Can User-Generated Content Change Your World? - eMarketer

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Can User-Generated Content Change Your World?

“There’s somethin’ happenin’ here
What it is ain’t exactly clear…”
For What It’s Worth
Stephen Stills

January 28, 2009

Every day, user-generated content (UGC) is part of the online experience of millions of US Internet users. From entertainment to communications to e-commerce, consumers are taking charge of the creation, distribution and consumption of digital content.

And it’s growing.

Up from 83 million in 2008, eMarketer estimates the number of UGC creators will grow to 115 million in 2013.

Even more important, rising from 116 million in 2008, in 2013 the number of US Internet users consuming some form of UGC will reach 155 million.

For consumers, UGC creates opportunities that were inconceivable 10 years ago, when self-expression consisted of letters to the editor, town hall meetings and call-in shows.

Today, whenever people get fired up about anything, they take to the Web—to create, read, listen to or view what other people have to say.

“Unfortunately, if things stay as they are, this frenzy of content generation and attention is not likely to produce commensurate rewards for marketers or site publishers,” says Paul Verna, eMarketer senior analyst and author of the new report, User-Generated Content: More Popular than Profitable.

The prevailing wisdom used to be that user-generated content would attract advertising volume commensurate with its audience.

“The pinnacle of giddy optimism was Google’s November 2006 purchase of YouTube for a jaw-dropping $1.65 billion,” Mr. Verna says.

A number of factors have dampened expectations since then:

  • The inherent unpredictability of UGC and the risks it represents for marketers
  • The absence of advertising standards for UGC and the difficulty in measuring ad effectiveness
  • The expansion of major UGC sites, led by YouTube, into licensed professional media and the resulting flow of dollars toward this newer type of content, which is considered safer by advertisers
  • The global recession, which has led many analysts and research firms, including eMarketer, to reduce online ad spending forecasts, including in areas that directly affect estimates of UGC ad spending, such as online video and social networking

“As these realities set in, content owners, marketers, site publishers, entrepreneurs and everyday opportunists are realizing that there is no easy road to riches in user-generated content,” Mr. Verna says. “Even finding lucrative niches will require patience, risk-taking, creativity and a long-term commitment.”

Of course, at the same time revenue models elude UGC sites, they are still pulling attention away from traditional media, such as newspapers, magazines, television and radio—and putting increased financial pressure on them at a time when they can least afford it.

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