Curator Economy — How web3 will take the Internet from abundance to quality
On October 20, 2021, two streamers in China, Li Jiaqi and Viya, sold $3 billion dollars of products in a 12-hour livestream. Over 200 million people tuned in, and the best-selling product, a facial sheet mask, was purchased by over a million people. With an up to 20% commission rate, they made more money in 12 hours than most companies can in a year. How did they do that?
An apparent explanation is that they struck deals with merchants so people can buy from them at a discount. But it’s their ability to sell that gave them the negotiating power, not the other way around. After all, if anyone could sell billions worth of goods by just offering discounts, merchants would have simply done so themselves.
Instead, I think the key reason is that they have become trusted product curators. E-commerce in China is nothing like that in the West. On one hand, you can find a wider variety of merchandise there, a side effect of the country being the world’s factory. On the other hand, counterfeiting and fraud are rampant and products vary considerably in quality. Consequently, it’s hard to spot the hidden gems yourself. There’s even a popular term — Cai Lei, or stepping on a mine — for when you buy something that turns out to be much worse than you expect.
Curators like Li Jiaqi solved this problem. Li is known for trying lipsticks on himself during livestreams, and only recommending products he personally likes. Over time, more people bought from him and were delighted, words spread, and his personal brand grew. Fast forward to today, he has become the go-to channel to discover and buy products for his 50 million loyal followers.
This is a manifestation of what can be called the Curator Economy. While many factors unique to China contributed to the impressive rise of the streamers, web3 is quickly leveling the playing field for the rest of the world to catch up. But before digging into that, let’s first look back in history and see how curators come about in the first place.
From scarcity to abundance. And then to quality.
The Curator Economy is a modern phenomenon. For most of the history, people lived in relative scarcity, struggling to produce enough food, clothing, and necessities. One would be fortunate not being bothered by hunger or poverty, let alone having the luxury of choice and variety.
We now live in a world of relative abundance, an emblem of which being the supermarket. Stepping into one, you can find dozens of ice cream flavors, off-season fruits, and a myriad of shampoo brands that fill an entire section. The way we shop for groceries today is truly unimaginable to someone from 100 years ago.
Most supermarkets strive to offer as many products as possible, as it’s likely to lose a customer by not carrying just one item they want. Walmart once reduced its product variety by 11% in an attempt to simplify logistics, but quickly reversed course as the move ended up hurting its bottom line.
However, there is a notable exception: Trader Joe’s. The most loved grocery store chain in the US, it carries only about 4,000 SKUs, 92% less than a typical supermarket. Yet it doesn’t seem to have the aforementioned problem, as customers would still visit Trader Joe’s, and simply go to other stores to pick up items Trader Joe’s doesn’t offer.
How did this happen? Once again, Trader Joe’s succeeded as a curator, deliberately filtering out products — over 90% of them — that don’t meet its own bar. As a result, shoppers are much more likely to try out different products at Trader Joe’s, making it the leader in revenue per square foot among grocery stores, at 2x that of Whole Foods and 3x the industry average.
Curators can only exist, and would eventually appear, in a world of abundance. Just as we’ve seen in the case of Trader Joe’s and Li Jiaqi, they help us combat the problem of having too many choices by filtering out the inferior ones. In other words, they take us from mere abundance in quantity to quality.
Yahoo, Google, and curators on the Internet
The Internet followed a similar path of evolution. In its early days, there wasn’t much to do online. The most popular website in the web1 era was Yahoo, which started as “Jerry’s guide to the world wide web” in 1994. Anyone can submit their site to the Yahoo directory, which served as a map for early web surfers to locate the few websites existed back then.
In the 2000s, the digital world went from scarce to abundant. And just like in the case of grocery stores, people flocked to the site that gave them access to the most amount of information on the web — Google. It is the Walmart of the Internet, the information megastore indexing over 35 trillion webpages.
We’ve been in the abundant web2 era for more than a decade. Over in China, where Internet penetration crossed 50% only 6 years ago — a level reached by the US in 2000 — curators like Li Jiaqi are making millions of dollars. So why haven’t curators emerged on the western Internet?
To answer this question, it’s helpful to understand one big difference between the Chinese and western Internets, namely the former being far more centralized than the latter. For example:
- Alibaba is the go-to destination for everything e-commerce in China. Unlike in the US, few Chinese consumers visit merchant websites, and even luxury brands like Hermes and Maserati sell through Alibaba. It also has social features built-in, including the live streaming functionality used by Li Jiaqi.
- WeChat is the default communication channel for 95% of Chinese Internet users. Official accounts and mini programs, two features tightly integrated into WeChat, are relied upon by government entities and private companies alike to offer services, often as the only channel.
This centralization is both a result and a catalyst of the fact that Chinese tech giants offer much more to users than their American counterparts — social, e-commerce, payment and financial services, and even logistics. This significantly reduces the friction of anything involving multiple parties. In Li Jiaqi’s case, viewers can place orders right from his streaming room, with the platform handling inventory and data attribution, merchants dealing with customer support, and shipping partners fulfilling the orders, all in synchrony.
