Ads and User-Generated Content

APRIL 22, 2008


Paul Verna, Senior Analyst

Despite the massive size and projected growth of the user-generated content (UGC) movement, advertising revenues alongside this content will remain relatively modest.

eMarketer projects US user-generated content ad revenues of $824 million in 2012, up from $162 million in 2007. By 2012, this total will represent 1.62% of US online advertising spending, up from 0.77% in 2007.

eMarketer’s estimates of advertising spending against user-generated content are calculated as percentages of ad spending on online video and social networking sites. Because the bulk of the advertising activity around user-generated content occurs on video-sharing sites like YouTube and social networking destinations like MySpace and Facebook, eMarketer’s ad spending outlook is limited to these types of online venues.

Related content categories like blogs and photo-sharing were not included in eMarketer’s calculations because they account for a tiny fraction of overall ad spending against user-generated media. Similarly, eMarketer did not include Wikipedia entries, since there is currently no monetization mechanism for this content.

The inherent unpredictability of user-generated content is the main barrier to the emergence of a larger advertising market around this medium. Another obstacle is the migration of ad dollars toward professional content on YouTube and MySpace, as well as on newer sites like Joost, the NBC/News Corp. joint venture Hulu and other network-affiliated portals.

Because of these market dynamics, Screen Digest recently downgraded its revenue expectations for user-generated online video. The company now expects US advertising revenues associated with user-generated video streams to reach $624 million in 2012, growing from $229 million in 2007.

While these ad revenue numbers and growth rates are respectable, they are far smaller than Screen Digest’s forecasts from May 2007, which called for ad revenues of $956 million in 2011, up from $515 million in 2007.

Explaining this change in outlook, Arash Amel, Screen Digest’s head of broadband media, told eMarketer: “Video-sharing is continuing to grow beyond our initial expectations. However, whereas consumption has been increasing, the failure of video-sharing sites and social networks to monetize their assets in a meaningful way has meant that we’ve had to downgrade our revenue expectations.”

Interestingly, even though Screen Digest lowered its projections for ad revenue around user-generated online video, the company significantly raised its forecast of video streams. It is now projecting that US consumers will stream 62.6 billion user-generated clips in 2012, up from 49.9 billion in 2008. Previously, the company forecast 49 billion views by 2011.

Reflecting this disconnect between the expected rise in user-generated video views and the guarded forecast for advertising around this content, attitudes of US marketers and media executives are all over the map.

On one hand, 68% of US online marketers polled by iMedia Connection said established media will lose dollars to user-generated content.

On the other hand, essentially the same percentage of respondents to an AdMedia Partners survey of US senior media executives said the growth potential of social networks was overhyped. Those same executives were almost evenly split as to whether the perceived growth potential of user-generated content was overhyped or accurate.

To learn more about the amateurs who are creating content that attracts professional money, get your copy of the new eMarketer report,

Will Pharma's Big Ad Spend Move Online?

APRIL 22, 2008

Drug companies won't abandon traditional media.

US direct-to-consumer pharmaceutical marketers say they plan to increase their online marketing spending this year and decrease spending on traditional media, according to a March 2008 Cegedim Dendrite study.

Respondents generally said they planned to spend more this year on Web sites, search and e-mail marketing, and less on TV and radio.

Respondents were split over the effectiveness of DTC marketing; 31% said it was less effective than in the past, while the same number said it is now more effective.

Among those who said DTC had become less effective, a plurality (36%) said there were just too many ads in a saturated market. They also cited public backlash and poor media plans as reasons for declining effectiveness.

Those who said DTC was more effective were most likely to credit increasingly savvy consumers who conduct independent research.

Cegedim said that while respondents said they wanted to see more focus on emerging and targeted channels, and less on general mass media tactics, the industry seemed reluctant to actually reallocate budgets to make it happen.

eMarketer predicts that online ad spending by the pharmaceutical industry will indeed increase through 2011, reaching $2.2 billion from $1.2 billion in 2008.

