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The Ad Question About User-Generated Content

Kim Hart

Following the trend of the last couple of years, user-generated content is expected to grow substantially this year. But the advertising revenues brought in by this type of content isn't expected to keep pace.

A report released today by eMarketer projects that user-generated content advertising revenues will will make up 1.62 percent of US online advertising spending by 2012, up from .77 percent last year.

In 2007, user-generated content brought in $162 million in ad revenues. This year, that's expected to increase to $278 million, or 1.07 percent of the online ad spending, according to Paul Verna, senior analyst at eMarketer. The firm calculated these numbers as percentages of ad spending on online video and social networking sites, where the bulk of user-generated content usually appears.

The main barrier is the content's unpredictability. Some marketers are wary of putting their brands alongside material that could be racy or off-color. With the introduction of sites that offer premium content, such as Joost and Hulu, more ad dollars are going to content that is perceived to be safer.

While ad spending may not be growing as fast as some sites such as YouTube or Facebook had hoped, market research also shows that the demand for online video is growing at a fast clip. Still, there seems to be a disconnect between the rise in user-generated content and the cautious outlook for monetizing the content through ad revenue. A recent iMedia Connection poll showed that 68 percent of online marketers expect established media will lose revenue to user-generated content. But a similar number of marketing executives polled by AdMedia Partners say the growth of social networks, and the content associated with them, is overhyped. Nearly half of them said the projected growth around user-generated content is overhyped.

It appears the rise of user-generated content--specifically videos and social networks--is reaching a turning point. Internet users are flocking to them, but the struggle to make money from those users still lingers.

By Kim Hart  |  April 22, 2008; 10:36 AM ET  | Category:  Kim Hart
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