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  1. 1. June 2007 User-Generated Content: Will Web 2.0 Pay Its Way? Paul Verna, Senior Analyst pverna@emarketer.comExecutive Summary: The explosion of user-generated content has reshaped the media landscape, shattering thestatus quo of content ownership and distribution, and creating new opportunities for marketers to attach their brandsto a vibrant online world. Meanwhile, consumers enjoy an ever-expanding universe of content in which they are alsothe publishing industry. Led by the companies that started this revolution—YouTube,US User-Generated Content Advertising Revenues,2006-2011 (millions) MySpace, Facebook, Photobucket and others—US user- generated content sites will earn $4.3 billion in ad revenues in2006 $450 2011, up from $1 billion in 2007. Worldwide, user-generated2007 $1,042 content ad revenues will rise to $8.2 billion in 2011 from $1.62008 $1,748 billion in 2007. 084515 0845162009 $2,4772010 $3,292 Issues & Questions I How much will be spent this year on advertising on user-2011 $4,303 generated content sites?Note: includes ad revenues at user-generated video sites (eg YouTube), I What role will marketers play in making the user-generatedphoto-sharing sites (eg Photobucket) and social networking sites (egMySpace, Facebook)Source: eMarketer, June 2007 content revolution a paying prospect?084515 www.eMarketer.com I Who is consuming all this user-generated content?Worldwide User-Generated Content Advertising I How many Internet users are actually generating content?Revenues, 2006-2011 (millions) I Will any new business models emerge within this new media 2006 $630 landscape?2007 $1,5622008 $2,796 The eMarketer View 22009 $4,210 A New Media Landscape 32010 $5,925 Monetizing the Content Revolution 4 Online Advertising Trends 72011 $8,175 Types of User-Generated Content 10Note: includes ad revenues at user-generated video sites (eg YouTube),photo-sharing sites (eg Photobucket) and social networking sites (eg Mobile User-Generated Content 20MySpace, Facebook) The Audience for User-Generated Content 22Source: eMarketer, June 2007 The Content Creators 28084516 www.eMarketer.com Related Information 31 About eMarketer 31 The First Place to Look Copyright ©2007 eMarketer, Inc. All rights reserved.
  2. 2. The eMarketer View Key eMarketer Numbers — User-Generated Content Even taking into account the power and ease of use of user- $4.3 billion US user-generated content advertising revenues* generated content tools like digital cameras and affordable in 2011, up from $450 million in 2006 audio/video production software, there are more content $8.2 billion Worldwide user-generated content advertising consumers than creators. In the US, an estimated 69 million revenues* in 2011, up from $630 million in 2006 people consumed user-generated content in 2006, and that 101 million US users of user-generated content** in 2011, up from 69 million in 2006 number will grow to 101.4 million by 2011. Worldwide, user- 254 million Worldwide users of user-generated content** in generated content users will nearly double in the next five years, 2011, up from 128 million in 2006 reaching 254 million in 2011, up from 128 million in 2006. 95 million US user-generated content*** creators in 2011, up from 64 million in 2006 Driven by such massive numbers of active content generators and 238 million Worldwide user-generated content*** creators in 2011, up from 118 million in 2006 users, advertisers will spend $4.3 billion on user-generated Note: *includes ad revenues at user-generated video sites (eg YouTube), content sites in the US alone by 2011, up from $450 million in 2006. photo-sharing sites (eg Photobucket) and social networking sites (eg MySpace, Facebook); **includes video, audio, photo sharing, blogs, On a global basis, advertising revenues at user-generated content wikis, podcasts and online bulletin boards; ***includes video, audio, sites will reach $8.2 billion in 2011, up from $630 million in 2006. photo sharing, blogs, wikis, personal Web sites, podcasts and online bulletin boards Source: eMarketer, June 2007084517The explosion of user-generated content hasreshaped the media landscape. Gone forever are the daysin which giant media conglomerates control the creation,distribution and monetization of content. The media companies arestill around and they still wield considerable clout as a result oftheir content and distribution networks, but today much power hasshifted to the consumer. Not only are consumers able to choosehow and when they consume virtually any media, but they are alsoincreasingly in control of the actual creation of content thanks tothe popularity of sites like YouTube, MySpace and Wikipedia.The Web has become a truly participatory culture. Web 2.0 is aworld in which traditional media companies recognize that theyneed to “begin to let go,” as Procter & Gamble chairman and CEOA.G. Lafley said during an October 6, 2006, keynote speech at theAssociation of National Advertisers’ annual conference.Of course, user-generated content in itself is not a newphenomenon. For as long as “content” has existed, common folkshave used all manner of public forums to make their voices heard.Witness America’s Funniest Home Videos, subway graffiti, folksongs, Speaker’s Corner and cave paintings. The difference now isthat the Internet has truly democratized the creation and massdistribution of any content. Anyone with the basic tools of a PCand an Internet connection can reach literally millions of peoplewith a keystroke.This capability has put enormous power in the hands of theestimated 64 million Internet users in the US who created user-generated content in 2006—and that number is expected to swellto 95 million by 2011. And while the US dominates this space,other geographies are expected to contribute increasing amountsof user-generated content over the next several years, with 238million user-generated content creators worldwide in 2011, upfrom 118 million in 2006. User-Generated Content 2
