May 2008: User-Generated Content, Fad or For Real?

Industry Stats & Data by eMarketer

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US user-generated content creators and consumers will represent a gradually rising percentage of the US Internet population over the next five years. User-generated content creators are defined as individuals who create and share online, any of the following media at least once per month: video, audio, photos, personal blogs, personal Web sites, online bulletin board postings, customer reviews or personal profiles in social networks or virtual worlds. By the same token, user-generated content consumers are those who consume any of those media types in the same time frame.

The number of user-generated content consumers will exceed the number of creators, but by a much smaller margin than for traditional, less interactive media.

Despite the projected growth in the numbers of content creators and consumers in the US, the monetization of user-generated media has yet to materialize. Retail models have not caught on and advertisers have shown reluctance to attach their brands to content that is, by its nature, unpredictable.

As a result, advertising revenues around user-generated content will not approach the proportions that one might expect, given the size and level of engagement of the audience. eMarketer anticipates US user-generated content advertising revenue will reach $824 million in 2012, up from $162 million in 2007. By 2012, this total will represent 1.62% of US online advertising spending, up from 0.77% in 2007. User-generated content advertising includes only promotions placed around the content itself.

The user-generated content movement started out on dedicated social media sites but has since fanned out to Web properties that include online retailers, major media destinations and portals. Still, the sites that defined the social media revolution—YouTube, MySpace, Wikipedia, Facebook—continue to grab most of the traffic on the Web. eMarketer’s estimates of advertising spending against user-generated content are calculated as percentages of ad spending on online video and social networking sites.

Although social networking gets mixed reviews from media and marketing executives, ad spending on sites like MySpace and Facebook is one of the bright spots of the emerging economy around social media. US online social network advertising spending will rise from $920 million in 2007 to $2.7 billion in 2012.

To be clear, the $920 million spent on social network advertising was only 4.3% of US online ad spending in 2007. Furthermore, only about 10% of the social network ad spend is against user-generated content. Nevertheless, the active participation of brand marketers in Web sites that are built around user-generated content is an encouraging sign of the monetization potential of this content.

US online video advertising spending will rise from $775 million in 2007 to $4.3 billion in 2012. Because the bulk of the advertising activity around user-generated content occurs on video-sharing sites like YouTube and social networking destinations like MySpace and Facebook, eMarketer’s ad spending outlook is limited to these types of online venues.

US Internet users are creating and consuming user-generated content in record numbers. Their level of engagement is deep and broad, with participation rates of up to 62% in categories like customer reviews and involvement in an ever-expanding range of online content that includes video, audio, personal profiles, avatars, photo sharing, encyclopedia entries and reviews.

US Internet users will seek out content created by their peers, in part because such content is seen as more credible and relevant than professional and often promotional content.

To find out more about eMarketer’s User-Generated Content: In Pursuit of Ad Dollars Report, click here.

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