Business Models for User-Generated Media

Tomorrow morning I’ll be speaking at http://ibreakfast.com/ on Business Models in User Generated Media. I have attached a DRAFT of my talk below. I’d be grateful for any feedback readers might have. In particular, I’m trying to get rough revenue estimates for each of the categories below.

Business Models for

User Generated Media (UGM)

(Thank you to Detelina Kalkandjieva for her research help!)

As introduction—-Shawn Conahan, CEO, Intercasting Corp., observes that several macro level changes are driving the explosive growth in user-generated media:

1. We are moving from top-down media to point-to-point media. 57% of online teens, ages 12-17, create content for the Internet.

2. Media distribution is changing from pushing from the center to circulating around the edge.

3. Lastly, media is converging with personal communication, and it’s happening in the mobile space.

We’ve identified eight business models around user-generated media, which I’ve listed below in roughly declining level of revenues.

1. Hardware

There is tremendous opportunity in selling very small printing presses to the masses. For example, InfoTrends/CAP Ventures projects that worldwide camera phone shipments will grow from 178 million units in 2004 to over 860 million units in 2009. By 2009, camera phones are expected to account for 89% of all mobile phone handsets shipped. 100% of those devices are being used to generate content (photos, SMSs, emails, and of course speech), and the great majority of those devices are being used to generate media (which for purposes of this sentence I’ll define as content reaching more than one person).

2. Advertising Platform

Examples: Myspace, Facebook. A search engine like Google, which rides on top of the growth of Internet usage, is also benefiting from the rise of UGM. UGM is particularly helpful for advertisers looking to reach very targeted small communities. 24/7 Real Media points out that to be successful, UGM hosts will need scale in a) advertiser acquisition; b) delivering the right ads to the right person; c) hosting and screening very complex data– hundreds of thousands of sites with millions of transient visitors.

The backdrop for this phenomenon is, of course, the explosive growth in Internet advertising. Google will sell more advertising in 2006 than any of the major TV networks or newspapers. 24/7 Real Media observed that in 2006, "Internet advertising will continue along on the same trajectory that the cable TV industry traveled during the 80s and 90s. The key differentiating factor that will continue to fuel growth of Internet advertising is its transparency, flexibility and accountability."

3. Promoting a User’s Services

Examples: Clay Shirky; Danah Boyd; Jeffrey Zeldman.com ; Scott Allen. People use their virtual presence for marketing, for job search, business development, and so on. Charlene Li of Forrester VERY roughly estimated that her blog had generated $1m in revenues for Forrester. This practice is most applicable for independent consultants, but is more and more broadly relevant as more people move to a self-managed career.

4. Enabling Software

Companies like Six Apart, Lithium, and 21Publish are happy to sell you software to build your own UGM platform.

5. Analysis: Selling the Long Tail’s Content

Another approach to monetizing the long tail of content is the approach of my firm, Nitron Advisors. We work primarily with institutional investors, and provide direct access to a network of frontline industry experts. The traditional model of consulting is: we have smart employees who will tell you what’s going on. It’s top-down, like traditional television. Our model is: we have access to millions of frontline industry experts who will tell you what’s really going on.

How do you think Iams pet food feels about the negative results that show up when you search on ‘Iams’? Jupiter Research reports that 26% of top search results for world’s 20 largest brands are consumer-generated. Nearly 150M searches are now conducted every year on the term ‘new car’. In a Forrester Research study in June 2003, 74 percent of car buyers named consumer reports as the most influential factor in their purchase decision.

Firms must know what’s going on out there in the online world. Having a corporate blog is helpful; and firms like Trendum, Hitwise, Nielsen BuzzMetrics, Cymfony, or Brandimensions would be happy to monitor the UGM world for you. You can use this input to redefine your marketing and pick up valuable ideas for R&D.

6. Brand-Building and Support

Examples: Albourne Village, Value Investors Club. Many companies are sponsoring UGM platforms primarily in order to promote their corporate brands, and to tap the wisdom of the community around them.

You can also use UGM to cut your support costs. When an Act user looks at online chat about Act software, instead of contacting Act directly, he’s saving Best Software some money.

7. Subscription Fees

Examples: LinkedIn, OpenBC, Minyanville. Certain online communities, based heavily on UGM, have a strong enough brand to charge membership fees.

8. Producing UGM

Examples: BzzAgent. Companies like this will proactively try to manage and influence online opinion.

Selected Sources for this Presentation:

Blogging Business Models

http://investors.qumana.com/blog/BloggingBusinessModels

The Rise of the Consumer-Generated Media Machine

http://publications.mediapost.com/index.cfm?fuseaction=Articles.showArticleHomePage&art_aid=28733

Consumer-generated media is becoming more and more commercialized by the day

http://www.m-travel.com/news/2006/05/consumergenerat.html

Lessons from Vloggercon 2006

http://rohitbhargava.typepad.com/weblog/consumer_generated_media/index.html

How to use social media in B2B marketing

http://www.imediaconnection.com/content/10017.asp

Are consumer-generated ads here to stay?

http://www.imediaconnection.com/content/9521.asp

What to expect from CGC

http://www.imediaconnection.com/content/9332.asp

The Agency of the Future: Consumers. Five consumer-generated campaigns (http://www.imediaconnection.com/content/9265.asp)

The Year in Consumer Generated Content

http://www.imediaconnection.com/content/7800.asp

Tagvertising = Blogging 2.0… Already?

http://www.imediaconnection.com/content/5467.asp

Consumer-generated marketing

http://www.imediaconnection.com/content/4045.asp