  3. 3. A New Media Landscape“There’s little doubt YouTube and the next Additional research suggests that brand marketers are generations of sites like it are going to assimilating these rapid changes and making adjustments in their change the way Americans—and the future plans. When asked by JupiterResearch whether they world—consume what we now call ‘video.’ planned to use social networking and user-generated content marketing tactics in the coming year, 48% of respondents said yes The days of passive ‘leaning back’ viewing for 2007 (compared with 38% for 2006). are over. We’re firmly in a ‘leaning forward’ era, where people are choosing what they US Brand Marketers Who Plan to Use Social Network* want to see when, how, where and on what Marketing Tactics in the Next Year, 2006 & 2007 (% of device. It’s really just started.” respondents) —Josh Warner, President, Feed Company 2006 38% 2007 48%The explosion of user-generated content across many disciplines Note: *Web sites designed for members to create and post content,has reshaped the media landscape for US advertisers. In a usually in the form of profile pages, primarily in order to communicate withFebruary 2007 poll by the US Advertising Federation, clear each other Source: JupiterResearch, "Social Networking Sites: Defining Advertisingmajorities of respondents said they were taken by surprise by such Opportunities in a Competitive Landscape" as cited in press release, March 2007Web 2.0 phenomena as the rush to virtual network Second Life, the 081779 www.eMarketer.compopularization of “mash-up” applications and the rise of YouTube. 081779 TV networks also recognize the need to adapt to a Web 2.0US Advertisers Reactions to Select Innovations in theMedia Landscape, 2006 (% of respondents) environment in which users expect to be able to seamlessly integrate their own media with professionally created content.The rush to Second Life 23% 77% Blogging, viral video sharing, MySpace functionality and YouTube functionality, and video podcast capabilities are a few of theThe popularization of "mash-ups" or Web applications that havemore than one source implementations that US TV networks regard as important, 39% 61% according to a 360i study from March 2007.The rise of YouTube 49% 51% Emerging Media Formats Implemented Most by Top TV Networks in the US, Q1 2007 (% of top TVThe movement of traditional newspapers to the tabloid format networks) 50% 50%The advent of issue-specific print audience measurement systems E-Mail alerts 97% 52% 48% Blogs 83%The introduction of a television commercial rating system Mobile 80% 53% 47% Podcast (audio) 80%The growth of free daily newspapers in many markets 54% 46% Games 74%The restructuring of traditional media RSS 74% 58% 42% Viral video (sharing functionality) 66%The explosion of consumer-generated and consumer-distributedcontent MySpace 37% 65% 35% Podcast (video) 31%The emergence of podcasting YouTube 14% 75% 25% Note: n=35The importance of social media/networking Source: 360i, "Tuning into Emerging Media: How Broadcast and Cable TV 77% 23% Networks Use Blogs, the Mobile Web, Mashups and Other Media," March 2007The mass adoption of text messaging in the US 081616 www.eMarketer.com 80% 20% 081616Television programs on the Internet 86% 14% Saw it coming Took them by surpriseSource: American Advertising Federation (AAF), "AAF Media InvestmentSurvey 2007," February 2007080858 www.eMarketer.com080858 User-Generated Content 3
  4. 4. A New Media Landscape Monetizing the Content RevolutionBy the same token, two-thirds of US private companies surveyed Few would dispute the continued and growingby the Center for Marketing Research also regard social media as“very important” or “somewhat important” to their business and impact of user-generated content on the Internetmarketing strategies. These media types include online bulletin and the media world as a whole. What is less clearboards, social networking functions, online video and blogging. is how, if or when it will become a significantImportance of Online Social Media* to the revenue-generating activity.Business/Marketing Strategy of the Fastest-GrowingPrivate Companies in the US, November-December2006 (% of respondents) “That’s sort of the big project for the year.” Very No —Eric Schmidt, CEO, Google, referring to monetizing response unimportant YouTube 2% 13% Very important Somewhat 26% While there are various business models associated with user- unimportant 19% generated content, the most prevalent, and promising, is advertising. Somewhat important Google’s headline-grabbing $1.6 billion acquisition of YouTube was 40% largely predicated on the video-sharing site’s vast audience and its potential to attract even more eyeballs in the future.Note: n=121 on the Inc. Magazine "2006 Inc. 500 List"; *includesmessage/bulletin boards, social networking, online video, blogging, wikisand podcastingSource: Center for Marketing Research, "The Hype is Real: Social Media “As yet, no one has found a way to make realInvades the Inc. 500," January 2007 money from the huge audiences who081451 www.eMarketer.com participate on these [user-generated online video] sites. [Even] the major players haveSelect Types of Online Social Media that Are Used bythe Fastest-Growing Private Companies in the US, yet to find a way to generate significantNovember-December 2006 (% of respondents) revenues.”—Arash Amel, Senior Analyst, Screen DigestMessage/bulletin boards 33% eMarketer projects that US advertising revenues at user-Social networking 27% generated video, photo-sharing and personal data sites will rise toOnline video 24% $4.3 billion in 2011, up from $450 million in 2006. These sitesBlogging 19% include the leaders in those respective content areas—YouTubeWikis 17% (video), Photobucket (photo-sharing), and MySpace and Facebook (personal profiles and personal data). This estimate does notPodcasting 11% include retail-based photo-sharing services, blogs, wikis and otherNote: n=121 on the Inc. Magazine "2006 Inc. 500 List" forms of user-generated content that are too small and diffuse toSource: Center for Marketing Research, "The Hype is Real: Social MediaInvades the Inc. 500," January 2007 track, like online auctions and classifieds.081449 www.eMarketer.com081451081449 US User-Generated Content Advertising Revenues, 2006-2011 (millions) 2006 $450 2007 $1,042 2008 $1,748 2009 $2,477 2010 $3,292 2011 $4,303 Note: includes ad revenues at user-generated video sites (eg YouTube), photo-sharing sites (eg Photobucket) and social networking sites (eg MySpace, Facebook) Source: eMarketer, June 2007 084515 www.eMarketer.com 084515 User-Generated Content 4