Yet this will represent almost no change as a percentage of total media spending by the industry. US pharmaceutical and healthcare companies spent about 5% of their ad budgets online in 2006—almost the exact same percentage as they will spend in 2011.

"The pharmaceutical industry is in a state of flux or siege depending on your point of view," said Lisa Phillips, senior analyst at eMarketer. "Some of the trouble is self-induced and some is caused by market and regulatory forces, a change in congressional leadership and just plain bad luck.

"In the face of all this, pharmaceutical marketers are sticking with what they know —brand awareness messages—in the media they know best: TV and print," Ms. Phillips said.

The eMarketer Pharmaceutical Marketing Online report will be published next month. Click here to be notified when it is released.

A Web Shift in the Way Advertisers Seek Clicks

By STEPHANIE CLIFFORD

Tyler Townsend, a digital media manager who plans online advertising for travel clients at Ypartnership, an agency in Orlando, had $150,000 to spend on behalf of a Caribbean island’s visitors bureau. And this client did not care about branding — it wanted action.

So Mr. Townsend, who once might have made a simple buy on a site like Yahoo, created a complex campaign, which ran in March. He bought ads on Budget Travel, and he bought out Lonely Planet’s home page for a week. He used custom ad networks that included travel-themed sites, and another that would put the ads only on high-end sites.

Last year, Mr. Townsend said, many clients were happy to spend money just to raise awareness. Since January, however, “everyone’s retail-oriented. They want as many clicks for the dollar as possible,” he said.

So far, the threat of a recession has not slowed the migration of ad dollars to the Internet — as Google’s strong results showed on Thursday, when it reported a 30 percent jump in net income for its first quarter. But as Mr. Townsend’s campaign suggests, the slowing economy might be changing where those ad dollars are being spent.

Increasingly, marketers are looking to ad networks, which sell display advertising across groups of Web sites. Some networks offer targeted advertising; others, called vertical ad networks, include sites that focus on one subject, like travel or sports.

Their growth could mean a lower share of advertising for portals like AOL and particularly for Yahoo, which is particularly strong in traditional display advertising. (Yahoo will report its quarterly earnings on Tuesday.)

In 2007, United States revenue growth slowed at three of the four major portals (Yahoo, AOL and Google) according to an analysis by eMarketer. The fourth is MSN. Any downturn could also be bad news for media sites that attract a lot of display advertising, like CNN.com or nytimes.com, at premium rates.

In the United States, $21.1 billion was spent on online advertising last year, up from $16.9 billion in 2006, according to eMarketer. Search advertising — Google’s stronghold — is the majority of that spending, according to Jeffrey Lindsay, an analyst at Sanford Bernstein.

According to a report by Imran Khan, an Internet analyst at JPMorgan Chase, ad networks “are growing much faster than the general graphical advertising industry.” He estimated that the top 20 ad networks had earned $2 billion in 2007, or 14 percent of the display market.

The reasons ad networks are thriving are price and improved technology. Ad networks charge much lower cost per thousand ads served (known as CPMs), as low as $4 on an ad network with some targeting, compared with $40 and up for some ads on premium sites like MSN or Yahoo.

“While the home pages are still very effective media buys, the price tags on them have become a little outrageous for many advertisers. For all the growth that has gone on from a site standpoint, there are other ways to amass that type of audience fairly quickly that are more efficient,” said Margaret Clerkin, the chief executive of Mindshare Interaction, a media-buying firm.

The improved technology has helped. Ad networks once served ads to pages where no advertiser wanted to be, like pages that get few hits or those with controversial content. Now, though, many attractive sites are not major home pages. Also, many ad networks now offer targeting (as do portals, for a higher price), matching ads to likely buyers.

