User-generated blues

Remember when user-generated content was all the buzz? It still is in the social networking space. Facebook is nearly 100% user-generated content, but where’s the business model?

Facebook is top dog in social networking, but it’s number one among the most fickle user base. Not too long ago all your Facebook friends were on MySpace. Should Facebook irritate users further with another UI change or more ads, its users will go elsewhere.

In 2005 Rupert Murdoch surmised that MySpace had achieved permanent dominance in its segment due to Metcalfe’s Law, and promptly shelled out $580 million for the soon-to-be-number-two social networking site. Apparently Murdoch failed to factor zero switching costs into his network valuation model.

But this isn’t about MySpace or Facebook. It’s about user-generated video content. In another blow to the Long Tail [see previous post], both AOL and Brightcove have announced their free video publishing services will go dark in mid-December. From Brightcove’s announcement:

Although more than 40,000 publishers have signed up for the Network, it represents less than 1% of our revenue. Our core business, the Brightcove platform, has been extremely successful for us and for our customers. So we’ve decided to focus 100% of our business efforts on the Brightcove platform, which customers pay us to use.

That’s not much revenue, but a good amount of storage and bandwidth. Brightcove is a distribution platform, so it makes sense to move unprofitable content off the system. AOL is in a much different position. Liz Gannes gives a good analysis over at NewTeevee.

If you’re truly pushing your overall platform as a default, there should be a way for users to post videos without leaving to log in somewhere else. But it’s also an ominous sign that simply hosting a few user videos is a significant enough diversion of resources to be considered worth cutting. The cost of running a video service is pretty high, regardless of how cheap everything is getting.

Video differs from other types of UGC. Watching video online requires greater audience commitment than text, still images, and even audio. Having reasonably short, clearly rated, and easily searchable content all in one place are the table stakes. YouTube for UGC and Hulu for commercial material are the clear winners. There’s no room for a second tier player.

The dynamic changes somewhat for longer form content. Users have to block out a time to watch the content. That investment in time must be rewarded. Quite often the content offerings on the free platflorms don’t reward that investment. Put more succinctly, a lot of the content on free Brightcove Network wasn’t very good, making it difficult to find the good stuff. What Brightcove learned is that charging producers to publish content filters out a good proportion of the nearly unwatchable.

It’s not a feel good story about the democratization of the media or the Long Tail. It’s just a market working itself out. To this capitalist, that’s a pretty good feel good story in 2008.

One Thought on “User-generated blues

  1. Bill Lattanzi on December 9, 2008 at 3:25 pm said:

    excellent digest and provocative. Glad to find your useful blog, sad that the future remains the future for now.

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