  5. 5. Monetizing the Content RevolutionThe nearly tenfold increase in user-generated content advertising Screen Digest estimates that US online user-generated video adspending in the US reflects optimism in the ability of companies revenues will grow to $956 million in 2011, from $216 million inlike YouTube, MySpace and Facebook to continue to build—and 2006. During the same period, the number of annual user-retain—vast audiences. generated video streams is projected to increase to 49 billion from 12.4 billion.On a worldwide basis, user-generated content ad revenues willreach $8.2 billion in 2011, up from $630 million in 2006. US User-Generated Video Streams and Associated Advertising Revenues*, 2006, 2007 & 2011Worldwide User-Generated Content Advertising Streams Ad revenuesRevenues, 2006-2011 (millions) (billions) (millions) 2006 12.4 $216 2006 $630 2007 28.5 $5152007 $1,562 2011 49.0 $9562008 $2,796 Note: *includes all video viewership and associated advertising revenues from online videos served by user-generated online video sites2009 $4,210 Source: Screen Digest, provided to eMarketer, May 29, 20072010 $5,925 084518 www.eMarketer.com 0845182011 $8,175 Taking a global view, In-Stat forecasts user-generated video contentNote: includes ad revenues at user-generated video sites (eg YouTube), revenues of $1.6 billion by 2011, up from $80 million in 2006.photo-sharing sites (eg Photobucket) and social networking sites (egMySpace, Facebook)Source: eMarketer, June 2007 User-Generated Video Content Revenues Worldwide,084516 www.eMarketer.com 2006 & 2011 (millions)084516 2006 $80Given the close interrelationship between social networking, onlinevideo and user-generated content—with top networking sites like 2011 $1,600MySpace and Facebook driven largely by the video content their Source: In-Stat, "User Generated Content - How About Just Content?" asusers post—it is worth looking at eMarketer’s most recent ad cited in press release, April 18, 2007 083259 www.eMarketer.comspending forecasts for online video and social networking. 083259US online video advertising spending is expected to increase Other estimates of online video ad spending include a July 2006tenfold in the next five years, reaching $4.1 billion in 2011, up from JupiterResearch study that estimated that US online video ad$410 million in 2006. spending overall would reach $1.3 billion in 2011, up from $400 million in 2006. If one factors in Screen Digest’s figures for theUS Online Video Advertising Spending, 2001-2011 percentage of online video that user-generated content makes(millions) up—47% in 2006 and 55% by 2010—Jupiter’s estimates are 2001 $40 somewhat lower than Screen Digest’s. 2002 $55 US Online Video Advertising Spending, 2006 & 2011 2003 $85 (billions) 2004 $135 2006 $0.4 2005 $225 2011 $1.32006 $410 Source: JupiterResearch as cited by Media Life, July 25, 20062007 $775 075474 www.eMarketer.com 0754742008 $1,3002009 $2,0002010 $2,9002011 $4,100Source: eMarketer, February 2007082081 www.eMarketer.com082081 User-Generated Content 5
  6. 6. Monetizing the Content RevolutionSocial network advertising spending is also a bellwether of the On the other hand, banner ads on YouTube would be tolerated bymarketability of user-generated content. eMarketer expects 63% of US Internet users polled by Wired magazine in October 2006.spending in this area to reach $3.6 billion in 2011, up from $445million in 2006—and the ratio of social network ad spending to Type of YouTube Revenue Model that US Internet Users Would Tolerate, October 2006 (% ofoverall online ad spending is also expected to increase, to 6.9% in respondents)2011 from 2.1% in 2006. Banner ads on site 63%Worldwide Online Social Network Advertising Short "pre-roll" ads before a video 14%Spending, 2006-2011 (millions) If there were ads, Id go elsewhere 10% 2006 2007 2008 2009 2010 2011US $350 $900 $1,380 $1,810 $2,170 $2,515 Long "post-roll" ads after a video 7%Outside of US $95 $335 $530 $745 $970 $1,115 Subscriptions 6%Worldwide $445 $1,235 $1,910 $2,555 $3,140 $3,630 Note: n=514 Wired readersNote: Definition includes general social networking sites where social Source: Wired Magazine, December 2006networking is the primary activity; social network offerings from portals 078914 www.eMarketer.comsuch as Google, Yahoo! and MSN; niche social networks devoted to aspecific hobby or interest; and marketer-sponsored social networks that 078914are either stand-alone sites or part of a larger marketer site; in all cases, So, while user-generated content sites have great potential tofigures include online advertising spending as well as site or profile pagedevelopment costs attract advertising dollars, there are obstacles that marketers andSource: eMarketer, May 2007 content owners will have to overcome in order to reap profits from083270 www.eMarketer.com083270 this area. “User-generated video is going to have a lot of issues to resolve“God knows what we’re going to do with before it becomes an effective advertising medium,” said Screen MySpace.” —Rupert Murdoch, Chairman, News Corp. Digest senior analyst Arash Amel. “There’s how will people react to (in Wired, July 2006) personal media with ads, and how will advertisers feel sitting around rude or offensive content.”The monetization of user-generated content will depend in part onhow successful user-generated content sites are at continuing toattract large audiences. Furthermore, marketers will have to takeconsumers’ ad-type preferences into account in order to avoidalienating their audience. A January 2007 Harris Poll study showedthat up to 73% of consumers would visit YouTube less if the site’sclips were preceded by short commercials.Impact of Short Commercials before Every YouTubeVideo Clip according to US Adult Frequent* YouTubeWatchers, December 2006 (% of respondents) Not sure Would not 6% Would visit change frequency YouTube of YouTube visits a lot less 21% 31% Would visit YouTube a little less 42%Note: n=363 ages 18+; *more than once or a few timesSource: Harris Poll, January 2007080542 www.eMarketer.com080542 User-Generated Content 6
