July 31st, 2006

Who Will Make Money with User-Generated Online Video?

by

If you thought the social networking market was frothy, online video is rapidly expanding to fill all the bubble space. Jeff Jarvis observed that YouTube has now surpassed MySpace on Alexa (at least in reach) and speculates on who might buy YouTube — he also invited me to comment, and I’m going to take up the challenge by focusing on my favorite obscure corner of Web 2.0 — business models.

In particular, I’m going to focus on business models that reward the “users” who everyone is depending on to “generate” all this video “content.” The following list of business models is by no means comprehensive, but it’s indicative of the rush to figure out how to make (or in some cases lose) money:

1. Attention

Attention has been the most successful form of currency for user-generated online video to-date, which has rocketed YouTube to stardom, and has prompted everyone from Google to Grouper — and now AOL — to get in on the game — even the venerable CNN wants in on the user-generated content action. Of course, CNN is not offering “attention” so much as a chance to participate in “journalism”:

User-generated content has the potential to play a pivotal role in journalism whether it’s online or offline,” Mitch Gelman, senior vice president and executive producer for CNN.com.

The quest for attention has also been the key driver of the social networking explosion, at MySpace above all.

My standing question here is how long users will be satisfied with attention as the only form of recompense — especially since YouTube changed its terms of service to exert more ownership over uploaded content:

“…by submitting the User Submissions to YouTube, you hereby grant YouTube a worldwide, non-exclusive, royalty-free, sublicenseable and transferable license to use, reproduce, distribute, prepare derivative works of, display, and perform the User Submissions in connection with the YouTube Website and YouTube’s (and its successor’s) business… in any media formats and through any media channels.”

2. Advertising revenue sharing

Revver has been a high-profile innovator with this model, offering to share 50% of advertising revenue with users that submit videos.

3. Subscription revenue sharing

LuLu.tv’s approach is to get users to contribute a fee to a collective pot, which will be doled out to users proportional to how often their videos are viewed.

4. Free bandwidth in exchange for advertising

Red Swoosh’s approach shines a spotlight on one of the key issues for YouTube — the high price of bandwidth. Red Swoosh uses P2P technology to provide essentially free bandwidth — in exchange, Red Swoosh delivers pre-roll ads in any “swooshed” videos. Users can pay for a “Pro” account with no ads.

Red Swoosh appears to be anticipating a moment when successful content creators will start to eschew YouTube and its lack of rights and revenue sharing.

So who will be the winner in the user-generated video game? Just as MySpace is having trouble monetizing its huge sea of user-generated content, I think YouTube and others that traffic in the “America’s Funniest Home Videos” category of online video will continue to get A LOT of attention:

YouTube Vs. Other Online Video

BUT they may be be hard pressed to monetize it. There’s no real premium on lip synching, stupid human tricks, and soft core porn videos, and advertisers will eschew this kind of content in video the same as they have on MySpace.

I think the real winners long-term will be platforms that enable a new generation of content producers to break free from the old media content hierarchy and make money from their creativity. As Umair reminds us, it’s all about enabling creativity.

It’s not just content creation and distribution that will be democratized — the business of content will be democratized as well.

As to the question of who might buy YouTube, Rupert Murdoch has certainly shown a willingness to value online properties based on audience size rather than business models.

Comments (43 Responses so far)

  1. So, although some suggest that to create online video content is to take a vow of poverty, there is that 60% in the IPG study who say remuneration is a good thing and the 57% who are brand friendly. Scott Karp at Publishing 2.0 asks directly, Who Will Make Money With User Generated Online Video? Karp highlights what he refers to as his favorite obscure corner of Web 2.0, business models. He suggests four: The attention model which is described in the IPG study as personal recognition, coveted by 62%. I haven’t seen this part of the study but

  2. , meanwhile, reports on Wikipedia’s celebration of the 750th anniversary of the Declaration of Independence, and Techdirt talks about Stephen Colbert’s jokey TV segment on Wikipedia. Publishing 2.0 has a couple of posts about users making money from online content, specifically with reference to YouTube. Yahoo have launched a build your own search engine, along the lines of Rollyo (which seems somewhat pointless, as Rollyo already uses Yahoo

