Creator Economy: The Path of Transformation Under the "Crisis of Orthodoxy"

*Original Title: 《 The Creator Economy: The Path of Transformation Under the "Crisis of Legitimacy" *
Original Authors: Li Jin & Katie Parrot
Original Translation: Nan Feng, Unitimes

When historians write about the rise of the "creator economy," two moments (ten years apart) will surely emerge. The first moment was in the spring of 2007, when YouTube began sharing advertising revenue with creators—this decision can be said to have laid the foundation for what we now know as the "creator economy." The second moment was in the spring of 2017, when the cracks in this foundation became impossible to ignore, and questions about the "legitimacy" of the platform economy began to surface.

The spring of 2017 marked what creators commonly refer to as the "Adpocalypse." Due to advertisers' concerns that their ads would appear next to objectionable content, YouTube faced a massive exodus of advertisers. Consequently, the platform completely overhauled its advertising policies, choosing to implement more stringent content reviews, introducing increasingly harsh content terms and revenue mechanisms, and adjusting algorithms for content classification and recommendations to ensure that the video content served for ads was "advertiser-friendly." As a result, thousands of creators saw their views and income plummet—some by as much as 99%.

A YouTube creator told The New Yorker at the time: "Almost everyone's views dropped by half. So we're struggling against this (YouTube's) system and the new algorithms, and it's like, how can people still make a living off this?"

For many YouTube creators, the Adpocalypse was a wake-up call. It was the first time they realized that their income—sometimes their entire livelihood—was conditional. It was the first time creators questioned the legitimacy of the agreements they had made with the platform.

But this would not be the last time. Following the first Adpocalypse in 2017, YouTube experienced a second, third, and fourth Adpocalypse in 2018 and 2019. YouTube was not the only platform with strained relationships with creators. In 2016, Facebook changed the algorithm for Instagram's feed, affecting creators' engagement on the platform, leading to backlash against Facebook. When OnlyFans announced changes to its content policies in the summer of 2021, the swift and strong opposition from creators forced the platform to almost immediately pause those changes.

If this pattern sounds familiar—where a group of people opposes the policies governing them and demands better conditions from the authorities that set those policies—it is no coincidence. What else could changes in platform profit policies be, if not a form of taxation that lacks user support? If creators are not a new type of labor seeking protection for a previously non-existent emerging job type, then what are they?

Like feudalism and earlier forms of monarchic theocracy, the creator economy (at least in its currently highly centralized form) is undergoing a legitimacy crisis. Creators are questioning the terms that govern their relationships with the platforms they frequently use, as well as the rights of those platforms to set those terms in the first place. How the ecosystem responds—what alternatives are proposed, who builds those alternatives, and how they are built—will determine the next phase of the creator economy.

01. What is Legitimacy? Where Does It Come From?

Legitimacy is like air quality; we usually don't think about it until there's a problem. We all participate in various political, economic, and social institutions—governments, schools, workplaces—that govern our behavior. When we believe these systems are fair, we trust they are "legitimate." When we perceive them as unfair and feel we deserve better treatment, we consider them "illegitimate."

Thus, when enough people within a system question its fairness, it threatens the system's ability to continue functioning and faces a legitimacy crisis.

Vitalik Buterin, co-founder of Ethereum, wrote: "Legitimacy is a higher-order acceptance model. If people in a certain social context widely accept and play a role in creating that outcome, and everyone does so because they hope everyone else will do the same, then the outcome in that social context is legitimate."

The term "legitimacy crisis" was coined by sociologist Jürgen Habermas in the 1970s. However, philosophers and social thinkers have been pondering legitimacy for centuries—who has it, where it comes from, and how it disappears.

For example, the ancient philosopher Aristotle proposed that political legitimacy is built on "the legitimacy of rewards"—in a just system, everyone benefits according to their virtue. Two thousand years later, political philosopher Jean-Jacques Rousseau argued that the legitimacy of government depends on the public will and common good (as opposed to individual interests like those of monarchs or a few elites). A century after Rousseau, German sociologist Max Weber identified three basic sources of legitimacy:

• Traditional legitimacy—essentially, ruling according to the status quo. "Follow me because that's how it's always been done."
• Charismatic legitimacy—in other words, rule by personal charisma. "Follow me because I am charismatic and persuasive." (Many dictators rise to power following this pattern.)
• Rational-legal legitimacy—in other words, rule by reason. "Follow me because the rules and legal system I establish are clear and objectively make society function better."

Ultimately, legitimacy comes from trust: trust that the ruling order is just, and trust that the actors who establish and enforce that order are doing so for the benefit of the majority. When this trust is eroded, a legitimacy crisis occurs—when the ruled no longer believe that those in power are exercising authority for the collective good.