  7. 7. Online Advertising TrendsUsers Take Charge Marketers are also enlisting consumers to create ads for them. ForMore than half of media and entertainment executives surveyed some brands, these types of user-generated campaigns havein Accenture’s “Global Content Survey 2007” cited user-generated delivered measurable results. For instance, the month after Geicocontent as a leading threat to their bottom lines. launched a site that allowed visitors to explore the apartment of the company’s caveman mascot, the site received 850,000 uniqueWhatever their fears, two-thirds of the respondents of the visitors. A similar campaign for M&M’s that encouraged users toAccenture survey said that their businesses will be making money create their own “inner M” yielded 1.5 million virtual M&M avatars,on user-generated content within three years. A quarter of according to a May 7, 2007, Washington Post article.respondents said they did not know when they would beginprofiting from user-generated content. Other experiments have met with disastrous results. The most infamous case was a Chevrolet campaign in which the companyOne of the avenues marketers are pursuing is the creation of their allowed consumers to edit existing images and text into aown profiles on MySpace. A study conducted by eMarketer using commercial for the automaker’s Tahoe SUV.MySpace data shows that major automobile, fast food, movie,sports and wireless communications brands have created their The resulting ads were largely negative—or at least the negativeown destinations on the popular social networking site. ones got the most attention on video-sharing sites like YouTube. Environmental activists excoriated the vehicle’s low gas mileageSelect Marketers with Ad Profile Pages on MySpace, and its impact on the environment.July 2006Company URL “We anticipated that there would be critical submissions,”Adidas soccer http://www.myspace.com/adidassoccer Chevrolet spokeswoman Melisa Tezanos told The New York Times.Burger King http://www.myspace.com/burgerking “You do turn over your brand to the public, and we knew that weCingular http://www.myspace.com/cingularstudio were going to get some bad with the good. But it’s part of playingDisney "Pirates of the http://www.myspace.com/deadmanschest in this space.”Caribbean"Fox "24" http://myspace.com/24onmyspaceTwentieth Century Fox http://www.myspace.com/xmenthelaststand “The old-media production and distribution"X-Men: The Last Stand"GE http://www.myspace.com/ellifont hierarchies are crumbling. Everything is inHBO "Entourage" http://www.myspace.com/entourage flux, and nothing is a given anymore—exceptHonda Element http://www.myspace.com/hondaelement for the fact that customers are in control.Motorola MotoQ http://www.myspace.com/motoq Brands can and must start earning theNike soccer http://www.myspace.com/nikesoccer attention of these customers through theParamount "Failure to http://www.myspace.com/failuretolaunch creation of compelling and valuable digitalLaunch" content.” —Laura Lang, President, DigitasPepsi Aquafina http://www.myspace.com/aquafinaProcter & Gamble Secret http://www.myspace.com/secretSparkle/RihannaToyota Yaris http://www.myspace.com/yarisVerizon http://www.myspace.com/callingallbandsWendys http://www.myspace.com/wendysquareNote: all links active as of June 26, 2006Source: MySpace, July 2006; eMarketer research, July 2006074395 www.eMarketer.com074395“To succeed, we need to stop standing between [consumers] and their content, and actually be the content they want to see.” —Greg Verdino, VP, Digitas User-Generated Content 7
  8. 8. Online Advertising TrendsAnother user-generated content campaign with questionableresults was a spot for Dove soap that first aired during the “Viral sharing enables hyper-distribution,Academy Awards telecast on February 25, 2007. The result of a and—with the right content—a geometriccontest that drew more than 1,000 submissions, the winning ad return on creative and promotional mediawas viewed by some three million people on YouTube, but the dollars. Traditional advertising isn’t going tocomments were almost unanimously negative, according to go away, but making a brand hit on allpublished reports. Interestingly, this flirtation with user-generated cylinders is going to be more complicatedcontent followed Dove’s far more successful “Evolution” spot, a and require a finely honed sensitivity toprofessionally created TV ad that has since become a sensation what works online.” —Josh Warner, Founder andonline through thousands of homegrown imitators who have President, Feed Companyposted their versions on sharing sites.Marketers and brands that have employed user-generated and While the ads in themselves were not particularly flattering toviral video advertising include: either brand, the mere fact that a chemical reaction occurred when the two were mixed together created a water-cooler effect and anI Ban (deodorant) entire movement of amateur videographers who posted their ownI Blendtec Mentos–Diet Coke experiments online. The result? Sales of MentosI Cadillac rose 15% in the immediate aftermath of the online ads andI Chevrolet Tahoe remained 5% ahead of earlier benchmarks even after the brouhahaI Chrysler had died down, according to MediaPost. As for Coke, the companyI Converse was less specific but noted in the same MediaPost article that salesI Coca-Cola rose in the 5%–10% range following the Mentos craze.I DoritosI DoveI Geico “User-generated content is sort of the wordI Jet Blue of the day, and I think smart marketers willI L’Oreal start harnessing that.” —Anne Zehren, PresidentI M&M’s of Sales and Marketing, Current TVI MasterCardI Mentos Companies that use “corporate” user-generated contentI Ray Ban campaigns are generally well perceived by US Internet users. MoreI Smirnoff than half of the respondents in a November 2006 survey by theI Sony American Marketing Association and Opinion Research CorporationI Toyota said they thought companies that use customer-generatedI Volkswagen advertising are more customer friendly, creative and innovative.Even Corporate Ads Aim to Look User-Generated US Adult Internet Users Perceptions of Companies that Use Customer-Generated Advertising vs.While the practice of soliciting viewer-created content is widely Professionally Created Advertising, November 2006 (%accepted in the advertising industry, some brands are taking the of respondents)concept a step further by creating their own user-generated- More Same Lesscontent-like ads. As with “genuine” user-created spots, the results Customer friendly 68% 25% 8%among corporate efforts to emulate the user-generated content Creative 56% 29% 15%look and feel are mixed. Innovative 55% 32% 13% Socially responsible 39% 49% 12%In some cases, the viral distribution of the ad is spontaneous. The Trustworthy 37% 50% 13%marketer does nothing to encourage or dissuade the Note: n=1,098 ages 18+; numbers may not add up to 100% due todissemination of the content and, because the content is usually rounding Source: American Marketing Association (AMA) and Opinion Researchnot copyrighted by the company in question, there is little it could Corporation (ORC), "Mplanet," December 2006do to control it even if it wanted to. A classic example of this type 079107 www.eMarketer.com 079107of viral promotion occurred when a series of home-made videosfeaturing explosive chemical experiments with Mentos candiesand Diet Coke bottles began to circulate on the Internet. User-Generated Content 8
