Video Websites Lack Revenue Pulling Power, Says Report

17 January 2007

LONDON: The honeymoon period for user-generated video websites such as YouTube and MySpace is over, according to a new report by media analysis specialist Screen Digest. Although the sector boomed during 2006, it is expected to account for just 15% of the total online advertising budget by 2010.

US ad revenues are likely to grow from $200 million (€154m; £101.8m) last year to $875m by the end of the decade, but, says senior analyst Arash Amel: "As yet . . . no one has found a way to make real money from the huge audiences who participate on these sites."

He adds: "The interesting developments in this market are going to be about who can monetise user-generated video online, and how they'll do it."

Screen Digest suggests that sites will have to diversify to survive, especially the smaller ventures that are up against the market dominance of MySpace, part of News Corporation, and YouTube, bought by search giant Google last year.

Amel continues: "Emerging alternatives include online editing, revenue sharing with content producers and hybrid services which offer both premium and user-generated content."

Despite question marks over revenue, other key players are entering the market with Sony, Time Warner, Comcast et al poised to maximise opportunities through 2007 and beyond.

The report says user-generated video remains a fledgling business in Europe compared with the US market, but Screen Digest believes localised versions of big names like MySpace will appear alongside regional sites in the future.

Data sourced from Financial Times online; additional content by WARC staff