Monday, March 19, 2007

User-generated content and Web 2.0

In the last two or three years there has been a tremendous growth in the amount of user-generated content being made available via the World Wide Web. One manifestation of this has been the explosion in the number of blogs (weblogs). Another is the growth of Social Networking sites like MySpace and YouTube. Some observers have seen this as heralding a completely new phase in the development of the Internet and have referred to it as Web 2.0.

Is this really a clearly distinguishable new phase or just an evolutionary development of what we have seen before? Is it, as some skeptics allege, just a lot of marketing hype that will only lead to the creation of "Bubble 2.0" and a reun of the crash? And, whatever we think about the notion of Web 2.0, how will those sites hosting user-generated material be able to turn it into a reliable profit stream?

What is Web 2.0 ?
The term was originally coined by Dale Dougherty, an employee of O'Reilly Media, and then, after he had organised a conference on the topic, worked up into a more extensive document by Tim O'Reilly, the company's President and CEO. What seems to come across in all the discussions about Web 2.0 is that there are now many more web sites that are essentially interactive and two-way rather than static and one-way(permitting uploading as well as downloading of material).

Furthermore web applications have been developed to make it easier for users to upload their own user-generated content, or to comment and interact with content that is already there. So, for example, Google has its simple to use Blogger tool. Flickr (now owned by Yahoo) was set up to enable users to store and share photos. News media sites like BBC News encourage people to upload pictures and video clips of newsworthy items. Social networking sites like YouTube, MySpace, and FaceBook have millions of users who upload photos, video and audio clips to share with others, effectively enabling everyone and anyone to be a publisher or a broadcaster. Another key development has been the growth of wikis, websites that allow any one of a group of users to edit material on the website, that is to collaborate on the generation of material. Perhaps the most famous wiki of them all is Wikipedia, the collaborative online encyclopedia.

So the web has clearly developed as a platform. You don't have to have your own server connected to the Internet in order to place material on the web, you can just upload it through one of these web applications.

Whether this merits a label as pretentious as Web 2.0 is a moot point. Certainly contibutors to the IT industry online site The Register were virtually unanimous that it is all just hype. In a poll conducted in November 2005 few respondents accepted the idea that the buzzword had any real meaning. Most were scornful in their criticism.

Social networking
However whether these new developments deserve a special name or not there is clearly an expectation in some business quarters that there are profits to be made. Why else would Rupert Murdoch's New Corporation shell out $580 million to acquire MySpace (summer 2005) and Google take over YouTube in exchange for $1.65 billion worth of stock (October 2006). There is no doubt that they attract millions of users. MySpace has over 100m registered users (4m in UK). According to John Naughton,writing recently in the Observer newspaper, YouTube provides up to 100 million video streams every day. Successful acts like Gnarls Barkley, Sandi Thom and Arctic Monkeys have had their careers launched via their MySpace web sites.

These sites have tapped into the desire on the part of many users to share content in the form of words, pictures or videos with anyone out there who comes across it. And on the part of those who trawl through the material on these sites perhaps the appeal is similar to that which has fuelled interest in reality TV? So the owners of these sites can get huge numbers of visitors without having to create any content themselves. All they have to do is to provide the platform - the space on the servers and the web applications to process the material. This entails costs, of course, but nothing like as much as there would be if the content itself had to be paid for. It seems that, as Nat Torkington observed (quoted in O'Reilly (2005)), "..successful companies all give up something expensive but considered critical to get something valuable for free that was once expensive."

Business models
So the owners of the sites must provide storage capacity, network capacity and tools for uploading, processing and linking content but they get the content for free. How can they "monetize" it to generate profits? A number of different business models have been tried. First we had better note that some of the material on these video sharing sites is not free but provided by copyright owners. For example YouTube has done a deal with the Warner Music Group (see the BBC News story of 18th September 2006). It then made similar deals with CBS, Sony and Universal Music Group (see the AFX News story from the ECommerce Times of 9th October 2006). The YouTube business model is based on targeted advertising revenue through the Google Adsense system. But there may be limits to users' willingness to tolerate advertising. As Keith Regan notes in his piece in the ECommerce Times of 19th May last year, some MySpace pages are "drowning in advertising". This has led other sites to attempt to obtain revenue directly from users through monthly membership fees (Regan cites as an example).

It is still debatable though as to whether there is sufficient revenue to be generated from users and advertisers to justify the huge amounts paid out for these sites in recent years. Some commentators feel that they were over-valued.

