🦄 Tokenizing Creators
How 'social tokens' turn creators into stocks
Hi, and welcome to the fifth monthly series of Untangled. This has been a heartbreaking and terrible week — I’ve been watching the news unfold in Ukraine with a sense of powerless outrage. This week’s newsletter is nice and low-stakes, so I hope it’s a distraction from the misery, or perhaps something fun to come back to when you’re ready.
This month, I’ll be speaking with Kyle Chayka, contributing writer to The New Yorker about all things DAOs, and Ian Bogost, contributing writer for The Atlantic about his stellar essay, “The Internet Is Just Investment Banking Now.” Got a question for Kyle or Ian? Send them my way.
🤑 Social tokens, and how they’re going to turn us into stocks
A year and a half ago, a guy named Alex Masmej conducted the first-ever “human IPO.” He created the $ALEX token and raised $20,000 by selling 100,000 tokens to 29 participants. Token holders were guaranteed 15% of Alex’s income over the next three years (capped at $100,000 in total). Anyone with $ALEX can also exchange it for a retweet, a one-on-one conversation, or an introduction to someone in his network. Alex recently launched “Control my Life,” granting token holders the ability to (non-binding) vote on his life choices, like what hobby he should prioritize in a given month. He’s not alone.
NBA player Spencer Dinwiddie launched a token as a bond sale, which allowed him to raise and access a large chunk of his contract upfront, so it was more like a business loan. Then, he will pay his token holders (shareholders?) over the course of his contract. If this all sounds a little crazy to you, well, you’re not wrong. But the crypto community is abuzz with... well, they haven’t decided on a name — either “creator coins,” “personal tokens,” or “social tokens” — as the next-gen business model for creators, artists, athletes, and musicians.
I’d say that someone like Lebron James or Taylor Swift tokenizing themselves is slightly less absurd than Alex Masmej, who is (no offense) just some guy. Right, because we already commoditize celebrities in our brains. But what if everyone was a celebrity? Good news: they already are! It’s called social media.
How to tokenize yourself: any creator or influencer with a following can create a fungible token, and then decide what rights a token gives a holder. This can be stuff like access to merch, backstage passes at a concert, invitations to private events, and so on. Then the creator can start handing the tokens out — or selling them. Not unlike DAOs, social tokens, when combined with smart contracts, stop creator platforms from sucking up most of the value of the content, and attempt to align the interests of the creator and their audience. This hasn’t taken off yet but imagine if tomorrow YouTube or Instagram enabled all of the creators or influencers on their platforms to tokenize themselves? I mean, what could possibly go wrong?
It doesn’t surprise me that there’s a strong appetite for this right now: online platforms don’t really work for the vast majority of creators. The creator economy mostly resembles the economic stratification of the U.S. economy. For example, on Patreon, only 2% of creators made the federal minimum wage. Or take Spotify, where the top 1% of artists make 90% of the royalties, or roughly $22K per artist, per quarter. The other 3 million creators? They made $36 per quarter on average. Not great. How did we get here?
It might be hard to remember, but the Internet was actually supposed to be great for creators. Every user was “empowered” to be a creator — they would have the flexibility and autonomy to pursue their dreams. But content platforms sold creators to advertisers, and both sides cashed in, turning creators into the product and leaving them with scraps. Turns out, there is a fine line between “flexible” and “autonomous” and precarious and insecure. As researchers Robyn Caplan and Tarleton Gillespie put it:
“User content was a form of unpaid labor, generating massive financial value for the platforms distributing it. These platforms then developed new ways to encourage users to participate more and more, provide more and more content, and leave behind more and more data.”
Content creators are also at the whim of the changing policies and algorithm tweaks of their chosen platforms. At each turn, creators have to adapt or falter. Journalist Abby Ohlheiser summarized it this way, “Small algorithmic changes by a platform can make or tank an entire career.” So too can policy changes. When YouTube changed its monetization policy — requiring creators to meet a new standard that pleased advertisers or avoid demonetization — creators had to pivot. But pivot how and where?