For example, if an airline wants to promote a flight from Dallas to Chicago, it can direct those ads to users with Internet addresses from those areas. Marketers can also direct ads by content: a reader on a cellphone ratings site is probably looking to buy a new phone, while another reader on the Yahoo technology home page might be browsing stories about Wi-Fi and not looking to buy anything.

David Metter, chief marketing officer of MileOne/Atlantic Automotive, a group of car dealerships with over 3,000 employees, said that it was possible to “blow your spend” on a home page ad.

“I would much rather get more specific and go to the customers and have maybe less eyeballs and higher quality eyeballs, or less leads and higher quality leads,” he said.

Based on the success of ad networks, some big players are buying their way into the game. Yahoo bought BlueLithium for $300 million last September. Last July, AOL bought Tacoda for a reported $275 million, and in November, it bought Quigo Technologies for a reported $350 million. Last May, Microsoft bought aQuantive, which owns some ad networks through a subsidiary, for $6 billion. DoubleClick, which also owns ad networks, was acquired by Google for $3.1 billion. Dozens of other networks have sprung up — one tally at eConsultant lists more than 80.

“There’s no slowdown in terms of a really targeted ad spend,” said Mitch Lowe, whose network, Jumpstart Automotive Media, handles ads for 12 automotive sites. (Jumpstart was sold to Hachette Filipacchi Media last year for $110 million.)

However, the reliance on ad networks mean that two of their major attractions — that they are simple and that they are cheaper — are diminished.

“These are the gold rush days now for ad networks,” said David Hallerman, senior analyst with eMarketer. “And that kind of counters the appeal of ad networks for advertisers’ agencies, which was to simplify the purchase of ads. And that’s why its unlikely that a great number of ad networks will survive.”

Even given the choice of ad networks, the continued flow of dollars online means that prices are rising.

Mr. Townsend says that his clients were happy with their campaign and want him to do a similar one. Except this time, they want him to hit the networks even harder.

“We thought,” Mr. Townsend said, “for this amount of dollars, we can get you this many more impressions than we did.”

E-Mail Marketing Still Works

APRIL 21, 2008

But consumer standards of relevance are high.
First, the good news: permission-based e-mail is great at getting consumers to buy.

Half of US adult e-mail users surveyed in April 2008 for Merkle's "View from the Inbox" study, conducted with Harris Interactive, said they had made an online purchase in the previous year as a result of permission-based marketing.

In addition, e-mail was second only to customer reviews on Web sites for influencing online purchases, according to DoubleClick Performics' "Green Marketing Study," conducted by Opinion Research Corporation in February 2008. E-mail was roughly equal to search results in terms of influencing online purchases.

Bad news for e-mail marketers included the fact that consumers are increasingly willing to revoke permission that they have previously granted and that the bar for relevance remains high.

About one-third of respondents in the Merkle study also said they had stopped doing business with at least one company as a result of poor e-mail marketing practices.

In the same vein, more than half of US adult e-mail users told Merkle in 2007 that they were only willing to get marketing or promotional messages in status or transactional e-mails if the offers were relevant to them.

"There is a substantial gap between what marketers believe is relevant to the consumer, and what consumers rate as valuable," said Lori Connolly, director of research at Merkle.

"Traditionally, marketers believed that relevancy meant pushing content that is based on stated preferences or behavior, but companies need to update their view of what is relevant," Ms. Connolly said.

Consumer wariness is often justified. Some marketers are the victims of spammers, who ruin it for everyone, according to David Hallerman, senior analyst at eMarketer.

"Consumers welcome relevant, opt-in e-mails from companies they have a relationship with," said Mr. Hallerman. "But the broad spectrum of spam—any unsolicited message—continues to degrade the e-mail environment for all parties."

The eMarketer US Online Ad Targeting report will be published next month. Click here to be notified when it is released.

Can User-Generated Content Generate Revenue? - eMarketer

Can User-Generated Content Generate Revenue? - eMarketer:

“Show me the money!”