  9. 9. Online Advertising TrendsAmong the minority of respondents who said such companies are Companies like Feed avail themselves of any number of tactics toless trustworthy, socially responsible and customer friendly than generate a buzz for their clients. A MarketingSherpa study fromcompanies that use only professionally generated ad content, March 2006 showed that simple, low-tech efforts like e-mailmost were in the 18-to-24 age bracket. forwarding are used by more than 90% of experienced B2C viral marketers in the US.US Adult Internet Users Perceptions of Companiesthat Use Customer-Generated Advertising vs. Viral Marketing Tactics that Are Used by ExperiencedProfessionally Created Advertising, by Age, November B2C Viral Marketers in the US, March 2006 (% of2006 (% of respondents in each group) respondents)Less trustworthy Encouraging e-mail forwarding 21% 91% 10% Tell-a-friend boxes on site (eg sweeps, coupons, etc.)Less socially responsible 80% 20% Online games, quizzes and polls 10% 69%Less customer friendly Cool microsites (not your site URL or brand) 13% 54% 5% Offering e-cards 18-24 25-64 47%Source: American Marketing Association (AMA) and Opinion ResearchCorporation (ORC), "Mplanet," December 2006 Video clips079114 www.eMarketer.com 46%079114 Audio clipsWhether the viral distribution is controlled by the marketer or the 29%consumer, the success of these campaigns has created a cottage Source: MarketingSherpa, "Viral Marketing 2006: Benchmark Data,industry for companies that have learned how to maximize the Practical Tips and Biggest Change," March 2006reach of a viral ad by guiding the creation of the content and 071694 www.eMarketer.comseeding the final product on user-generated content sites and 071694social networks. The viral marketing possibilities for user-generated video are not lost on marketers. According to the American AdvertisingOne such firm, Feed Company of Los Angeles, calls itself a “video Federation, 19% of US advertisers had advertised on a user-view optimization” company that exists on the premise that generated content site as of June 2006. And an additional 14%“getting videos ranked, forwarded and featured is an art in itself.” planned such advertising in the coming year.The company scored big viral video hits with two recent high- US Advertising Executives Who Have Advertised on aprofile ads: The first was a General Motors ad featuring a quality- Blog or User-Generated Content Site, 2006 (% ofobsessed “robot” that has a nightmare about jumping off a bridge respondents)after it makes a mistake on the assembly line. The ad debuted Blogduring this year’s Super Bowl but was quickly pulled off the air 24%following a firestorm of criticism from suicide-prevention groups. 7%As a result of the controversy, the video became an online User-generated content sitesensation thanks in part to the efforts of Feed Company. 19% 14%Another success story for the firm was an edgy video for Ray-Banthat was created (by Ray-Ban’s agency) exclusively for Web Have advertised Plan to advertise in the next yeardistribution. The spot has received 2.27 million views on YouTube, Note: n=140 advertising industry leaders Source: American Advertising Federation (AAF), "Survey on Digital Mediaaccording to the company’s logs. Trends," June 2006 073911 www.eMarketer.com 073911 User-Generated Content 9
  10. 10. Online Advertising Trends Types of User-Generated ContentAs the 2008 presidential campaign heats up thanks to wide-open Videofields on both sides of the political spectrum, it is almost certain User-generated content falls into various categories, includingthat citizen journalists posting user-generated clips will have an video, audio, photos, information, personal data, reviews andeffect on the candidates’ fortunes. Already, YouTube has impacted recommendations and career services. Of these, video is by far thepolitical campaigns by magnifying the inevitable verbal miscues of largest, most visible and most potentially lucrative to marketers.various candidates, and the rival Barack Obama and Hillary Clinton eMarketer expects the number of US online video viewers tocamps have sparred over a viral ad that ridiculed Mrs. Clinton by increase to 157 million in 2010, up from 108 million in 2006.spoofing a Big Brother–themed Apple Computer spot from 1984.While Mr. Obama disavowed the ad, the incident served as a US Online Video Viewers, 2003-2010 (millions)warning shot to anyone who might downplay the potential effects 2003 52.3of the viral video revolution on the political process. Those who are 2004 69.6savvy about how to leverage this content will reap the rewards, 2005 89.4while those who misstep will be left out in the cold. 2006 107.7 2007 123.4 2008 137.2 2009 149.0 2010 157.0 Note: ages 3+; online video viewer defined as an individual who downloads or streams video (content or advertising) at least once a month Source: eMarketer, November 2006 078698 www.eMarketer.com 078698 These numbers correlate with an October 2006 comScore study that found that there were approximately 110 million unique online video streamers in the US in August 2006. Top 10 Online Video Properties among US Internet Users, Ranked by Unique Streamers, August 2006 (thousands and % reach) 1. Yahoo! sites 39,881 23.0% 2. Fox Interactive* 39,528 22.8% 3. YouTube 35,531 20.5% 4. Time Warner Network 23,770 13.7% 5. Microsoft sites 16,894 9.7% 6. Viacom Digital 13,697 7.9% 7. Google sites 11,654 6.7% 8. MLB 6,227 3.6% 9. eBaums World 6,187 3.6% 10. Sony Online 4,746 2.7% Total Internet 110,266 63.6% Note: home, work and university locations; streams are attributed to the property that provides the stream (for example, the YouTube data include streams that occurred on their Web property and on other properties where YouTube provided those streams); number of unique streamers at top 10 sites is greater than total Internet figure because of overlap among visitors; number of streams initiated at top 10 sites is less than total Internet figure because of streams initiated at other sites"; *as of August 2006 data, MySpace.com is being included as part of the Fox Interactive property Source: comScore Networks Inc. as cited in press release, October 2006 077760 www.eMarketer.com 077760 User-Generated Content 10
