The rise of AI UGC robots...

Everyone’s hyped on AI UGC creators because 99% of “real” UGC is lazy, half-assed bullshit.

The worst of this involves pricing. It’s damn near impossible to find a creator charging less than $250 per video PLUS usage rights. And I’m not talking about creators that have a large, impactful following on their Instagram or TikTok. We’re talking about micro-influencers that will provide little to no value to your business outside of the single video they send you (if it gets made at all).

A brand will be over the moon to have 5% of these UGC ads profitable. That’s 1 / 20 concepts, if they’re lucky. $250 per video x 20 = $5,000.

On top of production and usage costs, you have to spend a ton of money testing the ads on Meta and/orTikTok. Unless you’re running Cost Caps or Bid Caps, you’re going to have to spend at least 3x-5x your AOV to get a minimum viable statistical significance on performance. Anything less and you’ll never truly be certain the ads didn’t perform. Anything more and you’re likely burning even more cash than you already were.

The average E-Commerce brand operates with about 10% of OPEX on creative costs. OPEX usually makes up around 20% of overall expenses. For 20 videos per month to be profitable for a brand, they need to be generating around $300,000 in revenue per month to reasonably afford a relationship like this… not even factoring 10% usage rights.

What I suggest most brands do now is charge based on the performance of the videos. Rather than having a fixed fee, have creators charge 5% - 10% of ad spend. The risk is totally eliminated from the brands’ perspective, because they’re not paying anything aside from product gifting unless the ads actually perform. Most would be happy to pay $5,000 per video if that ad generates them $15,000 of profit. So there’s more upside for the creators anyway, as long as they’re producing a high quality product.

The entire business model of ICON is successful because of the value equation I just covered.

But we’re not done…

What happens the majority of the time once you finally agree to price and terms with a creator? You send over the product, wait forever, and nothing gets done by the deadline. Or in some cases, 1-2 months+. No business wants to deal with this kind of inconsistency. Creators that are begging for work but then simply never show up and get it done. Or if they do, it’s clear they put very little effort into it.

These will be the first creators to be completely cut out of the market once AI really gets going. By my estimate we’re only a few years away.

Like the fat guy who gets eaten first in a zombie apocalypse because he’s slower than everyone else.

Too harsh? Maybe.

The bar is extremely low with real humans. So I personally have no qualms with AI eventually taking over (from a performance standpoint). One could make the argument that it wouldn’t be great for morals/ethics… but technology progression doesn’t care. You have to adapt or die. It’s how business has worked for thousands of years in every market.

Anyways, hope you enjoyed my mini-rant.

Nuff said, see you next week.

Jhori