Brands and creators that build for niche and dedicated communities will win the 2020s.
I’ve seen a lot more sweetshops around recently. Specifically, these Victorian-themed tuckshops and sweet connoisseurs, plucked from two hundred years prior and plopped in the middle of a high street that doesn’t quite know how to welcome its new tenant. One of the sweet shops near me plasters ‘Toys, Trains, Treats” on dated storefront panelling; it’s the shop you thought your grandparents went to when they were young, except the steam trains on sale are battery powered.
This wasn’t just a Baader–Meinhof phenomenon, where upon seeing something once you perceive it everywhere. During the first year of the pandemic, an extra 73 sweetshops popped up in the UK, net, according to the Local Data Company. That’s not a huge number, but it’s pretty significant given the broader lockdown context; the total number of clothing shops fell by 1,236 in the same period. The shop near me was set up in September ‘21. It begs the question: what’s so special about sweet shops?
I had spent my Saturday morning at Waterstones buying some books, at the sweet shop questioning the shop assistant, and now I’m writing about it on Substack. In days gone by, I would have bought my physical items at Sainsbury’s and, in comparison to today, where I have my Substack and my main website, all my digital publishing would be through the same technology stack (probably Wordpress).
Sweets are nice, but the real difference is the existence of a shop that will focus all of its resources on their specific niche product. I bought some weird caramel chocolate flakes that defy description, but they were excellent. I certainly paid a premium, but next time I want sweets, I’ll go there again, because they know their product; I just bought what the shop assistant recommended. At Waterstone’s, I picked up Train Dreams because I told the manager I was after contemporary fiction; I use Substack because it’s built for writers. What makes these businesses special is that they serve niche markets in which they can give people much deeper value.
Unbundling into niches
Bundling and unbundling are not new concepts. It’s a pretty simple convection model: you start with a business, over time you add more products, services, and features, and then you get bloated, do everything ‘kinda well’, until a niche competitor comes along and does one of your services really really well, and bit by bit you get pieced apart. The complexity convection is a pattern that cannot be unseen.
People have observed this happening to our contemporary digital landscape for about a decade, beginning in practice much earlier. Craigslist was unbundled into many things, including Reddit, which is now being unbundled into many more things, like Nextdoor. In the language of a16z, the famed tech investors: platforms get unbundled into verticals, which turn into platforms, at which point the cycle resumes, and all of a sudden I’ve turned into a strategy writer.
I’m not the first to herald this unbundling in the physical world either. Peter Day wrote an excellent essay predicting “the heartbeat economy, almost a concierge approach to customers,” in 2013:
He wrote about it in the BBC, but today he would write on his own blog.
My real contribution is to note that this challenges why unbundling and bundling happen at all. The main idea behind why we sway between bundled and unbundled products is the underlying technology. Marc Andreesen, co-founder of a16z and of Mosaic, the first web browser, talks through the concept of the newspaper:
This is certainly true: we could only put live events on Twitch after network infrastructure made it cheap enough to broadcast live video around the world.
But it’s no coincidence that physical businesses are unbundling at the same time as digital ones, despite relying on different technologies, and often very little tech at all. Neither technology nor innovations built upon it come from magic: what consumers actually want plays a key role; today it’s driven by the niche market vibe shift.
Why? Well first, consumer demand fosters technological innovation. I took a cursory glance at solar panels last month, where growing consumer demand and growing production have induced new technologies. If people hadn’t used streaming services in the early days, there wouldn’t have been the investment to make them possible at scale. Substack was built because its founders believed writers wanted to offer readers deeper value in a specific niche - and that readers would pay for it – not due to any new technologies, just due to the niche market vibe shift.
Second, even when this technological innovation happens, there is no rule forcing consumers to use every new product that is offered for sale. Google, Facebook, and Twitter all had to create new bundles that people actually wanted to use: do Google+, Google Answers, or Google Notebook ring a bell?
I think the reason I’m seeing more sweetshops around is because of a niche market vibe shift. The technology for serving more niche communities has always existed, but now consumers actually want it.
But what does this mean?
The rest of this essay is to explore how this shift is influencing culture.
We can think pretty big about all the unbundling opportunities new technologies bring: in Life After Google, Gilder points out that even money could be unbundled. But this isn’t on the cards: consumers don’t want to unbundle money into a store of value, unit of account, and so forth. Very few communities are built simply around money as a tool; everyone will not become currency traders; a niche can’t be built around something that everyone uses, and most people don’t care.
Meanwhile, a lot of people do care about culture. Culture is also beautifully adaptable and flexible and fluid, changing rapidly and exhibiting immense diversity of contribution and consumption: it’s a collection of niches. Sure, culture is also something that we all share, and there will continue to be big Instagram accounts, large companies, and shows and books that everyone talks about and events that unite us all.
Yet, as Rex Woodbury notes: “Celebrities like (Tom) Cruise are a dying breed”. The 2020s will be defined by the “long tail of creators”, each creating en masse for far smaller communities with much deeper engagement. In the 21st century, we will seek experiences that feel, in some important ways (and not all), totally and emphatically human — that’s why people love eSports; we’re in the moment with the players. For the hobbies and niches that we love, for which we’re far more than mere followers, we’ll find people serving that niche with dedicated communities built around them.
Late Checkout is an agency that doesn’t deserve the negative tag associated with such companies; they capture the situation perfectly:
It’s exciting to see people building the future, and culturally we’re going to see exactly this: content will be built around niche and dedicated communities with genuine human connection.