  11. 11. Types of User-Generated ContentIn a March 30, 2007, blog posting, research firm Compete Inc. In a study conducted by the Associated Press and America Onlineranked the top 10 US online video sites by unique visitors, sessions with Ipsos Public Affairs in July and August 2006, 43% ofand market share for February 2007—and noted the sites’ respondents said they watched or downloaded “amateur videospercentage gains or losses over the prior month. or home videos posted to Web sites.”Top 10 US Online Video Sites, February 2007 (visitors Types of Online Videos Watched or Downloaded byand sessions in millions, market share and % change US Online Video Viewers, July-August 2006 (% ofvs. prior month) respondents) Visitors Sessions Market % change Yes No share News videos 72% 28%1. YouTube 35.6 114.9 45% 2% Short clips from movies or TV programs 59% 41%2. MySpace 16.7 38.2 15% -1% Music videos 48% 52%3. Google Video 13.9 26.1 10% -1% Clips or highlights of sporting events 44% 56%4. AOL 6.1 16.4 6% -1% Amatuer videos or home videos posted to Web sites 43% 57%5. MSN 5.3 8.6 3% -1% Clips or highlights of concerts 23% 77%6. StupidVideos 3.0 7.7 3% 0% Full-length movies or TV shows 22% 78%7. Yahoo! Videos 3.8 6.9 3% 0% Live sporting events 17% 83%8. Break 2.2 5.0 2% 0% Video podcasts* 17% 81%9. eBaums World 2.5 4.5 2% 0% Live concerts 9% 91%10. PureVideo 2.2 4.3 2% * Note: n=1,347 ages 18+ who have ever watched or downloaded an onlineNote: *new to top 10 video clip; *remaining 2% were "not sure"Source: Compete, Inc. as cited on company blog, March 30, 2007 Source: Associated Press (AP) and America Online (AOL) with Ipsos Public Affairs, September 2006083229 www.eMarketer.com 076593 www.eMarketer.com083229 076593Added together, these sites accounted for 91 million unique visitors While the AP/AOL/Ipsos study does not directly correlate with thethat month, and they represent a cumulative 91% of the US market Screen Digest findings—one looks at relative percentages ofshare, so by deduction, there are approximately 100 million unique content types, the other at percentages of users who view certainvisitors to online video sites in the US, according to Compete. types of content—they both paint a picture of a robust market forIn January 2007, Screen Digest estimated that 47% of all online online video viewership in the US.video watched in the US consists of user-generated content, and As a counterpoint to these studies, a Burst Media surveythat percentage is expected to increase to 55% by the end of conducted in November 2006 shows that user-generated contentthe decade. makes a comparably low 19% of US online video viewing by 18-to-User-Generated Online Video Content As a Percent of 34-year-olds, and even less among older demographics.Total Online Video Content Watched in the US, 2006 &2010 Types of Online Video Viewed by US Online Video Viewers, by Age, November 2006 (% of respondents)2006 47% 18-24 25-34 35-44 45-54 55+ Total2010 55% News clip 29.4% 40.1% 49.3% 46.3% 55.4% 44.9%Source: Screen Digest, "User-Generated Online Video: Competitive Review Movie trailers/attractions 49.4% 40.5% 41.1% 29.8% 23.8% 36.7%and Market Outlook," January 2007 Comedy 47.0% 39.6% 35.5% 26.5% 26.6% 34.5%080052 www.eMarketer.com Music 49.2% 42.2% 33.6% 23.5% 14.0% 32.1%080052 TV shows/clips 46.4% 40.3% 30.9% 21.9% 18.5% 31.0% Entertainment/reviews 33.2% 31.9% 30.9% 28.8% 23.7% 29.8% Sports/sports news 25.1% 34.8% 31.4% 21.2% 23.6% 27.7% Instructional/how-to 12.1% 13.6% 20.6% 21.5% 21.2% 18.3% Home/user-generated 19.4% 19.5% 15.0% 11.5% 9.1% 14.8% Political/advocacy group 8.4% 13.7% 17.5% 9.6% 16.9% 13.5% Cooking 3.8% 6.6% 4.2% 6.7% 10.7% 6.2% Note: n=1,815 Source: Burst Media, "Online Video Advertising," December 2006 079481 www.eMarketer.com 079481 User-Generated Content 11
  12. 12. Types of User-Generated ContentIt should be noted that some of the categories in the Burst Media Considering the traction of the online video category overall, it isstudy overlap with user-generated content. For instance, some hardly surprising that most media and entertainment executivespercentage of the “comedy,” “music” and “instructional/how-to” in North America and Europe regard short-form videos as theclips are likely to be user-created, which would skew the user- media type with the highest growth potential, according to an Aprilgenerated content category higher. 2007 Accenture study.While research firms might disagree on the ratio of user-generated Media Content with the Highest Growth Potential*video to online video overall, most agree that YouTube is by far the according to Media and Entertainment Executives inleading player in the online video space, as well as the prime North America and Europe, Q1 2007 (% of respondents)mover in the user-generated content revolution. Short-form videos 53%In a Piper & Jaffray study from January 2007, YouTube commanded Video games 13%a higher share than all TV network sites combined. YouTube alsoled its competitors by large margins, including MSN, Yahoo!, Full-length feature films 11%MySpace, AOL and Google Video (which, since November 2006, is Music 11%actually affiliated with YouTube through Google’s acquisition of the Consumer publishing 9%pioneering video site). Business publishing 4%Web Sites on which US Adult Internet Users Watch Note: n=105 at advertising, film, music, publishing, radio, Internet, videoOnline Video Content, 2006 (% of respondents) game and TV companies in Austria, Canada, Belgium, France, Germany, Italy, Spain, Switzerland, the UK and the US; numbers may not add up to 100% do to rounding; *over the next five yearsYouTube 43.5% Source: Accenture, "Global Content Survey," April 2007TV network sites 41.0% 083109 www.eMarketer.com 083109Google Video 26.5% As user-generated video continues to expand into a mass marketMSN video 24.5% medium, video sites and marketers will have to contend withYahoo! Video 22.0% ongoing resistance to embedded ads, prerolls and other forms ofMySpace 16.5% in-video advertising.AOL 13.5% According to a fall 2006 report from Forrester Research, onlineOther 17.5% users are not so eager to integrate commercials into their video- viewing experience. Over 80% of the online video viewers polledSource: Piper Jaffray & Co., "Silk Road: Online Video Usage Increasing as TVViewing Declines," January 2007 by Forrester said that in-stream ads—commercials appearing080000 www.eMarketer.com before or after video clips—were “annoying,” and 75% claimed080000 they ignore them.Broken