The Creator Economy Is Broken

The creator economy has a problem: it doesn’t work for creators.

Despite the fact that over $100 billion is spent annually in this amorphous industry, most creators don’t make enough money to survive, let alone thrive.

"For seven years, I made no money online. I built a huge following thinking that if I had a large fan base, I would make money on YouTube and Instagram. Nothing really came of it, and I was still working five jobs. I was making only - 10,000 a year."

— Alla Driksne, founder of Allasyummyfood, Kajabi Hero

Tens of millions of serious creators like Alla generate compelling content day after day. Collectively, they reach billions of people around the world. They build connections and community. They share knowledge. These creators fuel the success of the most influential social platforms on earth. And still, only a tiny sliver of them have become financially successful in this space.

The dominant reality is that the everyday creators working the hardest to make money from their knowledge and content are the ones receiving the smallest payout, and they have fewer opportunities to find success. Influencer Marketing Hub reports 97.5% of YouTubers don’t make enough to reach the U.S. poverty line. Among part-time creators, 68% earn less than $1,000 a year.

How can this be possible?

The rules have been written by social media platforms and big brands to meet their own objectives. They have created a dynamic where aspiring creators believe they have to chase viral-celebrity status and entertain algorithms’ whims in hopes of generating explosive follower counts that can justify brand sponsorship deals. At least 77% of creators say they depend on brand deals to make money. As long as big brands operate in the currency of social media followers, creators will be forced to play the game of quantity over quality, catering to what they think will earn them the most reach, and subsequently, the most money.

While platforms are slowly starting to recognize that content creators are their lifeblood, the solutions they propose are only designed to perpetuate a cycle of dependence that keeps the platforms at the epicenter, rather than the creator.

From this competition for creators’ attention, new options for content monetization have emerged. Creator funds like TikTok’s Creator Fund and YouTube’s Partner Program were developed as a “solution” to pay creators directly. Nevertheless, these funds have major caveats and aren’t large enough to serve the millions of creators vying for a piece of the pie. Even top TikTokers are struggling to prosper from TikTok’s Creator Fund. Influencer Hank Green recently revealed that his earnings amounted to only $0.02 to $0.03 for every 1,000 views on TikTok, and world-famous influencer MrBeast made less than $15,000 a year on TikTok even though he had accumulated billions of views.

‍Algorithms are yet another barrier creators have to confront—unfavorable updates have the power to impact a creator’s revenue by limiting their content’s exposure. We found that 40% of creators estimate yearly impacts of $10,000 or more due to constant changes to social media algorithms. Additionally, creators who constantly contribute almost exclusively free content to meet the algorithm’s need for endless engagement are at risk for burnout and mental health issues. In fact, Vibely found that a full 65% of creators report that one of their top stressors is changes to platforms' algorithms.

Furthermore, algorithms and social platforms serve as a reminder that nothing is permanent. The success that creators experience one day, along with their audience and content, could disappear overnight should a social platform incorrectly or unintentionally ban their account—immediately halting their livelihood. This coincides with the reality that platforms themselves can crumble—Vine, the once popular video-sharing app, being a prime example.

Creator platforms that allow for direct monetization of content have emerged to address the issues of social media head-on. However, the platforms that purport to help creators fight the challenges of social media may not be so helpful as they take a significant percentage of the creator’s revenue in the form of a platform fee. A Premium plan on Patreon will cost 12% of a creator’s monthly income, and if they're earning less than $1,000 on Gumroad, it will cost them up to 9% of that income. Udemy may be the worst offender with instructors only keeping 37% of their revenue. The issue with creator platforms goes deeper than fees; unless they have a well-established brand and following, creators will not have the traffic needed to profit.

‍With the headlines and the hype starting to fade, it is becoming painfully clear the problem isn’t with creators. The problem is with the economic model.  

The creator economy thrives when the relationship is direct

At Kajabi, we’re committed to building an economic model that works for creators. We believe that in order for creators to see sustainable success, they need to be in the driver’s seat to own their audience, business model, pricing, and brand. We are calling it “direct-to-creator economy” - where creators earn a living directly from the people who value their content. No longer will a middleman control their earnings.

Over the past 12 years, we have been at the forefront of this creator-first solution. This was by design as our founder, Kenny Rueter, was a creator himself. Kenny understood the grit and determination it requires to build a business.

“First and foremost, I’m going to tell you why we are here: our customers. We don’t call them “users.” We call them our Heroes, and we exist to serve them. Everything we do at Kajabi must be done through the lens of our Heroes, their stories, and their successes. There should be no other agenda besides being Hero-centric and exuding love, appreciation, and value for our Heroes. We help our Heroes find success through our product, but the product is just a means to an end. The success of our Heroes is what matters most.”
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— Kenny Rueter, founder of Kajabi

Everything we do begins with a Hero's story and ends with their success...

“I use Kajabi for all of my business infrastructure. Over the past year alone, it has saved me hundreds of hours. Time and money are important to me as a small business owner. My business recently crossed an exciting milestone - we've now hit over seven figures in net revenue. I did not think this day was possible. Two years ago, I lost my job and was living with my parents. Kajabi made it possible, and if I can do it, you can do it too.”