The 1,000 True Fans thesis eventually manifests
In 2008, Kevin Kelly wrote one of the most seminal contributions in culture tech. The founding editor-in-chief of Wired wrote that, in the internet age:
A thousand dedicated fans who love your niche. Sound familiar?
So what took so long?
Kelly hoped that the internet would be the ultimate matchmaker. But the price for this matchmaking was almost everything: Facebook and Instagram take almost 100% of all the revenue creators see on their platforms; YouTube takes 45%; Spotify paid an average of merely £550 to each artist last year. These monoliths did the matching, but rendered creating or community engagement virtually unaffordable.
It was a vibe shift, not a technological one, that struck the first blow to this impoverished model. Twitch, Kickstarter, Patreon, Substack, amongst many others, are all services built for creators to cater for the dedicated fans of their niche; all built amidst the community-centric vibe shift born in the 2010s. Even before the 2021 crypto bull run, a16z heralded a 100 True Fans model (in 2020), arguing that this was made possible with even more niche services from Podia, Teachable, and Kajabi. (These companies all help people sell educational courses, which undermines the argument to an extent, but you only need 250 fans paying £20/$25 per month to earn ~3x the average UK salary or $75,000, so you get the picture.) With the alignment of technology and the vibe, the impoverished model of community-stricken creatorship is now collapsing.
Blockchain is a game-changer for this dynamic
In the early 2020s, new technologies like blockchain, distributed ledgers, and cryptocurrencies really came into vogue. A distributed ledger is triple-entry bookkeeping. Double-entry bookkeeping was invented in medieval Italy: two parties to a transaction would both record it, giving you more data about your business and more verifiable figures, making it easier to trade and pursue enterprise.
With triple-entry bookkeeping and distributed ledger technology, as well as the seller and buyer, every participant in the economy makes a record of the transaction, and every participant is using the same, enormous, book. Blockchain is the technology of how you add to this book and run software with it, and cryptocurrency is one use case: the ledger essentially records how much currency you own, which everyone verifies. I’m simplifying enormously, but I’ll refer to these technologies as ‘web3 techs’.
The significance of blockchain becomes clear upon interrogating why Facebook, YouTube, et al. can force such high take rates on creators. One side is discovery: you rarely find creators on Patreon. This happens, still, on big social networks. Everyone is on these platforms (well, not Facebook) and when you consume on these platforms frequently, they’re experts in figuring out what content you’ll click on next; big data, Markov chains, etc. There are some problems with this, mainly that you get served addictive content rather than niches that you want to engage deeply in, but generally they do this job pretty well, and web3 techs don’t hugely change this.
But there are a lot of platforms for discovery — this isn’t the competitive moat it once was. People use Instagram, Snapchat, TikTok, Pinterest, and much more; as mentioned, most people have moved beyond Facebook. Creators could do the same, moving to the discovery network which takes the smallest cut. Apart from one thing: they can’t. Everything you’ve ever uploaded to Spotify and all the followers you’ve earnt on Insta: the discovery platform manages this, and you can’t take your community with you. So it’s impossible to leave without starting all over again. And hence discovery networks squeeze creators for revenue.
Hence, the game-changer. Because just like with your cryptocurrency, you can store your writing, your music, your art, your videos, your followers, on a distributed ledger, or “on chain”. As LBRY puts it: “LBRY does to publishing what Bitcoin did to money.” This blog post is also published on mirror.xyz. Just like with your currency, everyone agrees that “yes, Leo, you wrote this blog”. Sites like Spotify and Instagram don’t manage your songs and your followers because these songs and follower relationships are stored on chain, and Spotify is reduced to one of many organisations competing to merely display this content in the best way, and help you discover new content as well. Creators are not beholden to any of them – neither are consumers.
So now the community economy is fully on the way because, finally, dedicated participants in a niche community can meaningfully support their creators. When people are deeply engaged in something they care about, even the original consumers become contributors, and we’ll start to see vibrant ecosystems formed around niches and creators. Greg Isenberg explores the Loot ecosystem, an NFT project upon which creators have built myriad different ideas; Jenkins the Valet is a great example of community-led storytelling, which will become a category-defining cultural genre in the 2020s, on a par with ‘art’ and ‘literature’; Joma Tech, a YouTuber with 1.5m subscribers, sold a collection of 2,500 ‘Vaxxed Doggo’ NFTs to fund his videos. Jadyn Violet, a musician, told me that “I’ve never got this much interaction on my art before.” He's been spending his time building new ideas to engage his community, spending time speaking with his fans, and making more music — this is what his fans love him for.
Business people often talk about the Minimum Viable Product your business needs before you start selling. The MVP isn’t dead, but all businesses (not just creators) will soon require a Minimum Viable Community to make a mark in their market.
What will underly all of these communities are tokens of membership, probably tiered, which tie a community together. They’ll be non-fungible, which means they’ll be unique and personalisable, thus allowing for deeper engagement. Consumers get dedicated community and deeper value in a niche they care about; creators are finally rewarded fairly for their work.
An exciting future, not an Exciting one
In 1999, Excite was a $6.7bn search engine, but collapsed soon after the 2001 dotcom crash. Google was only just getting started, but after aligning with the niche market vibe shift of the 21st century, became the favoured search engine of billions.
Joe Kraus, the founder of Excite, explains how: Excite targeted revenue from the top ten American companies, as media businesses had been doing for decades. Meanwhile, Google focused on attracting advertisers — and millions of them, with millions of markets across millions of keywords. Why did this work? “The 20th century was about dozens of markets of millions of consumers. The 21st century is about millions of markets of dozens of consumers.”