Saturday, January 20, 2007

User Generated Video Popular, Yet Hard to Monetize

eMarketer, one of the best sources for marketing information, research and analysis posted an interesting article the other day about user generated online video (UGOV). They referenced a study from London's Screen Digest that found that user generated online video was responsible for 47% of all the video consumed in the US in 2006. They further predict that by 2010, UGOV will account for 55% (44 billion streams) of video consumption on the net.

Like my prior article about monetizing virtual worlds, companies and marketers are looking at the sheer numbers of eyes on the monitor and they're recognizing that this could become a significant source of revenue and branding for them. eMarketer goes on to recognize that while UGOV is a significant source of traffic and media consumption, it only accounts for 15% of revenue from online video sources.

So what's a company to do? How does one create a stable business and profit around UGOV? One answer is to do what Current TV is doing. One of the ways is to create a cable channel like Current TV. I truly enjoy Current TV. They're edgy, they're smart and they create an addictive program watching experience. I like the fact that in the span of an hour, I can be touched, offended, enlightened, frightened and entertained by their submitted videos. Current TV drives traffic to their site and the site drives users to their TV. I enjoy what they do and I think they do it well.

Another option is to monetize the traffic that comes into the site by putting ads and sponsored links on the site. However, this may backfire on the providers when ads start piling up on the videos they want to watch. iFilm and Atom films do a good job with putting short ads on their content, but as more and more providers emerge, it'll be tougher to insure that the users are getting what they want, without sacrificing their credibility. Lastly, if I can watch the same video without ads, what's my motivation to watch the ads?

There are other ways to monetize the streams and traffic: digital sales, subscriptions and licencing technology. The desire to generate revenue has reached a point, where it's becoming like the multimedia "industry" in the early 90's.

Viddling Around blog has an excellent commentary that ties in Esther Dyson's "blasphemous" but accurate comment that there "Was no Multimedia Industry". She maintained that multimedia was a feature and not an industry. The post goes on to note that we may be following the same path now and treating UGOV as an industry and not a feature for relevant sites.

The eMarketer article goes on to say that in 2006, revenues from UGOV sites reached $200 Million in advertising revenue. They predict that in 2010, that revenue will increase to over $900 Million.

I however, remain skeptical of that prediction. I believe it's based on current trending only and the theory that they're treating UGOV as an industry in and of itself... not a feature. Only time will tell at this point.

I think that UGOV has huge potential for relevant and contextual markets, but the rush to profit from it reminds me of a few other internet revolution bubbles. It's exciting, it's exhilarating, it's cool and it's hot... but I agree with Viddling Blog and Esther Dyson, it's a feature, not an industry.

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