  3. But why not give the audience something to shoot for by offering a nominal fee for any content that, say, hits a certain threshhold of pageviews or makes it on TV? It would still be cheaper than paying professionals to create the content. And by paying the top contributors, CNN.com would be able to motivate everyone who contributes as long as everyone can strive for that same prize. Of course, you don’t get paid for anything you put up on YouTube either. But it’s not starting from scratch in the

  4. I read a really interesting article the other day – Who Will Make Money with User-Generated Online Video? and it was very thought provoking. When it comes to Web2.0 and User-Generated Content, YouTube is the belle of the ball. It has the technology, the traffic and the audience, but where is the money? Is it in a subscription-based model? Free-bandwidth in

  5. If you want to be rich stop being frightened, via PicoBusiness. How to launch a business in your 20s on StartupJournal. Further (mostly relevant) Reading A great series of posts on building blog traffic on Okdork. Who will make money with user generated video? Matt Cutts answers SEO questions in his videos, here’s a partial transcription of one. Ray Ozzie on Attention on AttentionTrust. The secret diary of Steve Jobs. 10 things not to do, from the women behind the tech guys.

  6. higher trust factor than virtually all other forms of advertising, and that word of mouth is a frequent factor for purchase. They also recognise that bloggers are the most important initiators of online conversation right now.” Thanks for admitting it. Scott’s got four ideas on how to make money with user generated video: Attention, advertising with revenue sharing, subscription revenue sharing and free bandwidth in exchange for advertising. I’m sick of all the C’s personally (CPC, CPM, CPA, CPXYZ), but who am I? All I know is YouTube is going to need to figure

  7. Stuff I ReadUnderstanding the 1% Rule: MotivationsThe Fallacy of Web 2.0Wonkette’s Ingredients for a Successful BlogYouTube: Notes to SelfWho Will Make Money with User-Generated Online Video?

  8. as a form of recompense for their efforts. But for savvy “users” — or in this case video production artists, let’s get real here — getting paid in attention while hosting platforms like YouTube get all the take-to-the-bank revenue is sheer lunacy. To all the Web 2.0 sites that think they are going make a fortune off of “free” user-generated content — it’s the users calling…they want their money. And if you don’t give it to them, they are going to take their content elsewhere.

  9. you have high-quality content that is carefully selected and researched and published under a brand that you trust (e. g. IEEE or Springer scientific journals). But that would also apply to other publication forms (e. g. video). While the question of who will make money from user generated content is important, it is even more crucial to find out what the conditions are for any provider (content or service) to find viable business models. If continuing to think about it, I would also have to include software (which is digital, after all). What

  10. Who Will Make Money WIth User-Generated Online Video? by Publishing 2.0 The business of content will be democratized as well.

  11. or what contributes most to them and how is this related to who controls what? We may be dependent on the Web companies to provide us with the tools to the next big trend or service, but they are just as dependent on us for that service to function. A recent Publishing 2.0 post highlights this new “business model.” Right now, the big draw for users to participate in what can be called “media 2.0” is attention, not money. People want attention, and they can get it by giving it. According to

  12. Ever since YouTube’s CEO Chad Hurley participated in Herb Allen’s annual Sun Valley media mogulfest, there has been much speculation about who will acquire the young online video phenom. If the chatter in the blogosphere is a reliable indicator, many believe it will be Rupert Murdoch. After all, with MySpace under his belt, it’s certainly logical for him to want to combine his 80% market share of social networking with

  13. Scott Karp writes about user-generated cpntent: I’m going to focus on business models that reward the “users” who everyone is depending on to “generate” all this video “content.” The following list of business models is by no means comprehensive, but

  14. I read a really interesting article the other day – Who Will Make Money with User-Generated Online Video? and it was very thought provoking. When it comes to Web2.0 and User-Generated Content, YouTube is the belle of the ball. It has the technology, the traffic and the audience, but where is the money? Is it in a subscription-based model? Free-bandwidth in

