The creator economy's rise has significantly changed how individual creators use their skills, personalities, or content to generate income from others. Today, there are more avenues available for monetizing talents, personality, and/or content than ever before (e.g., live-streaming, educational videos) for creators at all levels (from amateurs to professionals).
Of the many revenue generation options available to creators today, virtual gifts and subscriptions are two of the most popular and powerful monetization models.
While both virtual gifts and subscriptions are capable of providing sustainable revenue streams for online content creators, the model and/or mix that works best for a particular creator will depend on the creator's audience, type of content, and future objectives.

In this article, we will explore the benefits and challenges of using virtual gifts and subscriptions as monetization models for creators, so you can determine which model will best benefit your creator community.

Understanding Virtual Gifting

The virtual gifting feature enables fans to shower the creators with virtual items like stickers, coins, badges, and/or animations while watching the content live. These virtual items can be redeemed in the form of cash by the content creators.

The Significance of Subscriptions

Subscriptions allow followers to access exclusive content or advantages over time for a payment on a month-to-month or year-to-year basis. This subscription style became a platform for all types of people using social media to help create memberships and/or premium community spaces or applications for creator-led platforms.

The Benefits of Subscriptions:

Predictability: With a subscription, a creator will have a predictable income and better understand their financial position on a monthly/yearly basis.

Better community connection: Subscribers tend to invest themselves more deeply into the community they are a part of, creating a closer bond between creators and their followers.

Content flexibility: Creators can create and provide a variety of content, including exclusive videos, behind-the-scenes footage, private conversations, etc. Some creators also use the ability to provide educational resources, etc., to offer a greater variety of content.

Growth potential: When a creator has a large subscriber base, they can expect to generate greater revenue due to the increase in their subscriber base, without having to be live every time people are actively participating.

There are also drawbacks to subscriptions: Subscriptions are not just about creating revenue. The creator must keep delivering high-value content, or their subscribers will leave them. New creators have a harder time convincing their followers to purchase subscriptions as they still have not developed a high level of trust or authority within their community.

From a revenue generation viewpoint, virtual gifting is successful for short-term monetization, as it relies heavily on the viewer's excitement and live interaction with the creator. This method of monetization is especially effective for those creators who thrive on interacting with their audiences through real-time media (i.e., streamers, musicians, entertainers).

Understanding Subscriptions

Subscriptions create long-term value for creators. They are best suited for creators who generate structured content or ongoing experiences that fans want to remain continuously connected to.

The benefits of virtual gifting include:

Quick cash flow: Fans are able to support the creators in real-time, typically when they are most emotionally connected (such as a live performance, Q&A, or game stream).

Accessible: Fans can give small amounts without having a long-term commitment. This allows casual fans to be able to support creators.

Emotional connection: The Utility of gifting can cause a connection because it is often motivated by appreciation and excitement. As a result, it can be an effective means of driving engagement and user interaction during live streams.

Gamifying: Leaderboards, badges, and visual images all create an element of competition and the potential to create repeat givers.

The downsides of virtual gifting include revenue being unpredictable. Most people will give money to the creator at or near the live event when the creator's product is available for purchase. Due to possible revenue burnout or lack of resources, creators may feel pressured to continually be on a live stream to continue generating income. Additionally, gifting is heavily weighted in favour of high-profile creators, making it difficult for those who are less established or emerging to continue generating sustainable earnings.

Comparing Revenue Impact

Virtual gifting can generate extreme revenue spikes during particular events or when there are viral moments; however, the amount earned from virtual gifts may drastically change from one month to the next. Subscription income has slower growth than virtual gifting, but subscription income is typically more consistent in revenue generation and will not be as affected by algorithm changes or decreased reach.

Choosing the Right Model for Your Creator Community

The optimal revenue model for you will be determined largely by the characteristics of your target audience and the type of content you are creating.

If you are working with an active community that is very event-oriented and expresses itself emotionally to each other, then virtual gifting is likely to be an excellent primary revenue model.

On the other hand, if your audience wants exclusive access to content, to learn from it, or to connect more deeply, then subscriptions are a better option.

Newly established creators may want to start with offering virtual gifting because it may take less of a commitment for fans to participate.

Established creators who have built up a loyal fan base are in a position to offer subscriptions.

In addition to the various audience types, the demographic characteristics of your audience can be important. Generally, younger audiences tend to be very receptive to micro-transactions and gifting, while professionals or niche learners may be more likely to take advantage of subscription-type access.

The Hybrid Approach: Best of Both Worlds

Platform owners and creators often opt for hybrid monetization strategies. These enable platform owners and creators to implement subscription-based monetization (stable monthly income), while also utilizing virtual gifting to augment their earnings from live-streaming or special events.

An example of this strategy would be creating perks for subscribers, such as special badges, discounts on gifts, and/or priority recognition during a live stream. This allows many more avenues for revenue generation with a wide variety of customer behaviors and preferences.

Final Thoughts

Regardless of whether a gift is made via an electronic medium or as a monthly contribution, neither gifting nor subscription services can be described as a “one size fits all” solution. Gifting tends to lead to more immediate excitement because it is spontaneous; however, subscription services tend to build loyalty to the creator/community over time and help develop long-term relationships.

For creator-based websites and community groups, the creator must first determine how/why the user is using the creator's platform to best monetarily align with the user. If a creator can establish a genuine relationship with the user, the creator can expand their services and create ongoing sustainable business opportunities for themselves, and create a stronger bond with their users/audience.