The concept of legitimacy is not limited to political systems. Economic systems and power can also possess legitimacy and may lose it. For example, in Europe, when laborers—made scarce and thus valuable due to the devastation of the Black Death—gained greater bargaining power and used it to secure more personal autonomy and (ultimately) greater economic freedom, feudalism lost its legitimacy as an economic system. This ultimately led to urbanization and the rise of the merchant class. The Industrial Revolution and the subsequent Gilded Age led to a legitimacy crisis between factories and workers, as workers demanded better working conditions, child labor laws, and weekends, giving birth to the American middle class.

Our understanding of legitimacy and its sources is constantly evolving. In fact, shifts in the concept of legitimacy often drive legitimacy crises: 400 years ago, people more or less believed that the legitimacy of government came from the divine right of kings; then, the idea that "the power of rulers should come from the consent of the governed" gained popularity during the Enlightenment, and democracy replaced monarchy as the only legitimate form of government in much of the world.

All of this brings us to the current conflicts within the platform economy. An increasing number of creators no longer trust that platform decisions are made with the collective good in mind, nor do they trust that the outcomes of those decisions will provide fair returns for all participants.

Not long ago, the legitimacy of these platforms—their central role in the creator and attention economies, their role as the primary intermediaries of 21st-century business—was hardly challenged. Understanding how these platforms gained legitimacy—and how they are losing it—is crucial for understanding what needs to happen to resolve this legitimacy crisis.

02. How Do Platforms Gain Legitimacy and Then Lose It?

Initially, the legitimacy of these platforms came from the three sources identified by Max Weber: charismatic legitimacy, traditional legitimacy, and rational-legal legitimacy.

In the early days, the legitimacy of platforms was largely charismatic legitimacy: founders like Mark Zuckerberg (of Facebook) and Jeff Bezos (of Amazon) portrayed themselves as technological geniuses and philosopher-kings by painting a compelling vision of the future their creations could achieve. Platform legitimacy also had a strong traditional bent: platforms could freely build and manage their products as they saw fit because they were private companies, typically controlled by founders on the board, and traditionally, private companies' rights to build and manage their domains as they saw fit had gone unchallenged.

However, these platforms largely established their legitimacy through "rational-legal" means—gaining legitimacy through a set of rules and legal frameworks that everyone understood and agreed upon. Through terms of service and content moderation policies, "objective" algorithms, and "fair" oversight committees, the creators of the platforms constructed something akin to their own legal systems. These systems were established to protect everyone and maintain the best community for all.

But over time, the flaws in the social contract between platforms and creators began to surface. Changes in platform policies implemented during events like YouTube's Adpocalypse revealed the extent to which platform policies and practices were designed to protect and promote the interests of the platform, without regard for their impact on creators.

Algorithms could be adjusted, allowing platforms to grant or withhold traffic from creators based on whether content maintained viewer engagement and generated a steady stream of revenue for the platform. Data ownership policies locked creators and their audiences into specific platforms, making the platform the intermediary and regulator of their relationship, with the unilateral right to set fees.

The result was that platforms exercised near-tyrannical control over the creators who frequented their platforms. YouTube could arbitrarily ban well-known creators; TikTok could indefinitely ban its biggest stars; Apple could decide who could launch in its App Store; OnlyFans could set moral standards for its creators to appease their paying partners and investors.

As creators began to define themselves as a distinct category and gain recognition—as skilled professionals, as artisans, as partners providing value to the platforms they frequently used—they increasingly questioned the field of their work and concluded that the established system was not in their favor. Each subsequent change in profit-sharing or policy failure further eroded creators' trust in the platforms—similar to a series of colonial-era parliamentary acts that culminated in the American Declaration of Independence.

This brings us to today, and the current state of the social contract between platforms, creators, and the platform ecosystem. Today, the legitimacy of platforms largely depends on traditional legitimacy—which can be said to be the most fragile and easily abused of the three sources of legitimacy mentioned earlier. In other words, platforms set their own rules and thus define the terms of the creator economy because that has always been the practice, and no one has proposed meaningful alternatives to replace the status quo.

Fortunately, this situation is beginning to change.

03. How the Legitimacy Crisis in the Creator Economy Can End

A legitimacy crisis can resolve itself in two ways: either the regime re-establishes legitimacy by adjusting its governance to align with social interests and norms (as factories did in the industrial era by implementing fairer work policies); or the system is overthrown, and a new system is established that better aligns the values and incentives of people with power.

These platforms have taken the first route, striving to regain creators' recognition by increasing the variety of monetization channels available on the platform. Twitter and YouTube have both added tipping features to their sites. Facebook recently announced plans to pay creators $1 billion in "bonuses" by 2022. However, these readjustment efforts reveal the extent to which platforms are unable or unwilling to genuinely change their relationships with creators. For example, Facebook's bonuses will only be available to selected creators and will be tied to specific "milestones" related to product and growth goals set by Facebook.

Clearly, to resolve the legitimacy crisis in the platform economy, the second option will need to be adopted: genuine, credible platform challengers must emerge, offering a more democratic and decentralized alternative to the currently constructed platform economy.

The first generation of such companies has already appeared. In recent years, products like Patreon, Cameo, and Substack have gained traction by targeting the monetization issues creators face on traditional platforms, providing creators with direct avenues to earn income from their audiences rather than relying solely on ad revenue controlled by the platforms.

