Happy Thursday!

The rebound in funding for creator startups has faded.

Funding for U.S. creator economy startups fell nearly 16% to $253.1 million during the September quarter compared to a year earlier, according to the latest update to The Information's Creator Economy Database. Globally, funding for creator-related startups dropped about 20% to $415.8 million year over year.

The decline breaks two straight quarters of rising investments, as investors sank money into startups using generative artificial intelligence and those that buy the rights of independent musical artists, or offer them promotional tools.  

Funding totals for the first half of this year were also helped by a few larger deals, such as Create Music Group, which operates an independent music distribution service and a TikTok-focused creative studio called Flighthouse Media. Create Music Group raised $165 million in a round led by private equity firm Flexpoint Ford in June, while social shopping app Flip which raised $144 million from Streamlined Ventures in April. 

Instead, in the third quarter there were no individual deals of more than $100 million. The top three deals globally were for Spoon Labs, the owner of an audio platform and a short-form video service called Vigloo focused on K-drama, which raised about $89 million; Story Protocol, a blockchain-based project aiming to better manage intellectual property online for creators, which raised $80 million; and Captions, an AI-video editing startup for creators, which raised $60 million. 

AI startups based in the U.S. brought in just $53 million during the third quarter, an 81% drop compared to the second quarter of this year.

It's worth noting that my colleagues reported on other deals under way. In June, we reported Runway, an AI video startup for Hollywood and amateur filmmakers, was in talks with investors to raise $450 million at about a $4 billion valuation. In August, we reported that OpenAI's startup fund is leading a $60 million Series B funding round for Opal, which sells webcams used by creators and remote workers. Since neither has officially closed, we excluded them from the count. 

Even with an AI tailwind, investors have remained cautious backing creator startups after many of their bets haven't panned out. More than 27 startups have shut down since 2021. New closures include Koo, an Indian social network similar to X, which shut down in July after its buyout talks collapsed. 

Nine companies were acquired during the period, including a $500 million deal for influencer marketing firm Influential by Publicis in July 2024. Wasserman, a talent management and sports marketing company, acquired digital talent agency Long Haul Management to expand its creator business. Our database, which launched in 2021 with 50 private companies, now counts more than 615 startups. 

Here's what else is going on…

Introducing Our Generative AI Takeover List

Earlier this year, we launched the Creator Economy Startup Takeover List. Now, my colleagues have done a similar analysis of generative AI startups. 

The Information's new Generative AI Takeover List includes potential acquisition targets and focuses on firms that haven't raised funds in over two years and are pursuing high-cost projects like robotics and AI models. Subscribe to read more here.

Deals & Debuts

See The Information's Creator Economy Database for an exclusive list of private companies and their investors.

Instagram announced that photo and carousel posts featuring music will now appear in the Reels tab along with short-form videos, which it said will help creators reach people who don't follow them. 

Meta Platforms fired about two dozen staff in Los Angeles for using $25 credits meant for in-office meals to buy household products such as wine glasses and laundry detergent, The Financial Times reported. Separately, the company has also started restructuring certain WhatsApp, Instagram and Reality Labs teams.

ByteDance's publishing arm 8th Note Press, which has focused on e-books, is partnering with independent publishing company Zando to release print editions to sell in physical bookstores. The companies plan to release 10 to 15 books a year focused on genres popular with millennial and Gen Z, such as romance and young adult fiction, according to the New York Times.

Duolingo's TikTok-famous mascot is now the star of a webcomic on Webtoon. The Duo Unleashed series will be promoted at New York Comic Con, which kicked off on Thursday, where the Duo mascot will host meet-and-greets with fans. 

Policy Notes

Utah could soon join Illinois, Minnesota and California in establishing legal protections for child creators. Democratic State Rep Doug Owens opened a discussion this week in the Utah legislature to gauge support of a possible bill on the issue, the Washington Post reported.

Election Watch

• Donald Trump said he thinks TikTok is a "threat," in an interview with Bloomberg News, even as he has changed his stance on banning it in the U.S. "I think everything is a threat. Sometimes you have to fight through the threats."

• Trump hasn't advertised on Snapchat this election season after the app banned his personal account in 2021, while Vice President Kamala Harris' campaign has spent more than $5.3 million on ads on the app, The New York Times reported. "If young voters are as important of a demographic as both campaigns say they are, then they should be using every possible means at their disposal to reach them," Kyle Tharp, a former Democratic strategist, told the newspaper. "Snapchat seems like an obvious choice."

• Separately, Harris' campaign has spent more than $11 million on Facebook and Instagram ads to pump up a Facebook page managed by the campaign called The Daily Scroll, promoting news articles from outlets including CNN, ABC and NBC, about cheaper insulin prices or impacts of abortion bans. The account only has a few public posts and about 1,000 followers, but thousands of ads have appeared in users' feeds hundreds of millions of times, due to the paid social campaign, CNN reported.

Thank you for reading the Creator Economy Newsletter! I'd love your feedback, ideas and tips: kaya@theinformation.com. 

If you think someone else might enjoy this newsletter, please pass it forward or they can sign up here: https://www.theinformation.com/newsletters/creator-economy

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