It started out simple: get paid to post content people want to see.
Decade+ later and the advertising industry is pumping out over $600b per year and yet content creators are still struggling to figure out how to make it in the ecosystem.
Where did we go wrong?
As any good business student would do, lets follow the money!
The basic structure is pretty simple:
Step 1: Advertisers pay Distributors to show their ads
Step 2: Distributors incentivize content creators to make engaging content
Step 3: Content Creators self-promote to Consumers to get engagement
Step 4: Consumers see ads and go buy products
As you can see, consumers have to bring their own capital to this game, but that's understandable as they are just consuming, right? Value is created by companies making products people want to buy, and that value flows downhill to the relevant actors in the system that distribute awareness of those products. It all sounds alright at first glance.
At second glance, however, there's a darker game at play here. Everything in the digital world creates data, and data is nothing if not useful at making systems more efficient. So distribution platforms figured out early on that if they collect data from consumers and creators, they can utilize that data in secondary markets to drive more competition from advertisers. Now there's a whole new value flow, but one that is invisible to the users and content creators. So much for Consumers not creating any value!
With the advent of AI, this hidden market is starting to become more and more meaningful. It is creating such a dynamic change to the entire process that it actually interrupts the value flow from ever reaching Creators!
This is the dark loop that is being perpetuated by the attention economy we currently are stuck in. As AI continues to get better, and data continues to be enshrined within the distribution protocols that 'own' it, not only will Consumers be increasingly exploited by these centralized and narrative controlled platforms— another blog for another time, but also creators will be harvested for content and left with nothing. Platform owners and advertisers win because Consumers are blind to what is happening and are addicted to the dopamine rush of engaging with online content and buying new things.
Solutions for systemic problems like this are never simple. There's no one "do this and be saved" solution to offer here, sadly. We can, however, take collective steps towards building the foundation for a new economic model if we continue to focus on open primitives. That is the value of Open Source Software, Decentralized Platforms (non-extractive), and Public Goods Funding— also another blog for another time; open, decentralized platforms that are owned by the commons can provide a foundation to build an economy that doesn't have perverse incentives or hidden value extraction.
In this example, all of this happens on a decentralized platform that doesn't extract any value or "rent". This is obviously an oversimplification of everything that is necessary to get an economy like this off the ground, but it demonstrates the value flow and how significantly it changes the incentive structure. Instead of advertisers paying a third party to distribute their messaging, they can access data directly from the user (with their consent) in order to issue advertising "airdrops" to the most relevant user groups. This increases the amount of value that flows back to consumers tremendously considering they got zero value before. It also, incidentally, reduces the advertising budget needed for products to target the most beneficial niches.
I call that a win-win!
It also puts the power in the hands of the content creators by letting them utilize AI tools to maximize the quality of their content creation so that consumers are more motivated to spend this new income source on directly funding creators that they prefer. No external funding necessary! This is a closed-loop system that does not get exploited in any way if anyone chooses to invest external funding into it at any stage. Everyone is in sovereign control of their identity, data, privacy, and monetization.
Everybody's winning, nobodies getting exploited! The only difference is that there aren't centralized bottlenecks that are capturing all of the value and controlling where and when it gets distributed.
If you found this exploration of economic structures interesting, follow this blog for more ramblings from someone who absolutely refuses to give up on a decentralized future!