— Blaine Anderson, founder of Dating by Blaine, Kajabi Hero

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“As soon as I started with Kajabi, I was able to make my first $100,000 selling online courses and two memberships. I plan to be the biggest online cake-baking school in the world.”

— Alla Driksne, founder of Allasyummyfood, Kajabi Hero

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“Kajabi has allowed me to create a life and business I love. I’m stepping towards financial freedom. And I have hundreds of thousands of students and community members that are super excited and grateful for the future. As I create and travel the world, Kajabi gives me the peace of mind to know that things are still moving forward in every single way.”

— Katrina Julia Kiselinchev, founder of Fit Life Creation, Kajabi Hero

How we enable the direct-to-creator economy

We’ve already built the foundations of the direct-to-creator economy over the past decade. By providing multiple paths to monetization through a full suite of digital products, we help creators build sustainable businesses immune to the limitations of social media and dependence on brand sponsorships. And, we know it works:

• Kajabi Heroes have generated over $4.1 billion in revenue to date, and our total customer revenue, or GMV, is currently at an annual run rate just shy of $2 billion - the highest in our history.
• Kajabi Heroes earn, on average, over $30,000/year in revenue - 30x higher than the average part-time creator mentioned previously; one in three full-time Kajabi creators make over six figures.
• As of Q3 2022, Kajabi Heroes who started on the platform this year have earned 20% more than those who started in 2020 or 2021. This accelerated growth is evidence that creators are earning more and faster on Kajabi.
• Kajabi Heroes have created over 100,000 businesses and 300,000 products reaching over 60 million customers.

Given the success we see our Heroes finding, it is clear that creators do not need a massive social following to build a sustainable business. In fact, we found only 3% of full-time Kajabi creators have over 100,000 followers on Instagram, while 89% have 50,000 or fewer. On YouTube, only 5% of full-time Kajabi creators have over 100,000 subscribers, and TikTok was less with only 3% having 100,000 followers or more. This is not to say that these platforms don’t matter in building an audience - but that success comes from building a community that creators can directly engage, grow, manage, and monetize.

In the direct-to-creator economy, we enable an ecosystem that allows creators to build sustainable businesses, but more importantly, use their knowledge to change the lives of the audience they serve.

“Kajabi has allowed me to support my family when I didn't think I was able. There were two years in my life when I was the primary caretaker and we had two school-aged children. I had to give up work to be there for my family. Kajabi has allowed me to take what's in my head and put it out there into the world, and I've reached people across the planet. I've been able to connect and share my knowledge and support my family in a way which has absolutely transformed my life and others.”

— Nick McDonald, founder of High Growth Coach, Kajabi Hero

Our work isn’t done

The power of community is undeniable. Building a strong, branded community as a creator has become a cornerstone of the solution for combating the dilemmas of social media—owning your audience and brand.

This is why we are excited to announce our first acquisition of the best-in-class community platform, Vibely.

“With our mission to help entrepreneurs all over the world monetize online content, we’re continuing to invest in deeper integrations that will increasingly escalate a fully immersive community experience,” said Teri Yu, CEO and co-founder of Vibely. “Creators are leveraging community to break free from algorithms and enable authentic engagement around their brands. With a strong community, you’ll have a moat surrounding your business, which you can parlay into new initiatives and income streams.”

Vibely will power the next generation of Kajabi Communities, a product that allows creators to build an authentic community, and turn their audience into customers and customers into advocates.

And, we have more up our sleeve. Today, we’re also announcing:

• Kajabi Creator Studio. We found that 88% of creators report experiencing challenges with growing their audience and finding new customers. With Creator Studio, creators can quickly create eye-catching video clips from their existing course content and seamlessly post across platforms to gain followers and convert them into buyers. Coming Soon

• Mobile Creator App. We know for our creators time is of the essence, and they are always on the go—the very reason why we’ve released our Mobile Creator App. Creators can now manage and grow their business when and where it’s most convenient for them. Now Available for Apple & Android

• Kajabi Coaching. We’ve updated our coaching product to house every coaching tool you need in one central place, eliminating the requirement to use any other product for your coaching business. Creators can now start collecting clients and revenue right away, further diversifying their income streams. Now Available

Plus, this year we’ve made Kajabi even faster and easier to use through improvements such as new content creation flows, streamlined automations for your business, and user-friendly design and language.

But, we’re not stopping there. We know this economic model works, and it can change lives:

“Kajabi changed the whole trajectory of my life. I was a travel agent for 15 years. It was the only job I’ve ever had, and I didn’t know how to do anything else. I created a Facebook community, and I saw a need for courses and eventually a membership. I joined Kajabi and through my multiple digital products surpassed the income of my travel agent career. I was able to quit my day job and focus on my passion all thanks to Kajabi.”
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— Lori Gold, founder of Explore More Travel Co., Kajabi Hero

Welcome to the new creator economy.

We are optimistic about creators’ future. With the right economic model in place, creators will have a chance to earn what their content is worth and create a profitable business.

But if one thing is true, the creator economy is always changing. In response, we are constantly experimenting, innovating, and pushing to address creators' needs.

Our solutions to creators’ challenges will always align with our mission:

Empower knowledge creators who are serious about their businesses to achieve success online.

Together, we can build the new creator economy—one where creators always come first.