Most creators toil in this loop — they hustle to build an audience, develop content, and then adapt when platforms change something. Being a creator, in effect, means being a gig worker. But some influencers deemed “brand safe” by algorithmic tools were able to escape this loop, as brands selected them to participate in campaigns. Unfortunately yet predictably, the entanglement of these tools and social beliefs reify existing inequities along the lines of sexuality, race, and class. The tools draw upon like-to-dislike ratios of YouTube videos to discern things like “audience consistency.” If the audience is consistent, the thinking went, it was “brand safe.” But researcher Sophie Bishop shows that a consistent like-to-dislike ratio is actually a proxy for controversial creators. The more controversial the creator, the more consistent his or her audience — think of Joe Rogan, Jordan Peterson, or an angered bitmoji of me.
Bishop also finds that “women and people of color are more vulnerable (to) attacks that diminish an Audience Consistency score and overall Safety Score.” Other data that inform these algorithmic tools include scores that measure whether the influencer is covered negatively in the press. Well, if we happen to live in a society that normalizes negative coverage of women and people of color in the media, what do you think happens?
The large platforms have doubled down and formalized their own hierarchies. For example, according to Caplan and Gillespie, YouTube’s Partnership Program offered “benefits and material resources to some more than others, based on factors such as subscriber count, engaged time, and other measures of popularity.” Of course, we recently learned of Facebook’s “XCheck” program which exempts high-profile influencers and celebrities from enforcement actions.
The use of these tools and metrics to categorize creators and influencers has altered what is seen as valuable. According to scholar Nancy Baym, it has “become important to measure audiences in order to assess social values such as legitimacy, credibility, likeability and other kinds of status that can presumably (if mysteriously) be converted into economic capital.” In other words, for a creator, reputation matters more than production, and audiences provide legitimacy to one’s reputation.
Enter social tokens, wrapped in the old language of “empowerment.” They can’t possibly be any worse for creators, right? Right??
📈 Okay, so imagine that I decided to launch an $UNTANGLED token, gave them to my early readers — that’s you! — and then you could use them to access exclusive content from yours truly (my sister is chuckling right now.) If Untangled becomes super popular, more people will want to own $UNTANGLED, which means the value of the token goes up and everyone wins. Wahoo, send it to the moon, stans!
📉 But if you no longer wanted to hold $UNTANGLED tokens — for whatever really rude reason — you could sell them or trade them for other tokens, and the value of $UNTANGLED would go down.
Indeed, the token doesn’t just affect the value of my newsletter, it changes my role and our relationship. I’ve become an equity — a stock. You, dear reader, have become an investor. This shifts the location of my precarity — I’m no longer at the whim of algorithmic systems or finicky policy changes but I’m now subject to the vagaries of the market, or, more memorably: pump and dump precarity. Unless of course companies like Instagram and YouTube launch a social-token service, in which case, there are myriad mechanisms of precarity 🙈.
Moreover, as a cis-gendered white guy, I don’t have to worry about the findings from Sophie Bishop’s research. But as someone who has spent a number of years researching online disinformation, I have no trouble imagining that groups of people will organize campaigns to discredit the reputation of creators they don’t like and tank the prices of their tokens. Imagine the phenomena of meme stonks but applied to people, not companies.
Now, instead of turning to algorithmic systems and the metrics of successful posts to guide, creators will learn to develop content that pushes their token price up in value — we’re not just stocks, we’re financial analysts! Similarly, reputation won’t be mediated through platform metrics, but the token price. It’s not hard to imagine that Bishop’s findings will play out in crypto too; namely that the audiences of more “controversial” creators will tolerate their behavior, creating more stable token prices, while women and people of color will be more vulnerable to significant swings in price. They are disproportionately subject to online harassment and disinformation campaigns, so why should we expect token price manipulation to play out any differently?
If social tokens take off, what will the future hold? I don’t know, but I’ve got questions. If you’re no longer a fan of an online personality, but an investor, how does that change your expectations and priorities? How will those expectations trickle down into your behavior — will you hold for the long-term or speculate and trade? Will fans turn outward and market the content of their investment? Will fan communities become more demanding of their investment? For creators, will the value of one's reputation totally eclipse the value of what they produce? Will creators produce the equivalent of a quarterly earnings report to show their value? Buckle-up, it’s going to get weird.
Original image from Vanity Fair, edited by Georgia Iacovou. A huge thank you to Georgia for editing this piece as well.