down by age, the Piper Jaffray study highlights the extent towhich YouTube is predominantly a youth-oriented play, with 60% of Less-intrusive advertising, such as placements alongside video,respondents in the 25-to-34 age group saying they watch online scored somewhat better, with 50% of respondents saying theyvideo on the site, but only 11% of respondents 55 and older using it. were acceptable. Text links were most preferred, with only 19% ofBy contrast, TV network sites draw a more even pool of viewers respondents finding them annoying.among the different age brackets, ranging from 33% to 47%. “Marketers need to think differently about how they’reWeb Sites on which US Adult Internet Users Watch communicating with their customers viewing online video,” BrianOnline Video Content, by Age, 2006 (% of respondents Haven of Forrester told AdWeek. “When you see what’s going onin each group) with YouTube and short-form content, using the old mode of 25-34 35-44 45-54 55+ inserting ads into content when you’re looking at a 3-minute videoYouTube 60% 37% 22% 11% is not going to work.”TV network sites 43% 40% 47% 33%Google Video 32% 23% 25% -MSN video - 37% 28% 22%Yahoo! Video - 23% 26% 22%Source: Piper Jaffray & Co., "Silk Road: Online Video Usage Increasing as TVViewing Declines," January 2007079999 www.eMarketer.com079999 User-Generated Content 12
  13. 13. Types of User-Generated ContentA February 2007 Synovate study commissioned by Clipblast! Blogs and Wikisconfirmed Forrester’s findings, with nearly a third of respondents Blogs and wikis, along with online bulletin boards, constituteciting advertisements as the aspect of online video they like another broad area of user-generated content that presentsthe least. opportunities for marketers, even if it has proven an inherently challenging category to monetize.Aspect of Online Video that US Adult Internet UsersLike Least, February 2007 (% of respondents) A PQ Media LLC and Marketing Vox study from April 2006Too commercial (too many video ads) estimated that US blog advertising spending would rise to $300 31.8% million in 2010, up from $36 million in 2006.Inconsistent (too tough to find quality video productions) 20.7% US Blog Advertising Spending, 2005, 2006 & 2010 (millions)Frustrating (too difficult to find exactly what I am looking for) 19.3% 2005 $16.6Chaotic (too many videos to wade through) 2006 $36.2 16.4% 2010 $300.4Funky (too much user-generated content to wade through) Source: PQ Media, LLC, April 2006; Marketing Vox, April 2006 11.8% 072221 www.eMarketer.comNote: n=1,000 ages 18+ 072221Source: Synovate commissioned by Clipblast!, February 2007 Among emerging advertising tactics that US online marketers081452 www.eMarketer.com planned to use, blogs and blog networks ranked highest in a081452 January 2007 MarketingSherpa study. In addition, this categoryOther aspects of online video that consumers object to include also logged the highest increase from one year to the next, withpoor quality, problems with audio or video and long download 42% of respondents saying they planned to use it in 2007, up fromtimes, according to a September 2006 study by the Associated 30% in 2006.Press and America Online with Ipsos Public Affairs. Planned Spending in the Next Year on EmergingAspects of Watching Online Videos that US Online Advertising Tactics according to US OnlineVideo Viewers Do Not Enjoy, July-August 2006 (% of Marketers*, 2005 & 2006 (% of respondents)respondents) 2005 2006Poor quality 17% (predicted (budgetedProblems with audio/video playback 14% 2006 use) for 2007)Download time 12% Ads on third-party blogs and blog networks 30% 42%Screen resolution is too small 6% Social networking - 40%Slow 4% Adding RSS feeds 40% 37%Ads/commercials 4% Video ads 27% 37%Loading time 3% Sponsoring podcasts 14% 18%Inappropriate content 2% Mobile/wireless 20% 16%Lack of comfort or ability to sit 2% Ads in RSS feeds 21% 15%Small 2% Product placement in video games 10% 9%Dont have time 2% Note: *ad:tech attendees Source: MarketingSherpa, Inc., January 2007Viruses 1% 080572 www.eMarketer.comToo short 1% 080572Cost 1%Watching alone -Other 13%Nothing 24%Not sure 4%Note: n=1,347 ages 18+ who have ever watched or downloaded an onlinevideo clipSource: Associated Press (AP) and America Online (AOL) with Ipsos PublicAffairs, September 2006076598 www.eMarketer.com076598 User-Generated Content 13
  14. 14. Types of User-Generated ContentAs corporations join average consumers in leveraging the potential By far, the leading site for user-created educational information isof the blogosphere to get their messages out, the vast majority of Wikipedia, with a commanding 24% share of visits, according to acorporate bloggers report increases in traffic to their Web sites from March 2007 study by Hitwise that was recently cited by the Pewtheir blogs, according to a December 2005 Backbone Media study. Internet & American Life Project.Corporate Bloggers Who Have Seen an Increase in Top 10 Educational and Reference Web Sites in theTraffic to Their Web Site from Their Blog, 2005 (% of US, Ranked by Visits, March 11-17, 2007 (% marketrespondents) share) 1. Wikipedia 24.33% Have not seen an increase 2. Yahoo! Answers 17% 4.23% 3. Dictionary.com 3.79% Have seen an increase 4. Answers.com 83% 3.53% 5. SparkNotesNote: n=75 bloggers who run corporate blogsSource: Backbone Media, December 2005 1.62%072904 www.eMarketer.com 6. Google Scholar072904 1.31%The wiki phenomenon is another content area that has 7. Google Book Searchmushroomed in recent years, though its potential for marketers 1.09%has been limited at best. 8. Find Articles 0.99% 9. US National Library of Medicine 0.99% 10. Merriam-Webster Online 0.85% Source: Hitwise as cited by the Pew Internet & American Life Project, April 24, 2007 083390 www.eMarketer.com 083390 To give additional perspective on the extent to which Wikipedia dominates this category, a third of US adult Internet users have used Wikipedia, and more Internet users visit Wikipedia on a typical day than buy something online, visit dating sites, make travel reservations, use chat rooms or participate in an online auction, according to Pew. The research firm estimates that the user-generated encyclopedia claims more than 5.3 million total entries, with 1.6 million of them in English. User-Generated Content 14
