Passion economy is the concept of individuals monetizing their individual skills to earn income through freelancing and contract work. This is in comparison to a gig economy, where freelancers trade time for money. A passion economy allows individuals to scale their businesses exponentially, to work when and where they want, and to earn income passively. The term was coined by Li Jin, founder of Atelier Ventures and former partner of Andreesen Horowitz (a16z), in October 2019.
The concept of a passion economy includes a multi-faceted change in philosophy for creators, consumers and platforms. These changes include a focus on the needs of individual creators, the bridge between providers and consumers, and the ways platforms or marketplaces monetize and moderate the exchange of goods.
The term passion economy is similar to and sometimes used interchangeably with the creator economy, where individuals build their own business brands online, are focused on their passion for working on projects they are interested in, and demonstrate their individual skillsets.
Over the past decade, there has been a shift from traditional working roles to a gig economy, where workers are given flexibility in their work and utilize contracts to trade their time in exchange for money through services like Uber, Fiverr, or UpWork. As the gig economy has grown and more services appear to match workers with specific jobs, many individuals have begun freelance or contract work in lieu of traditional employment. Additionally, many employers have begun to utilize contract-based employment techniques as cost-saving measures during the coronavirus epidemic. A 2020 Gartner study found that 32% of organizations were replacing full-time employees with contingent workers, in order to cut costs.
Li Jin, a former managing partner at Andreesen Horowitz (a16z), coined the term "passion economy" in 2019 to describe a model of an economy that: allows revenue to be based on audience building, appeals to a wide range of creative products, emphasizes the individuality of providers, and encourages direct interaction between providers and consumers.
The passion economy has the potential to disrupt talent-based industries, allowing consumers to contact and interact with creators directly. In turn, creators are able to turn their personal passions into active or passive income, utilizing their individual strengths and interests to produce content, products, or services which fulfill them emotionally and financially.
Key aspects that differentiate a passion economy from a gig economy are: increased accessibility, viewing individuality as a feature, and a focus on digital products and services. In theory, a passion economy would reduce additional restraints for workers, allowing them to leverage their individual skills and strengths in order to earn money on projects they are best suited for and most interested in.
Additional differences arise when looking at the revenue models between gig and passion economies. While previous gig economy models focus on monetization through membership fees, cost-per-lead, and advertising revenue, passion economy platforms tend to operate as SaaS platforms that increase fees as an individual's customer base grows.
Comparison of Passion Economy vs. Gig Economy
A growing number of investment firms and startups have emerged to serve the passion economy sector. They seek to bridge the gap between consumers, who have expressed growing frustration over tradition wide-net approaches to social media, and a growing independent content provider-base that is exploring niche topics and interests at a growing rate.
By directly connecting content providers and consumers based on specific shared interests, passion economy service providers allow individual brands to monetize their audience and enable more genuine, engaging content.
Streaming media has become one of the largest segments of the passion economy movement. As more individuals move to work from home, there has been a rise in creators streaming content across audio and video platforms. While Youtube and Twitch make up the majority of the marketshare, startup streaming platforms are forming to create spaces which better compensate providers and offer a more direct connection between creators and consumers.
Education-based platforms have emerged as a popular segment in the passion economy due to the lack of in-person education as a result of the COVID-19 pandemic. Despite the barriers on in-person learning, online education and tutoring have been popular due to creators offering niche intelligence and knowledge on their individual preferred topic, compared to broad, general education typically performed in higher education. Creators can offer courses which provide clear ROI to small segments of people interested in niche topics, creating value in the market for these platforms.
Similar to streaming media, gaming platforms allow creators to utilize either their individual gaming expertise or personality to build a follower base and connect with consumers. Online gaming is a growing market and has a large range of game types, all of which have different purposes for playing and skill levels. While some games are meant as leisure activity, others are monetized in competition or are used for social purposes. All of these offer separate but sometimes overlapping niches that can be focused on by creators to create a notable brand which consumers can buy into and interact with.
Historically, marketplace businesses make revenue through transaction fees. A passion economy-based digital marketplace allows this and also introduces income streams through subscriber and brand management avenues. Compared to a standard marketplace based on products, a passion economy-based marketplace emphasizes the providers and creators of products. This allows consumers to know who makes the best products for them and allows providers to build their own store brands to attract customers who value their products.