But as we have seen, monetization is just one aspect of the legitimacy crisis facing platforms. It is not just about money: it is about agency and autonomy, and the opportunity to participate in decisions that directly affect your livelihood; it is about breaking the unilateral power that platforms hold as centralized control points within the ecosystem.

Fortunately, many founders pursuing innovation in Web3 are aiming to introduce the corrections needed in the platform ecosystem to address the current crisis. Founders looking to drive the next generation of the platform economy should pay particular attention to three areas: data ownership and portability, participatory decision-making and collaborative business models, and decentralization achieved through crypto and open-source protocols.

1) Data Ownership and Portability

One of the most significant sources of conflict in the current platform economy is the control and transfer of data. Platforms own the data created on their platforms—including identity, content, interactions, and engagement—which in turn allows them to control the relationship between creators and their audiences. In this model, creators are essentially captive, unable to leave a platform without losing their users and business.

A crucial step in restructuring the social contract within the platform economy will be to change this dynamic, empowering creators to own and transfer data related to their businesses.

Next-generation platforms are already beginning to shift toward more data-portable models. For example, Substack allows authors to have complete ownership of their readers, permitting them to take their email lists of subscribers if they decide to leave the platform; additionally, authors use their own Stripe accounts, meaning subscription relationships are not tied to the Substack platform. An increasing number of creators are beginning to establish their own independent properties, earning directly from users through tools like Stripe and Venmo.

Compared to the closed paradigm of consumer platforms currently being built, decentralized networks (crypto networks) are based on open data (stored on public blockchains), providing users with transparency and control over what is happening. For instance, creators can mint NFTs (non-fungible tokens) and sell them across many different platforms, with no single market "owning" the NFT. This dynamic means that creators can operate outside of specific platforms and can turn to other networks and services that better align with their needs and values. When creators can participate in the system from a place of their choosing (rather than being data-driven locked in), true creator consent and legitimacy emerge.

2) Decentralized Building Through Open Source Development

Open-source protocols played a key role in developing early network infrastructure (including email). Over time, open source has largely been pushed aside by a more proprietary model, as centralized networks built by companies far outpaced the capabilities of open-source protocols (consider the comparison between Facebook and email). As the current legitimacy crisis resolves itself, the platform economy is shifting toward a more democratic and representative model, and open-source protocols will once again play a central role.

The proprietary product development of platforms is a major reason they can maintain control over their ecosystems. Platform owners and internal teams decide what features to develop, what integrations can be used, who can access those features, and under what conditions they are offered; if creators want to participate in the platform, they must accept these terms. This, in turn, results in creators being locked into specific platforms, placing platform profits above creator autonomy and empowerment.

Through open-source development, this dynamic can be broken. The selection of platform features will be based on what is most meaningful to the entire community, rather than on what can generate more ad revenue or prevent users from leaving the platform.

3) Participatory Decision-Making & Collaborative Business Models

I have previously written that I believe true creator empowerment includes more than just data ownership. In a genuinely empowering platform economy, creators will own the platform itself.

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

Crypto networks are decentralized networks that use crypto tokens to incentivize and reward user participation; Bitcoin and Ethereum are early examples of crypto networks that incentivize participants with native tokens (representing ownership within the network). DAOs (Decentralized Autonomous Organizations) are online communities owned and operated by their members through tokens. I have previously likened DAOs to "crypto-native cooperatives." In a DAO, decisions about the community's direction are made by its members. It is conceivable that in the future, decisions about monetization, algorithm prioritization, and other decisions previously made unilaterally by platforms will be made by creators and users themselves.

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

While crypto tokens provide the strongest form of distributing ownership to the community, smaller-scale outcomes can also be achieved by inviting creators to join the platform as stakeholders or advisors, allowing creators to actively participate in influencing platform decisions and better align the incentives between creators and platforms. One example is Airbnb's Host Advisory Board, composed of 18 hosts who meet regularly with company leadership.

04. Moving Toward a Bright Future for the Platform Economy

A few years ago, when I first became interested in the Passion Economy (where creators produce content and products based on their passions and preferences, and fans pay for their output), what attracted me was that these platforms seemed to promise creators a new, more personalized, and autonomous way to make a living outside of traditional workplaces.

The more time I spent in this ecosystem, the more conversations I had with creators, and the more I observed the dynamics between them and the platforms they used, the more I realized that there is still much work to be done to fulfill this promise. The current platform economy—highly centralized, highly intermediated, with key decisions made by a few—has the potential to replicate the same issues found in the traditional economy, which have already led to widespread burnout, financial instability, and erosion of workers' rights in the traditional economy.

Historically, legitimacy crises are often resolved through new, more collectively representative forms of governance. This is the opportunity I see in today's platform economy. However, this is not a foregone conclusion: like all change, the outcome depends on who leads and the choices they make. But if the next generation of 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 liberated future of work.