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Monetizing User-Generated Content

User-Generated Content (UGC) has tremendously grown in terms of volume and awareness over the last couple of years (way beyond the tipping point).
50% of American adults have now been on a blog. On the other hand, monetizing it is still very
early stage: $50M of ad spending in 2006, expected to grow to $750M by 2011.

A few trends
I gathered at the Media Summit hint at how UGC will be monetized in the long run:

- The "Vert Ramp" still rules creative content, despite the hype about Youtube; the
consensus at the conference, echoed by moguls like Barry Diller (or Marc Cuban in his blog), is that
creative original UGC is large in quantity but somewhat short on talent: the
few ones that turn into actual success online (e.g. lonelygirl15) will get
sucked into the media machine that will provide them with mass production
means; moreover, advertisers are still reluctant to spend much on a media which
content is dubbed “risky” and “uncontrollable”.  

- UGC works well in a social network type of
environment, because the social bond is the context that makes the content
really interesting to the audience. This is the sweet spot for Flickr,
Photobucket, et al.; the emphasis here to further grow this segment should be
on privacy controls and ease of use; from an advertising standpoint, the
ability to abstract user profiles and match them in real time with ads is still
missing; for now, MySpace captures over 60% of all ad money going to social
networks;

- Comments and reviews are the most compelling kind
of UGC from a media and ad revenue standpoint. Those not only add free content
to professionally edited content, but also intimacy, relevance, and
stickiness. This UGC category represents a significant advertising opportunity for traditional media and websites that remains to be fully converted.