  15. 15. Types of User-Generated ContentIn the UK, Wikipedia was actually ranked the top user-generated If Wikia can succeed in building a commercial destination thatcontent destination in July 2006 by comScore Media Metrix, which leverages its brand equity, it should find a favorable climate forconducted a study that ranked five popular sites by the number of advertising support. In a June 2006 survey by the Americanunique UK visitors and percentage change over the same period in Advertising Federation, 91% of advertisers said they should exploitthe prior year. the viral potential of user-generated content sites, and 81% responded the same way about blogs. On the flip side, more thanUK Visitors to Select Web Properties* Featuring half of respondents said such sites were too risky to advertise inUser-Generated Content (UGC), July 2005 & July 2006 given their unpredictable nature.(thousands and % increase vs. prior year) July 2005 July 2006 % change Attitudes of US Advertising Executives towardWikipedia sites 1,852 6,545 253% Advertising on a Blog or User-Generated Content Site,MySpace.com 913 5,173 467% 2006 (% of respondents)Piczo.com 820 4,049 393% Blog User-generatedYouTube.com - 3,918 - content siteBebo.com 912 3,902 328% Advertisers should exploit the viral marketing 81% 91% opportunitiesNote: home and work users; *eBay is excluded from the list ofuser-generated content sites because it is primarily a retail site Concerned about the ability to control brand/ 76% 67%Source: comScore Media Metrix as cited in press release, September 11, product image2006 Useful for niche advertising, but will not have 70% 41%076662 www.eMarketer.com an effect on major accounts076662 Too risky to advertise with due to lack of 62% 53%For all its impact on Internet culture, Wikipedia has not created predictability of the editorial environmentappreciable business opportunities. After all, the free-content site Note: n=140 advertising industry leaders Source: American Advertising Federation (AAF), "Survey on Digital Mediais written by volunteers and run by a small, nonprofit foundation. Trends," June 2006However, an advertising-supported, for-profit spin-off, Wikia, is 073912 www.eMarketer.compoised to leverage the brand equity and technology infrastructure 073912behind the original Wikipedia into a variety of possible venues, Photo Sharingincluding Internet search. Wikia has received venture capital Photo-sharing sites make up another vibrant and growing sectorinvestments from such companies as Amazon. of the user-generated economy. To give some perspective on theAt a March 8, 2007, press conference at the Foreign growth of photo sharing as a consumer phenomenon, betweenCorrespondents’ Club of Japan, Wikipedia and Wikia founder 2003 and 2006 the number of US Internet users who postedJimmy Wales announced that Wikia plans to build a search engine photos online more than doubled, according to a November 2006based on the kind of collaborative cooperation that underpins study by the USC Annenberg School Center for the Digital Future.Wikipedia. Mr. Wales said the company plans to go head to head US Internet Users Who Post Photos Online, 2003 &with search leaders Google and Yahoo!, and that it can capture up 2006 (% of respondents)to 5% of the search market. 2003 11.0% 2006 23.6% Source: USC Annenberg School Center for the Digital Future, "The 2007 Digital Future Project," November 2006 079006 www.eMarketer.com 079006 User-Generated Content 15
  16. 16. Types of User-Generated ContentAn August 2006 Zoomerang study commissioned by Corel A newer crop of photo sites is geared toward allowing users toCorporation found that 24% of US adult Internet users who take post, share, link and edit (or “remix”) their images and videos. Mostdigital photos on a regular basis use online tools to post, print or of the sites in this category are advertiser-supported, and theshare their images—including sharing/printing services like Kodak market leader is Photobucket, which is said to be on track to earnEasyshare, Shutterfly and Flickr, as well as online storage lockers $25 million in advertising revenues in 2007. According to a Maylike Streamload and Glide Effortless. 2007 Hitwise study that ranked sites by share of visits, Photobucket commanded a 40% share in April 2007, well ahead ofDigital Photo Storage Locations Used by US Adult Yahoo! Photos, which had a 5.7% share in the same period.Internet Users Who Take Digital Photos Regularly,2006 (% of respondents) Top Photo-Sharing Web Sites among US InternetHome PCs My Documents/My Pictures folder Users, Ranked by Share of Visits, April 2006 & April 76% 2007 April AprilCDs or DVDs 2006 2007 53% Photobucket 25.0% 40.0%Different folder on home PCs main hard drive Yahoo! Photos 14.4% 5.7% 30% Slide - 4.8%Online services (eg Kodak Easyshare, Shutterfly, etc.) Webshots 11.7% - 16% Flickr 3.6% 4.5%Work PC Kodak Gallery 4.6% 3.8% 11% ImageShack 3.6% 3.1%External hard drive Source: Hitwise as cited by ZDNet IT Facts, May 4, 2007 083676 www.eMarketer.com 8% 083676Photo sharing site (eg Flickr) Because of their potential to easily link user-created photos with 6% other forms of content (e.g., MySpace profiles and music) theseOnline storage site (eg Streamload, Glide Effortless, etc.) advertiser-supported sites have made headlines in recent months. 2% A public spat between Photobucket and MySpace actuallyOther resulted in an alliance between the companies—which makes 7% sense when you consider the upstream traffic that already flowedNote: n=767 ages 18+ between them and the complementary nature of their customerSource: Zoomerang commissioned by Corel Corporation, August 2006 bases and business models.076431 www.eMarketer.com076431 This close relationship between social networking sites andSome of the top user-generated photography sites—especially photo-sharing sites is evident in the data. Photobucket, Slide andthe first-generation ones—are retail-based “photo-finishing” Imageshack all receive the majority of their traffic from MySpace.destinations that allow users to upload their images mostly for the “In September 2006, 57% of upstream traffic to Photobucket camepurpose of ordering high-quality prints. Typically, these prints are directly from MySpace,” reported Hitwise. “MySpace accountedsold on an à la carte basis and mailed to the customer. for 51% of upstream traffic to Imageshack and 77% of upstream traffic to Slide in September 2006.” A smaller category of photo sites operates on a subscription model, charging customers monthly or annual fees in exchange for digital storage space and a tool set to upload, organize, tag and exchange their content. User-Generated Content 16