The user-generated content movement is no longer a fad.

In the US, eMarketer projects that the number of user-generated content creators will rise from 77 million in 2007 to 108 million in 2012.

The content is being read, seen and heard, too.

The number of consumers of user-generated content will increase from 94 million in 2007 to 130 million in 2012.

“US Internet users are creating and consuming user-generated content in record numbers,” says Paul Verna, eMarketer Senior Analyst and author of the new report, User-Generated Content: In Pursuit of Ad Dollars, “across an ever-expanding range of online content that includes video, audio, personal profiles, avatars, photo sharing, Wiki entries and product reviews.”

Beyond written blogs, established media outlets like CNN and MSNBC, as well as startups like video aggregator YouNewsTV, are empowering consumers to submit video clips and still images of unfolding events.

“Since many of the growing numbers of Internet users creating social media are also consuming it, this is a content chain that feeds on itself,” says Mr. Verna. “There is a seemingly infinite demand for content, and there are legions of Internet users armed with laptops, cell phones and digital cameras ready to deliver.”

So the content is there, but is it accompanied by a viable revenue model?

”Advertising revenues against user-generated content are modest,” says Mr. Verna,” and they are expected to stay that way for some time.”

Or, as Andrew Keen, author of Cult of the Amateur, said in a Newsweek interview, “Nobody wants to advertise next to crap.”

"Given the size and level of engagement of the audience, advertising revenues around user-generated content will not approach the level one might expect,” says Mr. Verna.

Nevertheless, eMarketer anticipates US user-generated content advertising revenue will reach $824 million in 2012, up from $162 million in 2007.

To see why, download the new eMarketer report, User-Generated Content: In Pursuit of Ad Dollars, today.

One Place for Your Many Online Lives

One Place for Your Many Online Lives

FriendFeed is tearing down the walls between Web haunts such as Facebook, YouTube, Flickr, etc.

Attention, attention: The latest tech darling has arrived, and it goes by the name of FriendFeed. Silicon Valley is buzzing about the seven-month-old startup, which offers a promising if somewhat messy new Internet service. Part of the interest comes from the blue-ribbon pedigrees of its founders, including Google (GOOG) alums Paul Buchheit and Bret Taylor, who honchoed Gmail and Google Maps.

But just as much of the hullabaloo stems from how the founders are addressing a growing issue online: the balkanization of the Web. People are socializing on networking sites such as Facebook and MySpace (NWS) and sharing pictures and videos on Web sites including Flickr (YHOO) and YouTube (GOOG). But all these activities have been walled off from one another, like separate digital worlds. To keep track of friends and colleagues, you have to log in and out of different services constantly.

IT'S WHO YOU KNOW

FriendFeed is one of the first major efforts to break down these walls. With the startup's service, subscribers can pull together on one Web page everything their friends and colleagues are doing on more than 30 Web sites. The goal is to organize the Web's information in valuable ways, a bit like Google does. But instead of using search, FriendFeed uses people you know to uncover valuable information. To find movie recommendations or news items or provocative ideas, you can tap into the wisdom of friends. "Our thesis was that the best filter for information is people you know," says Buchheit.

The FriendFeed service looks a bit chaotic at first. After logging in, a subscriber sees a Web page with a steady stream of items from people he has signed up to follow scrolling down the screen. A news item on the Chicago Cubs. Photos from a trip in Costa Rica. A blog post about bug-eating bats. Depending on how many people you follow, you can see dozens or even hundreds of items each hour.

But FriendFeed isn't passive. Each subscriber can search, sort, or comment on the information in his feed. Thinking about seeing the movie 10,000 BC? Do a quick search on FriendFeed and you may find two colleagues who advise you not to bother. Want creative vacation ideas? Your friends may have suggestions. And if someone posts a link to a New York Times article on Senator Barack Obama's (D-Ill.) campaign, you can start a debate about his chances in the election among your friends. "We tried to map the natural thing that happens in real life, like when someone mentions an interesting TV show at a dinner party," says Buchheit.

