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YouTube, the UGC (user generated content) revolutionary platform, the site that changed forever the world of online video, the second biggest acquisition of Google, is admitting, implicitly, that UGC is dead. At least business-wise.
UGC was the main focus of internet video for years. Those poorly lit, shot and edited videos, which ranged from dogs on skateboards to kids running into walls, were the holly grail of online video revolution. Do you remember all those discussions about the death of TV as we know it, how YouTube is going to take charge of the industry?
Well, it seems that though content is king – it is only relevant to, well, good content. At least, business-wise.
Let’s look at the facts:
1. Out of the ten most viewed clips on YouTube of all times, only 2 are UGC. The rest are professionally produced video clips of famous songs.
50% of UGC in YouTube’s Top Ten
2. YouTube announced deals with major studios to bring proffesional productions to their platform. It seems that the competitive landscape moved from YouTube Vs. Metacaffe to YouTube vs. Hulu
3. Speaking of which, Hulu is gaining momentum quickly:
They are still much smaller than YouTube though:
4. Recent research shows that YouTube could monetize only 3% of its content. Not that good, one will say.
Does anyone really believe that UGC is still a viable business model?
So what’s the future of UGC?
It seems that there is an agreement that UGC is not a good way to make money. Advertisers don’t want to associate their brand with poorly produced content, and Google are trying to maximize the value of YouTube, without a lot of success.
But one cannot ignore the huge traffic this site has, that is still growing.
UGC is nothing more than a loss leader, a great way to bring eyeballs, but nothing more. The myth of UGC as a cheap way to create and monetize content is false. And in my opinion, companies that look at UGC as their main revenue engine, will simply, fail.
6 Comments
Well, Kfir, these are some interesting pointers.
However, UGC has many faces. Not only the Youtube face.
Sometimes you can take the UGC and dress it or direct it towards a more professional outcome. Either by guidance or by screening the users, simply by creating a site that is aimed at a unique group.
UGC is a content model, not a business model.
UGC create traction and traffic momentum based on the fact that content items are personal, “non biased” and add falvor to a core “commercial” items ( see tripadvisor.com ) .
Business model is what makes money. IE Adverts, items sales, subscriptions, lead sales.
In that sense, UGC is a good way to keep your traffic alive as you grow. It is a bad way to start (without the core content people would not come) and a bad way to become huge. At one point when you are very big, you need to become main stream, like Youtube, and bring main stream content (like the movie studios).
I must agree with Guy on this one.
Especially if you look at UGC that is not video-centric.
Flickr which does photo sharing builds upon pro accounts to its site, while they could try monetizing through advertising.
Stackoverflow.com does a kind of a forum based developers Q&A. They monetize through very limited advertising. While it probably doesn’t bring much money it also doesn’t cost a lot to host (text only).
@Guy, @ Tsahi – you are right if we are not talking about video. But video changes the game. Video is a double edge sword: on the one hand it is expensive to deliver, and on the other hand, it’s CPM is much higher than text and banners. So, a site that is based on UGC video, has a major issue with balancing between reach and revenues. If YouTube can’t monetize their expensive to deliver videos with video CPM, what is their case? Nothing besides ads on pro content. Which means that they use UGC as a loss leader – cause they are spending loads of money on it.
Kfir
They raise a good point. There are places where UGS is making money. The problem is with video being more expensive. I belive that this will also change. Not so long ago we were staring at web browsers for 30 seconds to see a 50kb jpg image.
Why does my video start and stop. Its like it pauses itself then starts up again. What can I do to correct this problem. Please help! TKS!