Creator Demand Curve
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As a creator, your fans have different willingness to pay:
Casual fans aren’t willing to pay anything.
Active fans are willing to pay a small amount.
Super fans are willing to pay a lot.
In this post, I’ll describe how you can use the creator demand curve to maximize your earnings based on fan willingness to pay.
What is the creator demand curve?
The creator demand curve shows how many fans are willing to pay for your content at a particular price. Most creators have a curve that looks like this:
The area under the curve is how much money you can make from your fans. If you:
Price too high, then some fans won’t buy.
Price too low, then you’re missing out on fans who will pay much more.
To maximize your earnings, you need to have multiple income streams targeted at different fan willingness to pay. Let’s use the creator demand curve to look at:
Ads let you earn income from the most fans at the lowest price.
In the US, YouTubers earn about $3 CPM (cost per thousand views) from ads after the platform’s 45% cut. That’s why many YouTubers need 100,000+ fans to make a living on the platform.
If you only rely on ads, you’re leaving a lot of money on the table from fans who are willing to pay much more.
Subscriptions let you earn recurring income from fans. Fans subscribe to:
Access your paywalled content or community (e.g., Patreon)
Unlock community badges and emotes (e.g., Twitch)
Typical subscriptions range from $5-10 per month, but some fans are willing to pay much more than that. To help you monetize these fans, platforms have introduced:
Tiered subscriptions: Fans pay to unlock more benefits. In my experience, however, most fans stick with the lowest-priced subscription.
Gifted subscriptions: Fans gift subscriptions to other fans. At Twitch, this feature encouraged super fans to mass gift subs to dozens of fans at once.
Ads and subs are the go-to-income streams for creators because they’re reliable. You can count on a good paycheck every month if you have 100,000+ fans to show ads to or a few hundred who are paying for subscriptions.
Tipping theoretically lets you earn income at any price point. In practice, most fans tip a few dollars, with the odd super fan dropping hundreds of dollars to make a splash in the community.
Unlike subscriptions and ads, tipping isn’t a reliable source of income. At Twitch, we found that gifted subscriptions were more effective at monetizing super fans than tips because the former was more likely to convert to recurring income.
Digital goods can range from a $5 PDF to an online course that costs thousands of dollars.
Once you build an audience in your niche, digital goods are one of the best ways to increase your income. For example:
Digital goods typically target your super fans. 5,000 people paid for Daniel’s $50 course vs. his 60K Twitter followers (or 8%).
NFTs theoretically let fans pay any price to own a unique piece of content. In practice, NFTs are arguably the best product right now to target your super fans.
The average sale price of an NFT was $1,385 in February 2020, which is likely higher than any other creator SKU above. NFTs sell for high prices because they have:
Unique ownership: The fan that buys the NFT owns it outright.
Auction mechanics: NFTs are often sold during an auction to bid up the price.
Market hype: NFTs has massive hype right now.
For more about NFTs, check out my step-by-step guide.
Be a multi-SKU creator or platform
The creator demand curve makes it obvious that:
Creators should use multiple SKUs targeted at different fan willingness to pay.
Platforms should offer multiple monetization products to help creators maximize their earnings.
For example, Twitch offers:
Ads for a creator’s casual fans
Subscriptions for a creator’s active fans
Gifted subscriptions for a creator’s super fans
Who knew that economics 101 would prove to be so useful?
Check out my Build for Creators course to learn more about creator monetization.