It should be noted that the companies didn’t build everything in-house. Rather, they acted as platforms. For example, WeChat mini programs are built by third parties, and Alibaba’s logistics is handled by external service providers. Platforms have the benefit of aligning the incentives of all parties involved — making the overall package better, growing the pie, and getting their own fair share. It’s thus not too surprising that Alibaba sends significant traffic to and even spends their own marketing dollars on Li Jiaqi. Good curators lead to more delighted customers, more successful sellers, and higher income for Alibaba itself.
In contrast, American companies usually have much narrower capabilities. For example, more than 97% of Facebook’s revenue still comes from ads placed on its social feeds. The company’s lack of commerce infrastructure not only hinders its attempts to diversify, but also leads to suboptimal ad conversion experiences — you would click on an ad, open a web page, add items to your cart, create an account, and enter all the information, rinse and repeat.
However, Facebook may never have the incentives to seriously invest in building such infrastructure:
- First, it may lower its handsome 36% net margin (Amazon’s is a mere 5%), while diverting traffic away from ads, causing a potential negative return on investment.
- Second, merchants prefer selling through their own websites. Unlike Alibaba, Facebook has little more than traffic to lure merchants over, so it’s hard for any effort to reach critical mass.
Going back to the original question, therefore, the lack of smooth infrastructure and the conflict of interest — which form a vicious cycle — are making it much harder for curators to thrive on the western Internet. It’s unfortunate from a utilitarian perspective, as the Chinese model is clearly more efficient and prosperous.
Luckily, this may soon change.
Web3 will take the Internet from abundance to quality
If there’s one thing that can create a more integrated digital infrastructure and more aligned incentives, it would be web3, or blockchains and cryptocurrencies. It will open the floodgate for curators, and take the Internet from abundance to quality.
In particular, web3 gives us the following 3 amazing things:
- A shared, public database. While there are already open standards like HTTP that define how data should flow on the Internet, it’s easy to cut the flow and build walled gardens. On the other hand, web3 apps are essentially different UIs that point to the same underlying data on the blockchain, so they can seamlessly interoperate.
- A built-in bookkeeping system. Bookkeeping is the very reason our ancestors invented writing 5,000 years ago. With web3, the Internet finally got its own universal bookkeeping system, with all transactions and balances faithfully recorded by the blockchain.
- Contracts that are on autopilot. These so-called “smart contracts” can be triggered automatically once certain conditions are met, for example to split the funds when a transaction is made. For the first time ever, we can set and enforce custom rules without paying hefty legal fees or involving an entire department.
This is great news for curators. In this new world, anyone can tap into the blockchain, pick what they like, and set up their own curated storefront. Since the data is shared, buyers can buy directly from any service, and the blockchain will seamlessly handle inventory and data attribution. In addition, both the original seller and the curator can always get their fair shares with the help of smart contracts.
But that’s not all. The real potential of web3 is that it can enable curators to do much more than facilitating e-commerce transactions. Curation will take many new forms, and play vital roles in a variety of endeavors. Here are just some of the early examples already taking place:
- Cultural Movements: Many notable people on Twitter are changing their profile pictures to a Bored Apes Yacht Club NFT they own, driving its price to well over $100k each, with a total volume of over $1 billion. This is a powerful form of curation, with many treating the NFT as part of their personal identity. While the curators didn’t create the original artwork, they helped turn bored apes into a global phenomenon. After hosting an NYC party featuring Chris Rock and Aziz Ansari, they are now opening an (actual) yacht club in Miami.
- Social Causes: A few weeks ago, Constitution DAO formed around the goal of buying one of the original copies of the US constitution, and raised almost $50 million in 3 days. During these 3 days, my Twitter feed was filled by contributors talking about it. People rarely get mobilized by a GoFundMe or Kickstarter campaign. But for Constitution DAO, those who joined were owners of the cause, not merely donors. So they gladly and proudly stood up and associated themselves with it.
- Investment: Index COOP offers products such as the DeFi Pulse Index, the weighted average of a curated list of DeFi tokens. It currently manages over $300 million for its clients. In web3, anyone — not just Dow Jones or S&P — can curate such an index and market it to the world. This will result in a more efficient market, helping the best web3 projects succeed, while generating returns for the investors and their clients.
Ultimately, to be a curator is to have an opinion. It’s about having a distinct personal brand, with the products, causes and movements we like being part of our own identity. And it’s about using this brand to influence others and attract like-minded people. In this sense, nothing is a better infrastructure for curators than web3, where identities are distinct and clear, and records are public and global.
It’s without doubt that web3 is still in its infancy, with less than 80 million people in the world owning a crypto wallet. And it’s only reasonable to expect that as more people get onto the blockchain and as the technology matures, more of these novel ideas would emerge. In a future article, I will write about some use cases of web3 I’m most excited about. But for now, it suffices to say that I believe curators will thrive in this new era of the Internet, and finally take the digital world from abundance to quality.