Good afternoon!
The Medium delivers in-depth analyses of the media marketplace’s transformation as creators, tech companies and 10 million emerging advertisers revolutionize the business models for “premium content”.
Each fiscal quarter, The Medium identifies three or four new trends that have momentum and seem poised to play out at a larger scale in 2023. These key trends pinpoint dynamic and constantly evolving developments in the media marketplace that are emerging from incremental shifts or fundamental changes. The bi-weekly mailings analyze these trends as developments emerge in real-time.
Read the three key trends The Medium will be focused on in Q4 2023. This essay focuses on "AI-meets-the-creator-economy business models are emerging."
Author’s note: My monthly Medium Shift opinion column —“Why So Many Streaming Services Are Struggling” — went live a few hours ago. I wrote about the fundamental problem with proposed increases at streaming services like Disney+ and Max: They are betting on storytelling for which consumers will spend a monthly fee, and Netflix and Hulu have proved that consumers need more.
Also, in the original Q4 trends mailing I had phrased this trend in the body of the essay as “Why the creator economy helps to explain emerging AI business models.” I was going back-and-forth up until the mailing on how to phrase it, and accidentally left both versions in the mailing. It is “AI-meets-the-creator-economy business models are emerging”.
Apologies for any confusion I may have created.
This interview of YouTube CEO Neal Mohan by YouTube creators Colin Rosenblum and Samir Chaudry—aka “Colin and Samir”—is one of the best windows we have had yet into YouTube’s business in this market moment. It offers insights into YouTube Shorts, creator business models, and Mohan’s views on YouTube’s NFL deal and a potential deal with the NBA. For those of you who are not familiar with Colin and Samir, they are YouTube creators who create content “About creators, for creators”.
If you spend the next 56 minutes watching and/or listening to the interview, you will learn a lot about Neal Mohan and YouTube’s business. And, if you read the rest of this newsletter, you will see why the interview offers an invaluable lens into this quarter’s trend, “AI-meets-the-creator-economy business models are emerging”.
At the heart of the interview is Mohan’s sales pitch for YouTube’s new suite of AI-powered creator tools announced at last month’s Made On YouTube event. The pitch is laser-focused on Colin and Samir’s audience of creators. Surprisingly, this sales pitch leads to a good discussion about creators' growing fears of competing with generative AI content.
There is a competitive, co-dependent tension building between AI and YouTube’s business model that threatens both YouTube and the creator economy.
Key Takeaway
YouTube’s challenge is ultimately that it is well-positioned to harness the efficiencies of AI for content creation, but so are AI-savvy creators whom it relies upon to drive and grow engagement on its platform.
Total words: 1,600
Total time reading: 6 minutes
About Colin & Samir
Colin and Samir have become important figureheads in the creator community. They have two separate channels on YouTube—Creator Support and Colin and Samir—and both are in their Colin and Samir podcast feed. They also have recently launched a newsletter called “The Publish Press” which delivers “The latest creator news—straight to your inbox, 3x/week, for free."
I listen to them and read them regularly as they provide a valuable lens on both the types of challenges creators face and also for their insider takes on creator economy business models. In the past, I’ve joked with people that the two hosts are like YouTube’s version of Pravda, the official newspaper of the Communist Party of the Soviet Union from 1918 to 1991.
To their credit, they are very much not YouTube’s version of Pravda. Instead, they have created content and built a brand that is very much the opposite of a propaganda arm of YouTube—they also discuss content creation on other platforms like TikTok and Instagram’s Reels—as this interview reflects. They are more focused on solving creators’ problems and helping to introduce their audience to interesting creators.
AI & Media
Mainstream media and social media discussion has been a speculative mess. I have been more focused on the impacts of AI on the monetization side of the media business. As I wrote in my Q3 2023 trends mailing, “The view of any individual or cohort of consumers by a singular AI program is ‘now truly holistic, and the decisions that are made about serving us content from data within a warehouse may be made without human insight or guidance.’” Meaning, the targeting of advertising can now pull from a wider set of data, and circumvent privacy regulations, because AI creates the capabilities to enable those outcomes.
I have been less focused on the creative side, which I wrote about in last year’s “What Will Happen When Artificial Intelligence Recasts ‘The Office’?”. I have had little to add since as there is no clear business model yet. Generally speaking, the creative threats to the media business from AI have emerged in three buckets: text, music and video.
Made on YouTube presented creators tools within all three:
Dream Screen: A new experimental feature that allows creators to create AI-generated video or image backgrounds to Shorts videos simply by typing an idea into a prompt.
AI-powered insights: Generative AI tool to “spark video ideas and draft outlines to help creators brainstorm.” The insights will be personalized for each channel and based on what audiences are already watching on YouTube.
Assistive Search in Creator Music: For creator soundtracks, assistive search in Creator Music will enable creators to type in a description of their content and “AI will suggest the right music at the right price.”
Automatic dubbing with Aloud: An AI-powered dubbing tool that will help creators translate their content into languages beyond their own.
In sum, YouTube is harnessing AI to improve creator tools and their engagement with audiences.
