User-generated Sites Face Marketing Dilemma

Sure, sites sporting user-generated content might be all the rage...but do companies really want their products promoted alongside insipid cell phone videos?

Sites like YouTube and MySpace built on user-generated content might be all the rage right now, attracting millions of users and data downloads every day. But a new report from the U.K.’s Screen Digest finds that, over time, these sites might have a hard time turning all that user interest in actual revenue streams.

In “User-generated online video: Competitive review and market outlook” Screen Digest projects that by the year 2010 some 55 percent of all online video content in the U.S. wil be user-generated video, totaling some 44 billion video streams; however, Screen Digest believes all that streaming will earn just 15 percent of the revenues in the online video market.

Why? The basic problem is the nature of the content. Although, for the moment, there may be no lack of Internet users willing to view online videos of kitten chasing a mouse cursor around a screen, babies farting, or anonymous strangers singing bad karaoke—or other content which is cruder, dumber, or duller—it’s not the sort of content major advertisers want to pay good money to have associated with their products or brands. Although advertising spending on user-generated video sites is expected to increase from $200 million in 2006 to nearly $900 million by 2010, Screen Digest speculates 2007 may be the year the hype over user-generated video begins to be leveled off by the business reality of the offerings, particularly as sites are acquired by larger media organizations and founders leave for other ventures.

Screen Digest’s overall recommendation to user-generated video sites? Diversify by offering new forms of content, localized versions of content, offering subscriptions services, license technology to other players, and tie user video in other forms of digital commerce.