Other issues
For the site owners The other big issue for the site owners relates to copyright concerns. If user place copyrighted material on social networking web sites will the owners of those sites get sued by the copyright holders? This is one reason why Google has been entering into deals with copyright holders like the Warner Group. After buying YouTube Google set aside $200 million just in case they found themselves suffering legal damages in relation to copyright issues. Now they face a legal challenge from Viacom who want $1 billion damages because of the display of copyrighted material.
For the users. Users might like to stop and think whether they can trust the owners of the social networking sites to look after their data. It is all very well taking advantage of the free storage and easy uploading of material to these sites, but a prime principle in data management is the separation of content and software. There is a danger that users are letting their data become too embedded in the software architecture. And what about compensation for content providers. YouTube CEO Chad Hurley indicated a move in this direction at the World Economic Forum held in Davos in Januray 2007.

Some other observations
O'Reilly (p8) makes a very interesting comment that has echoes of an important principle of economics "..users pursuing their own selfish interests build collective value as an automatic byproduct". Like any other network a social networking site does after all reflect the usual network externality effect so that the value of the network to any one user automatically increases as more users are added. But more than that, by providing a built-in process for aggregating data network owners automatically reap the added value, which comes as much from the network links as
from the content itself. Freely chosen keywords and tagging of sites by contributors enhances the value of the database.

Niche networking sites
It is not only the mass market social networking sites that can benefit from the new approach to creating and accessing content. More specialist and niche networking sites have been established, such as the gay networking site gaydar which is reported to have a million UK members. i-spark is a specialist social networking site for engineers and scientists. And Reuters has recently set up a special social networking site for the financial services community (see Lewis Page, The Register, 7th March 2007).

Where will it end?
John Naughton notes that some analysts predict that by 2010 over 70% of web content will be user-generated. This is all part of the gradual reversal of the mainstream media "broadcast model" to one where users themselves decide what is seen through a self-rating system. For example the company Digg allows users to rate videos posted on YouTube and similar sites. This provides a collaborative and democratic approach to content programming. Consumers not only create content they also directly influence what other people look.


  1. Leo Benedictus (2006) I told America to eat Jaffa cakes. The Guardian, 31st May 2006. Available online
  2. John Breslin and Stefan Decker (2006) Semantic Web 2.0: Creating Social Semantic Information Spaces. Presentation at WWW2006, May 2006. Edinburgh Available online
  3. Curt Finch (2006) The Web 2.0 transformation. Linux Insider 27th September 2006 Available online
  4. Dan Fost (2006) The Internet Web 2.0. San Francisco Chronicle 23rd June 2006. Available online
  5. John Hagel (2005) What is Web 2.0? September 2005. Available online
  6. Bobbie Johnson (2006) Search giant sets aside $200m for YouTube court cases. The Guardian 15th November 2006. Avaliable online
  7. Guy Judge (2006) Google and YouTube. guy's economics and the internet blog. 10th October 2006.
    Available online
  8. John Lanchester (2006) A bigger bang. The Guardian. 4th November 2006.
    Available online
  9. John Naughton (2007) Writers who work for nothing: its a licence to print money. The Observer 11th March 2007. Available online
  10. John Naughton (2007) They're interfering with TV: please adjust your mindset. The Observer 18th March 2007. Avaliable online
  11. Andrew Orlowski (2005) What is Web 2.0? You redefine the paradigm. The Register 11th November 2005. Available online
  12. Tim O'Reilly (2005) What is Web 2.0. Design Patterns and Business Models for the Next Generation of Software. Available online
  13. Tim O'Reilly (2006)Web 2.0 Compact Definition: Trying Again. Available online
  14. Lewis Page (2007) Reuters to start MySpace for City traders. The Register 7th March 2007 Available online
  15. Viviane Reding (2006) The Disruptive Force of Web 2.0: how the new generation will define the future. Youth Forum, ITU Telecom World, Hong Kong, China, 3 December 2006. Available online
  16. Keith Regan (2006) Six degrees of separation from profits? Making Social Networking Pay. ECommerce Times Available online
  17. Steve Rosenbush (2006) Socializing for dollars. ECommerce Times 16th April 2006 Available online
  18. Bill Thompson (2006)N Learning to Love Web 2.0 BBC News 27th March 2006 Available online
  19. Tim Weber (2007) Social networking, Web 2.0. BBC blog from the World Economic Forum 27th January 2007. Available online
  20. World Economic Forum (2007) The Impact of Web 2.0 and Emerging Social Network Models. Webcast of a panel discussion featuring Bill Gates, Caterina Fake (Flickr) and others. January 2007. Available online

Full list of social networking sites from Wikipedia.


Post a Comment

<< Home