The founders plan to sell advertising on the site, which is free to subscribers. They raised $5 million in venture money in February, so they have enough cash for operations in the near term.

Tech experts see a great deal of potential in the effort. "With the democratization of the Web, everyone is creating information, but what you want is a way to consolidate that information in an intelligent way," says Pradeep K. Khosla, dean of Carnegie Mellon's College of Engineering.

FriendFeed is developing filters and other tools to give subscribers more control over the information they get on the site. Subscribers now sometimes feel they're being deluged. "When Friendfeed came on the scene, it was like a clean slate," says Jevon MacDonald, a Toronto tech consultant who uses the service. "But then it became overwhelming to me. It is pretty obvious that it's in its infancy."

FriendFeed will have plenty of competition. Facebook offers a similar service where people post updates of what they're doing on the site that could be expanded to include information from other sites. Google is working on ways to share information across Web sites and is pushing for industrywide standards so that data from one site can be easily transferred to another. "The important thing for Google is we want to make the Web better by making it more social," says Kevin Marks, developer advocate at Google. "But the social pieces should be part of the Web, not part of separate sites."

FriendFeed's founders are Silicon Valley standouts. Buchheit joined Google in 1999 and is credited with coming up with the company's famous "Don't Be Evil" motto. He met Sanjeev Singh, another co-founder, when the two of them worked together on creating Gmail.

Taylor and Jim Norris, the other two co-founders, joined Google in 2003 after studying computer science at Stanford University. The two helped come up with Google Maps while tinkering with the search service for local businesses and addresses. The four teamed up last year to work on FriendFeed, which launched publicly in February.

For the four young men, all in their late twenties or early thirties, there's a clear challenge ahead. There's been an explosion in user-generated content over the past five years, and nothing, including Google's powerful search engine, has been able to help people easily find the information they want on social networks. They hope to create a new kind of Google for the next stage of the Internet. "There hasn't been a scalable way of finding the interesting stuff," says Taylor. "There are lots of tools to help me publish that content, but few to help me find the relevant information."

10 Billion Online Videos Viewed in February - Up 66% in One Year - MarketingVOX

10 Billion Online Videos Viewed in February - Up 66% in One Year - MarketingVOX

US internet users viewed more than 10 billion online videos in February - up 3 percent from January (despite February's being two days shorter) and a 66 percent gain from February 2007, according to data from the comScore Video Metrix service, MarketingCharts writes.

Google Increases Share of Videos Viewed

Google Sites once again ranked as the top US video property, with nearly 3.6 billion videos viewed (35.4 percent of all viewed videos), up 1.1 percentage points from the previous month:

• Google's YouTube.com accounted for 96 percent of all videos viewed at Google Sites.
• Fox Interactive Media ranked second with 586 million videos (5.8 percent), followed by Yahoo Sites with 293 million (2.9 percent) and Microsoft Sites with 293 million (2.9 percent).

Audience Data (Unique Viewers)

Nearly 135 million US internet users spent an average of 204 minutes per person viewing online video in February:

• Google Sites attracted the most viewers (81.8 million), who spent an average of 109 minutes per person watching video in February.
• Fox Interactive attracted the second most viewers (55.7 million), followed by Yahoo Sites (37.1 million) and Microsoft Sites (27.1 million).
• ABC.com attracted the tenth-largest viewing audience, and its viewers exhibited heavy engagement, averaging 51 minutes of online viewing per person.

Other notable findings from February 2008:

• 72.8 percent of the total US internet audience viewed online video.
• 80.4 million viewers watched 3.42 billion videos on YouTube.com (42.6 videos per viewer).
• 50.2 million viewers watched 539 million videos on MySpace.com (10.7 videos per viewer).
• The average online video duration was 2.7 minutes.
• The average online video viewer consumed 75 videos.