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After a turbulent period of irrational exuberance followed by skepticism, the creator economy appears poised for its second major growth cycle, with M&A activity forecast to accelerate significantly in 2025. Chris Erwin, founder of RockWater, a specialist M&A advisory firm focused on the creator economy, presented compelling evidence for this resurgence based on market dynamics, buyer behavior, and fundamental shifts in media consumption at last weekend’s 1 Billion Followers Summit in Dubai.
The creator economy has weathered a significant downturn in recent years. According to Erwin, funding for creator economy startups plummeted by 75% from $8 billion in 2021-2022 to just $2 billion between mid-2022 and 2024. This correction, while painful, has set the stage for more sustainable growth and realistic valuations.
“We’re entering our second major growth cycle for the Creator economy,” Erwin states. “Many people can make a lot of money. That being said, many could also lose a lot of money. The key is to choose to be better and not repeat the mistakes from the past.”
RockWater’s analysis has identified three primary categories where M&A activity is concentrated:
1. Owned and Operated Media Companies
The digital publishing sector has been particularly active, accounting for 47 out of 90 tracked deals between 2022 and Q3 2024. Recent notable transactions include Electric Monster’s acquisition by Brat TV and Lad Bible Group’s purchase of Betches at a premium 13x EBITDA multiple.
“What we’re seeing is not just consolidation within digital media,” Erwin explains. “Traditional entertainment companies, podcast businesses, and financial sponsors are all getting into the mix.”
2. Marketing Solutions Companies
This sector has seen the highest deal volume, with 135 transactions recorded from 2021 through Q3 2024. Digital marketing agencies represented 35 of these deals, attracting diverse buyers from traditional agency holding companies to financial sponsors.
A standout example is Publicis Groupe’s acquisition of Influential for $500 million, including earnout, at approximately 14x EBITDA. Erwin notes this deal’s significance: “Influential was doing $150 million in revenue with 50% year-over-year growth. Scale and growth remain key value drivers.”
3. Social-Native CPG Companies
While currently showing less deal activity, Erwin identifies this as a “sleeper segment” poised for growth. Major corporations like Hershey and Keurig are already making strategic moves in this space. Meanwhile, companies like Epic Gardening and Feastables have raised significant capital ($18 million and $60 million respectively) to fuel growth.
Several factors are aligning to support increased M&A activity in 2025:
- Strong Stock Market Performance: “Local stock markets are ripping,” Erwin observes, with many up over 20% in 2024, indicating renewed investor confidence.
- Mainstream Adoption: “The Creator economy is having mainstream success, and awareness is at an all-time high,” says Erwin, pointing to unprecedented entertainment and sports partnerships.
- Improved Business Models: Companies are now operating with “leaner business models, less OPEX, and they’re driving towards profitability,” according to Erwin.
- Expanded Buyer Pool: “We’re seeing a lot more buyers into the market,” Erwin notes. “What’s also interesting is these buyers’ mandates are changing. For the past couple years, many were just kicking the tires. Now they have mandates from their leadership to transact and buy.”
The previous cycle’s failures provide valuable lessons for investors and operators. Erwin identifies several key pitfalls to avoid:
- Solutions in search of problems
- Undifferentiated business models
- High operating expenses without focus on profitability
- Mismatched investor expectations
For those looking to capitalize on this next wave of growth, Erwin emphasizes three fundamental principles:
- “To attract capital, owners must think from first principles” – focusing on business fundamentals, revenue, profit, growth, and scalability.
- Expect increased M&A activity in social publishers, digital agencies, and social-native CPG companies.
- Understanding buyer motivations and values is crucial for successful exits.
“We’re at a very unique inflection point,” Erwin concludes. With valuations rising and deal demand growing, 2025 appears set to mark a new chapter in the creator economy’s evolution, characterized by more mature business models and strategic consolidation.
The message is clear: while opportunities abound, success will favor those who learn from past cycles and build sustainable, differentiated businesses with strong fundamentals. As the market enters this new phase, the emphasis on profitability, scalability, and strategic fit will be more important than ever.
