The Core Problem of User-Generated Content
Two recent articles, which when you connect the dots, reveal the core problem of user-generated content. In the 2/16/09 Newsweek, Daniel Lyons admits the futility of blogging as a way to generate revenue. In the 2/7/09 Economist, Hulu is emerging with a viable business model for online video. Why is Hulu starting to work? Because it's content is not user-generated….
User-generated content is what you find on YouTube, Facebook, Twitter, and MySpace, and thousands of blogs — it is all content generated by individuals. (The core issue with blogs is humorously captured at Despair.com) In the earlier days of the Internet, user-generated content was found on web pages (GeoCities) and email. I worked at eGroups (now Yahoo!Groups) where our content was user-generated emails on every topic under the sun.
On the one hand, user-generated content seems like a great business opportunity since it doesn't cost anything for the company to produce. On the other hand, it is extremely difficult to monetize because of two problems: quality and venue.
The quality of most user-generated content is extremely poor in terms of its value to advertisers. Most advertisers want to be associated with good content that is consistent with their brand and are afraid to be associated with content that is poor or not within their control.
Venue is the other problem. When I am reading email, Facebook, or watching YouTube, I am focused on that task and not generally responsive to advertising since it interferes with what I am trying to do. It is not the right venue.
Because of these problems, no company has really figured out how to monetize user-generated content of any kind in a meaningful way. As the the Economist notes – "YouTube is undoubtedly a phenomenon, but it is not a business."
Which brings us back to Hulu. Hulu is starting to work because it brings together professionally generated content. In other words, you actually want to watch this stuff and are more open to advertising that is associated with it. In a separate post, I'll look at Hulu in more detail — speficially the choices they made to design a viable business model.