  15. Ever since YouTube’s CEO Chad Hurley participated in Herb Allen’s annual Sun Valley media mogulfest, there has been much speculation about who will acquire the young online video phenom. If the chatter in the blogosphere is a reliable indicator, many believe it will be Rupert Murdoch. After all, with MySpace under his belt, it’s certainly logical for him to want to combine his 80% market share of social networking with

  16. “The tension between Web 2.0 “openness” and the need to control corporate profits is likely to accelerate and, sooner than many players expect, will start to separate winners from losers.” As an example, they cite the YouTube users agreement: “…by submitting the User Submissions to YouTube, you hereby grant YouTube a worldwide, non-exclusive, royalty-free, sublicenseable and transferable license to use, reproduce, distribute, prepare

  17. “The tension between Web 2.0 “openness” and the need to control corporate profits is likely to accelerate and, sooner than many players expect, will start to separate winners from losers.” As an example, they cite the YouTube users agreement: “…by submitting the User Submissions to YouTube, you hereby grant YouTube a worldwide, non-exclusive, royalty-free, sublicenseable and transferable license to use, reproduce, distribute, prepare

  18. Make Money Online make extra money online, make money with website, Ideas, Tips And Trick, pay per click affiliate, online forex, accept credit cards, Website Hosting, Domain Name, Adsense, Google Who Will Make Money with User-Generated Online Video? Publishing 2 If you thought the social networking market was frothy, online video is rapidly expanding to fill all the bubble space. Jeff Jarvis observed that YouTube has now surpassed MySpace on Alexa (at least

  19. to people from day one, the people you do attract will just switch to the next provider who’s paying more. We’re at a scale now that we feel we can do that and still have a true community around video. Scott Karp of Publishing 2.0, who’s written a fair amount on this topic, offers this shippet of interpretation on Hurley’s comment: “We made all those poor slobs work for free, and now that we’ve sold them out for $1.65 billion, we’re finally ready to share a few crumbs.”

  20. scott,
    you’ve touched upon an issue that will be increasingly relevant in the future as content creaters looking for “compensation” beyond attention. i wrote a post today about lulu.tv and its new program in which video makers pay a monthly fee that goes into a pool with the most money going to people who create the most popular videos. not sure it will work but it puts the spotlight on the compensation issue.

  21. I like the idea of tying compensation for content creators to usage. For example, CNN could pay standard video fees every time someone’s content gets on the air, or is featured on CNN’s main news pages. This incentivizes creators as well as having a “goal” to reach for.

  22. [...] Lulu.TV Enters Video Fray by Mark Evans on Mon 31 Jul 2006 07:54 AM EDT  |  Permanent Link  |  Cosmos Bob Young, who made his fortune from Red Hat, is moving into the videobusiness with the creation of Lulu.TV – a video-sharing service with a twist: it offers a “pro” account in which  it charges content creators $14.95 a month to submit their videos. Of that, 80% is put into a pool, which is split between “shareholders” based on how many times their video is seen each month. For example, if there are one million views, and one person’s video receives 10,000 hits, they would get 1% of the pool.   In a press release, Lulu cites how a “once-struggling video-maker from Manchester” just got $3,966.17 for two videos, and how his success has led to a deal to shoot 10 comedy mobile movies. While Lulu.TV sounds, well, interesting, you have to wonder how many people are actually willing to cough up $14.95 a month for a shot at success – something the company describes as “get played, get paid”. It’s like online gambling, and there is little evidence the growing army of online content creators is willing to pay for the privilege of sharing their material. Without dissing Lulu.TV too much, it strikes me as an opportunistic move by Young, who has a panache for marketing. If anything, Lulu.TV puts the focus on Lulu.com, which offers a self-publishing service for aspiring writers. No doubt, Young is aware of all the buzz surrounding video, and figures Lulu.TV is a no-risk way to get in the game and, at the same time, hopefully put Lulu.com in the spotlight. If Lulu.TV works, I’d eat my (red) socks.Update: Another twist on video-sharing is CNN Exchange – a service that will let people submit their video, audio and stories to CNN. If you think about it, Lulu.TV and CNN Exchange show how companies want to capitalize on user-generated content, but at some point – and I think Lulu.TV is a sign of things to come – content creators are going to want to be compensated for their work. For example, if CNN Exchange gets a great video of a spectacular car accident that attracts millions of TV viewers, doesn’t it make sense for the videographer to get some financial reward? Scott Karp has some thoughts on who will make money from user-generated video content. [...]