Creator Fears of AI
About 25:00 into the interview, Colin shares with Mohan his fear about the threats of AI-generated content to creators:
“I’m concerned about the influx of semi-autonomous content and it perhaps floods YouTube... and there is perhaps an appetite for it and it starts to change what it means for viewers to enjoy the platform and what it means for creators to succeed on the platform, if there truly is so much [content]”.
I think this is significant: A leading YouTube creator is telling the YouTube CEO in a public forum that he and other creators feel vulnerable to AI at a time when that CEO is selling AI capabilities. This is the very opposite of a propaganda arm.
If YouTube users become conditioned to enjoy AI-generated content, creators no longer have a business. Colin and Samir shared the example of Kwebbelcop, a virtual YouTuber or "vTuber", which is a creator who uses a virtual avatar generated using computer graphics. Colin described Kwebbelcop as having “transitioned to an AI-generated version of himself. It’s an avatar, the transcripts are AI-generated, the voice is AI-generated… it’s not a fully autonomous channel”. [1]
So, Colin’s concern restated is that YouTube becomes flooded by Kwebbelcop-type vTubers and is no longer a YouTube populated by creators. Mohan understood the concern and then tried to allay the fear:
“...the content that audiences want to see is what rises to the top, our corpus is enormous already, and there is a distribution of engagement… all videos are not created equal. Audiences gravitating to that content is certainly a possibility. But what makes YouTube really what it is is creators.”
As much as this may seem like PR spin from Mohan, it reflects how YouTube understands the threat of AI to its business. He’s effectively saying, yes AI is a threat as you describe, but no, YouTube would not allow itself to become a platform that would reward AI content.
He has to say this because his business depends on it: $29.2 billion in revenues in 2022 came from a mix of advertising and revenues generated via monetization tools offered in the Partner Program. This includes merchandise (both creator-owned and third-party-owned products), Super Chat (having messages highlighted for the creator), Super Thanks (effectively, tips for content), and channel memberships (exclusive perks and content for monthly paying members). They have also distributed $50 billion to creators over the past three years.
YouTube & AI
The interview invites the question of whether Mohan is being too dismissive of the threat of “flooding” on the YouTube platform given that YouTube’s algorithm primarily focuses on content that drives engagement. Do they know if human interactions will perform better than AI-generated interactions?
Samir offered a helpful answer in a separate, unrelated interview they did with Ali Abdaal, another popular YouTube creator:
“TikTok showed that the platform could be the creator… you take the top 10 creators off of TikTok, TikTok is still TikTok. It’s still enjoyable. YouTube, I believe, if you take the top 10 creators off of YouTube, it’s a very different place.”
He means that for consumers, TikTok is not a creator-centric platform and YouTube is. YouTube’s algorithm is engagement-driven and it is weighted towards creators who drive engagement. On TikTok, the consumption experience guided by its algorithm serving content clips sequentially is what consumers come for.
The Partner Program only works with creators, and not AI content, because it requires human engagement from the creators. AI bots could replicate the Partner Program with chat and help to sell merch (as Meta is building out now). But, as Mohan emphasizes throughout the interview, there is a human dynamic to creator content that AI cannot replicate.
YouTube leverages network effects—when products get more valuable as more people use them— to drive growth and engagement. Those network effects can also work in reverse: less scale can lead to less engagement, resulting in a smaller, more niche ecosystem like MySpace. If AI content outperforms any of the top 10 creators, YouTube risks losing its users. Worse, the next 10 creators after the top 10 have less scale and therefore drive less engagement from consumers.
The Kwebbelcop “Third Rail”
On this point, the “third rail” that Mohan nor Colin and Samir avoid touching in this conversation is that AI content cannot be monetized. The efficiencies of creating AI-generated content will lead to more volume—the bet Mohan and his team are making with tools like Dream Screen—and therefore drive more engagement on the platform. However, less and less of that content will be with creators in the Partner Program, and therefore less and less inventory will be available for "premium" advertisers. Monetization will go down as usage goes up.
This is a nightmare scenario for YouTube, creators, advertisers, sponsors, merchandising partners like Shopify… the revenues can decline exponentially at a time when all stakeholders expect and need it to grow. This will be true even if overall user engagement on the YouTube platform is growing because of AI-generated content. Instead, YouTube’s business model must create more incentives to harness AI to create efficiencies in the creative process to create more content, while killing the success of AI content on its platform.
The ironic twist is AI is more frenemy than friend to YouTube, as Sir Martin Sorrell, founder of advertising holding company S4 Capital, used to describe the competitive threat of Google and Amazon when he ran his previous advertising holding company, WPP. Meaning, YouTube’s challenge is ultimately that it is well-positioned to harness the efficiencies of AI for content creation, but so are AI-savvy creators whom it relies upon to drive and grow engagement on its platform.
Footnotes
[1] An autonomous YouTube channel is one that is populated by videos created by an AI that uploads those videos after creating them. A semi-automated channel involves some automation. Kwebbelcop is semi-automated because he remains involved in the content creation (e.g., editing).