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Once high-flying startups catering to online creators and influencers have responded to the downturn in the tech sector, leading to tragic layoffs, layoffs and abandoning fundraising plans.
Membership platform Patreon and newsletter service Nusstaq are among those that have secured rave reviews for their stance on Vanguard, which involves artists, celebrities and writers building and connecting directly with fans.
Andreessen Horowitz, one of Silicon Valley’s top venture capitalists, calls these businesses part of the “love economy,” offering services, products and infrastructure that enable creators to pay for their massive online followings.
The investment in the sector It will rise from $1.4bn in 2020 to $3.3bn in 2021, according to data provider Delrom. But this year It fell 75 percent to $801 million in 2022, the figures show, as investors grow increasingly worried about bubble valuations in private tech companies.
In the year Patreon, which is valued at $4 billion by 2021, told the Financial Times that it has abandoned plans to introduce cryptocurrency payments and delayed earlier ambitions of an initial public offering.
“Of course, the broader economic environment has changed dramatically,” said Julian Gutman, Patreon’s chief product officer. “We are not free from this, so we have to change things in the way we work.”
Substack, the much-hyped newsletter service that will be valued at $650 million by March 2021, told the FTA that it recently plans to raise additional capital to support its business.
“Our plan to grow Substack remains an important part of our journey,” said CEO Chris Best. We plan to use the proceeds from the growing business to fund the investments we need along the way.
Other tech groups have been forced to respond to cash shortages and the economic downturn to focus on generating stable revenue rather than spending more to achieve rapid growth.
Amazon-owned video game streaming service Twitch has announced plans to further reduce subscription fees for some of its biggest streams next year. Fan, known for hosting user-generated adult content, added purchasing features in November to diversify revenue streams for creators.
These moves by emotional economy companies represent a reset of expectations for a once-promising sector. In the year In April 2021, Tiger Global led a $155m funding round for San Francisco-based Patreon, valuing the business at $4bn, up from $1.2bn in its previous round six months earlier.
In the year Founded in 2013 by struggling musician Jack Conte and developer Sam Yam, the platform takes a 5 to 12 percent cut of direct fees paid by fans to creators.
According to a former senior Patreon associate, the company was “swimming in money and people were begging to invest more,” adding, “It dictated the timeline and the terms. Investors were told, ‘If you want to invest, apply here.’ That’s not something I’ve seen before.”
But six- or seven-figure deals to encourage Tik Tok stars to set up Patreon accounts that offer exclusive content like influencer Larry, according to former employees.
As part of its strategy, the company laid off about half of its 18-strong creative partnerships team responsible for signing and managing online influencers as part of a 17 percent workforce reduction in September.
“They have a symbol for struggling artists,” says a former Patreon colleague. They sought to change that perception by following the biggest innovators in the creative economy. The truth is, it didn’t work properly.
Substack faces a tough 2022 after abandoning a fundraising round in May, cutting 14 percent of its 100-person staff in June, and with high-profile journalists and publishers — such as the political newspaper Dispatch and academic Grace Lavery — leaving the site. .
Still, the company continues to attract interest. Twitter owner Elon Musk tweeted in December that he was “open to the idea” of buying Twitter after it decided to shut down its own news service, Revue.
“Getting a Substack mask is not something we’re thinking about right now. We are 100 percent focused on building Substack.
Passion Economy Businesses also face a broader threat this year: falling consumer spending. A third of people who use subscriptions to paid media, including payments to creators, plan to cut back in the next six months, according to market research firm Mintel.
Services such as Netflix offer viewers access to a wide range of content for as little as £7 a month. In contrast, Patreon, Substack or OnlyFans subscribers can pay that much to access a creator’s content.
“People are making choices,” said Rebecca McGrath, internet analyst at Mintel. “If you’re not very loyal to the creator, that’s one of the most obvious things to lose.”
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