  23. Interesting … I wonder about YouTube changing its terms of use – I’m certainly less likely to use it for my webcasts if they can just take the content and use it however they want.

    BTW, I’ve been following your blog for some time in Bloglines, and you may not have noticed but you are one of the inaugaural members of the SLOB awards:
    http://www.sparkplug9.com/bizhack/index.php/slob-hall-of-fame/

    If you wish, you can display the SLOB logo on your site or in a post.

    :-)

  24. [...] Who Will Make Money with User-Generated Online Video? A list of business models is by no means comprehensive, but it’s indicative of the rush to figure out how to make (or in some cases lose) money. link: http://publishing2.com | posted by Piers Fawkes 9 hours ago view profile comment | email this | link | tags: online video all category: Trend: Business | Add this link to… Add to: del.icio.us | my favorites / bookmarks | customize this list [...]

  25. [...] Speculation currently abounds as to who might meet YouTube’s proposed $1 billion price tag – Russell Shaw at ZDnet has a list of six, from Adobe (unlikely) to Yahoo! (currently looking like the odds-on favourite). Scott Karp expresses a passing fondness for News Corp as a buyer; others propose the best fit is with Apple and its iTunes/video iPod combo, or point out that a video content producer/distributor would kill YouTube (a notion I’m broadly in agreement with). Personally, I think it’s going to make most sense for eBay. [...]

  26. [...] Publishing 2.0 Scott Karp on the Convergence of Media and Technology « Who Will Make Money with User-Generated Online Video? | Home | [...]

  27. You Tube’s license to use your content terminates as soon as you withdraw the content from the site, which virtually eliminates You Tube’s ability to use the content in any other medium. I bet they will be cutting online syndication deals though.

    Scott, don’t you think You Tube has little choice other than to adopt Revver’s model? How else can you monetize that content and crowd without alienating the content producers?

    Also, thanks for the link to Red Swoosh… hadn’t seen that. Given the fact that Revver provides free hosting AND 50% of ad revenue, plus the fact that Red Swoosh requires an install by the viewer, the concept seems dead in the water to me at this point. Maybe I’m missing something.

  28. Mark, I too am skeptical of Lulu.tv’s model — there’s a Ponzie scheme aspect too it, and there are too many other options with no cost of entry.

    John — many thanks, I’m honored — you’re not the first to think I’m a slob.

    Brian, I don’t know if YouTube will adopt the exact same model as Revver, but I do think that they need to create a revenue sharing platform if they want to keep the content that actually has the potential to generate revenue. I agree that Red Swoosh’s that the viewer install software is a tough proposition — it all depends on how much the viewer WANTS to view the content.

  29. To be clear, in Ponzi schemes you *only* get paid when you induct new members. In this case, you get paid on every click (i.e. it’s merit based), and you can affect the outcome (i.e. change your odds), so it’s not gambling either. It’s more like a co-op.

    And “other options with no cost of entry do not pay creators”, and they end up with a mess of shoddy videos, porn ads, and copyright abuse.

    If they do pay creators, they do so with ads. Ads create site clutter, bother users, and bring one more voice into the editorial flavor of a site. (e.g. an advertiser likes to decide what video their ads play with/near or not).

    That said, we do have a free membership. Free users can upload and share all they want, they just can’t get paid.

    Maybe we’ll figure out a way to get money in the co-op that’s not from creators. Say from user donations, or monthly site patrons/sponsors.

    Thanks for blogging about us!
    –jeremy

  30. [...] Who Will Make Money with User-Generated Online Video? [...]

