What Does a Recession Actually Mean for Creators?

LinkedIn tells you it’s coming. Miscellaneous storage company CEOs tell you how to prepare for it in their Twitter threads. Your dad can’t last to dessert without bringing it up at family dinner—the recession.

Last week, it was announced that US gross domestic product, the value of all goods and services produced in the country, shrank for the second consecutive quarter—which some consider the mark of a recession. But you don’t need to pore over the data to recognize that the economy looks different today than it did a year ago, from inflation to supply chain issues to a labor shortage to interest rate hikes.

This will no doubt impact creators by means big and small. But today, let’s focus on the ways in which a changing economic tide might influence one of creators’ most substantial monetization strategies—advertising.

The prevailing logic has always gone like this: When brands are forced to tighten the proverbial belt, marketing dollars tend to go first. For creators who are largely ad-supported, that shift in marketing budget might directly impact their brand relationships, term sheets, and bottom lines.

But there’s an important caveat for the modern interpretation of that logic: This media world is not the same one that weathered the last major recession. In 2008, 21% of American adults said they used at least one social media site. By 2021, that number had jumped to 72%.

With it, advertising budgets began skewing away from more traditional avenues like television in favor of social media and internet ads.

Consider this example from IAB Canada: By 2013, internet advertising had outpaced TV advertising in the provinces. By 2016, internet ad revenue totaled $5.5 billion to TV’s $3.2 billion.

Another example? Digital video advertising soared 49% in 2021, according to IAB. By the end of 2022, it’s expected to be 26% higher, reaching $49.2 billion.

Simply put, marketing dollars are being spent differently, and there’s a significant chance that the media industry will trudge through this recession differently in turn.

Here’s how that’s playing out, according to Travis McBride, CEO at Spacestation Integrations: “It’s still business as normal, but there’s this feeling as if we’re walking on glass a bit,” McBride told us. “We’ve really doubled down on talent because the demand to work with creators is still very high.”

That sentiment paired with the cold, hard data seems at odds with the suggestion many have made—that creators could be hit hard by marketing spend drying up.

But here’s the thing. Audiences might spend less during economic downturns and brands might shift their spending, yes. But those realities don’t paint the whole picture for creators.

Turns out, it’s not so doom-and-gloom for our industry. In fact, some brands are increasing their creator spending in the face of a potential recession. According to Marketing Brew, skincare brand Peace Out has hiked its influencer budget by about 20% year over year, and wine brand Yes Way Rosé has increased its influencer spend some 15% annually.

Why might other brands follow suit with more creator spending and not less?

• Consumer behavior. Consider the psychology of a social media ad for a moment. During a recession, social media users might be less likely to click through a shoppable ad from a brand and make a purchase. But macroeconomic circumstances are unlikely to make users unfollow their favorite creators. The brands recognize that and are adjusting their marketing strategy and budgets accordingly.

• Cost efficiency. Working with creators is a simpler alternative to investing in a full-scale, in-house media team over the long-term. Instead of hiring talent, videographers, location scouts, and editors, brands can bake those costs and responsibilities into creator partnerships, often with favorable financials.

But it bears saying: There’s no universal experience in a recession. McBride shared that on the brand side, some of Spacestation’s clients have been forced to shutter departments within their businesses, taking those department budgets down, too.

“We had signed contracts and YouTube integrations that were tied to that department so we just lost that money,” McBride said. “On the other hand, some brands have almost doubled up. It was like with Covid. Some brands completely stopped, but then we had other online-based brands that almost doubled or tripled spend.”

Bottom line: Just because brands might be more timid with spending and audiences might cut back on their Patreon contributions doesn't mean that every creator is going to take a massive hit in a recession.

But being aware of the realities of advertising in our industry through every economic season can put you in a defensive position. As Colin and Samir suggested in a recent podcast, creators should always try to keep a little wiggle room in their savings and a little runway in their budgets to weather any storm, economic or otherwise.

Our Take

Despite whichever direction the economic winds begin to blow, the threat of a recession is a good opportunity to focus on the fundamentals of your business. Get granular about your finances—what costs are unnecessary? Double down on what’s working with your content and your customers—whether they’re advertisers or your audience.

Volatility is part and parcel of being a creator, from the economy to the algorithms. But creators are excellent adaptors. So remember not to get too caught up in the headlines—everyone’s business is going to be impacted differently, so keep your eyes on the road. Creators are ready for it.

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