web page, but the schema was never built, and even now therefore, there is no standardized encoded way to send or receive money online.
The fact that user-pays was never the business model of the Web. Initially, most of it was free. Then, Yahoo and others scaled up publishing and advertising as the business model, which Google and Facebook took to another level. Besides advertiser-pays, another business model started taking shape – that of commerce, which Amazon started dominating. Off late, we have begun revisiting the payments and commerce business model again. The reason is very simple – all of advertising is $470bn a year, ecommerce is ten times bigger at $5tn a year, albeit with thinner margins. Ecommerce makes up approximately 18 percent of the overall retail market already and is growing fast.
Companies like Square, Paypal and UPI in India are building the online payments infrastructure to address the original 402 error. But the company dominating it and making it as simple as Berners-Lee and his team perhaps envisaged, is the San Francisco head-quartered Stripe. Stripe burst into prominence with its latest funding round valuing it at $95bn, making it the most valuable private company ever. With its ambitious mission statement to ‘increase the GDP of the Internet’, it heralds a far more dramatic shift: the business model of the World Wide Web is shifting – from advertising to payments and subscriptions. The signs have been there for a while. The tech lash against rampant data monetization and the impact on privacy is the most prominent. Facebook has added shopping tabs on Instagram, it has started payments on WhatsApp in India and Brazil, it has even debuted its own cryptocurrency. Twitter is testing a way for users to charge for content, Tiktok is treading into ecommerce with a partnership with Shopify.
But nothing signifies this titanic shift as the rapid rise of what is being called the ‘creator or passion economy’. This concept of enabling people with an online following to make money from sales was initially popularized in China. Then came Twitch which did this in gaming, Patreon which enabled crowdfunding for artists, and then Substack which helps writers monetize their blogs and columns. The original creator economy pioneer was perhaps YouTube, with kids in the US three times more like to want to become YouTubers than astronauts!
The term was introduced in a seminal blog post ‘The Passion Economy and the Future of Work’ by Li Jin of Andreesen Horowitz, where she talked about how this trend will shift the current mass standardization to ‘monetizing individuality’, where we “view individuality as a feature, not a bug.” The VC firm SignalFire says that this new ‘economy’ has as many as 50mn creators, of which two million are making more than $100000 a year. COVID has turbo-charged this economy – Etsy, an original creator economy company where individuals sell artisanal objects, had $346mn of mask sales! It was in 2006, that Chris Anderson predicted this trend in his book The Long Tail. His thesis was that products in low demand can collectively make up market share of blockbuster rivals. He prophesized, “When the tools of production are available to everyone, everyone becomes a producer.” 15 years later, his wish that we move away from “suffering the tyranny of lowest-common-denominator fare” is coming to fruition.
Small live streams on Twitch outcompete with the Oscars and Grammys. OnlyFans users pay for niche and private conversations and viewings of individuals, rather than watch blockbusters. YouTube has 30mn channels, those earning more than $10000 growing at 40%. The top 10 authors on Substack collectively make over $15M per year. The top content creator on Podia, a platform for video courses, makes more than $100,000 a month. Even the mighty Amazon, a standardized marketplace, is under threat from the individualistic Shopify. NFTs or Non-Fungible Tokens, which I had written about in my last article, and helps digital artists monetize their offerings is one more offshoot of the creator economy. This Economy is rising in India too, with startups like GoSocial creating platforms and tools to help artists monetize their wares. The Long Tail is getting longer and rewarding.
“In the future, everyone will be world-famous for 15 minutes”, said Andy Warhol in a 1968 exhibition of his work at the Moderna Museet in Stockholm. What he did not foretell was that everyone’s fame would be experienced concurrently and monetized so well.
(This article was published as a column in Mint on April Fools Day, 2021)