  31. [...] models for user-created online video by Dragos, 02 Aug 2006, 23:18 Category: Business models, Comments (0) websites like youtube and the like – I also like the ending phrase stating that Murdoch paid forMyspace rather considering the audience than a certain business model. Do you have anything to say? Fill in the below Name (required) [...]

  32. [...] If I had talent, I imagine I would want to get paid. It seems to be coming to a head pretty fast [...]

  33. [...] If you haven’t read Publishing 2.0’s recent post about monetizing (or not) the user generated video space, run, don’t walk to read it. Scott Karp walks through the four most common forms of monetization found in the online user generated video space to date. Some great observations and insight to be found. [...]

  34. [...] Who Will Make Money with User-Generated Online Video? Distributed Revenue-Sharing Ad Platforms Are the Paradigm For Monetizing Social Media [...]

  35. [...] In MySpace + Online Video + YouTube Written By Robert Youngwindow.document.getElementById(‘post-6645′).parentNode.className += ‘ adhesive_post';Ever since YouTube’s CEO Chad Hurley participated in Herb Allen’s annual Sun Valley media mogulfest, there has been much speculation about who will acquire the young online video phenom. If the chatter in the blogosphere is a reliable indicator, many believe it will be Rupert Murdoch. [...]

  36. [...] Scott Karp takes a look at four ways for users to make revenue from video they post online: attention, advertising revenue sharing, subscription revenue sharing, and free bandwidth in exchange for advertising.  Link:  Publishing 2.0.  –Dennis [...]

  37. Excellent piece. I’ve made decent money on Revver ($2000) and Metacafe ($2200). And I’ve started to experiment with Eefoof. But Lulu.TV was new to me.

  38. [...] You will, dear reader. But now even more people will. Scott Karp, the popular “Publishing 2.0″ author, has given away some of our secrets in his article “Who Will Make Money With User-Generated Online Video.” That’s okay. There’s enough to go around. [...]

  39. Great post!

    I’ve been thinking a ton about what business model will unlock consumer generated media long-term (not, the flavor of the week). Looking at the past’s biggest winners online I see names like Google, Overture/Yahoo, and eBay — all businesses that monetize content in a marketplace fashion. Although they are toying with a variety of hosted-content plays, their core revenue/profits flow from taking a cut of marketplace transactions for advertising or goods/services.

    Therefore, I’ve been searching for THE marketplace for consumer generated media. It isn’t hosting-centric players like YouTube, MySpace, Revver, Flickr, Blogger, TypePad, WordPress or FaceBook; but it should unlock value for users of all of those. The closest platform I’ve found is PayPerPost — if you can get past the knee-jerk reaction that people are driven to post for money, not self-expression. I believe self-expression is the key to consumer generated advertising and allowing people to monetize what they already do. Interestingly, monetization may help increase the quality and quantity of self-expression, but the driver of CGM will always be sharing your opinions/experiences/talents.

    Whether you agree or disagree, click my sig-digg and I’d love to hear whether the future of CGM includes organic and sponsored content; and whether the best positioned business model is NOT hosting-based, but instead leverages a marketplace for buyers and sellers of CGM to transact with each other.

  40. [...] Who Will Make Money with User-Generated Online Video? July 31st, 2006 [...]

  41. [...] C’est ici. [...]

  42. [...] If you haven’t read Publishing 2.0’s recent post about monetizing (or not) the user generated video space, run, don’t walk to read it. Scott Karp walks through the four most common forms of monetization found in the online user generated video space to date. Some great observations and insight to be found. [...]

  43. [...] Publishing 2.0 » Who Will Make Money with User-Generated Online Video? Says: July 31st, 2006 at 10:51 am [...]

  44. [...] Last summer, in It’s The Users Calling…They Want Their Money, I wrote: User-generated content is going through a novelty phase, where most “users” are content with attention as a form of recompense for their efforts. But for savvy “users” — or in this case video production artists, let’s get real here — getting paid in attention while hosting platforms like YouTube get all the take-to-the-bank revenue is sheer lunacy. [...]

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