User-generated content (UGC) refers to media content that is not created by the provider of a media channel, but by its users. Originally, the term comes from web publishing and new media content production circles. In the 1970s and 1980s, all content and information was checked by gatekeepers such as newspaper editors and publishers before it was published. Today, thanks to new technologies, media production is much more accessible, user-friendly, and affordable. Often, UGC is a manifestation of crowdsourcing. The content should meet the following criteria:
- Published content
- Creative in-house work
- Creation outside of professional routines
There are a variety of uses for user-generated content, such as problem processing, news, entertainment, advertising, gossip, and research. It is a sign of the democratization of content creation and the smoothing of traditional hierarchies.
UGC is used in particular by the media. Examples of UGC are comment functions in blogs, video portals such as YouTube or Vimeo, web forums, social bookmarking services such as Technorati and digg.com or Usenet. Wikis can be used to set up ad hoc teams of authors, while podcasting can be used to produce and offer audio or video files over the Internet.
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Although user-generated content existed on the Internet long before the World Wide Web (e.g. in the form of letters to the editor), the term “user-generated content” only emerged in connection with the term Web 2.0. Some websites with user-generated content have grown rapidly (e.g. MySpace, Flickr, YouTube).
The share of user-generated content has risen sharply in recent years due to technical developments on the Internet. This was mainly due to falling prices for storage space, computer equipment and increasingly available broadband connections.
Different expectations are associated with user-generated content. Some would like to see a wider range of offers that don’t just follow the mainstream. In business, e.g. in the media industry, it is hoped to increase the number of users and thus sales and profits by integrating content generated free of charge. In the meantime, companies are trying to develop viable business models based on UGC. So far, however, UGC platforms are still a loss-making business for their operators in most cases. For example, the well-known video platform “YouTube” has 200 million dollars in advertising revenue per year compared to significantly higher traffic costs.
Some online projects lure their users with opportunities to earn extra money through the content they create and publish themselves. The approaches range from participation in advertising revenues to self-distribution of digital content in the form of an online marketplace or an authoring platform.
The possible business models with UGC usually target different focal points. These include network effects, in which additional usage activity is achieved by additional users in the form of, for example, word of mouth. Ideally, in order to achieve successful marketing communication, the so-called “critical mass” must be achieved in order to generate benefits for users and companies. Typically, around 10% to 20% of a brand’s customers create 80% of UGC through the brand. This phenomenon is known as the Pareto principle. Reviews and recommendations of products are intended to increase sales in online shops.
Furthermore, the lock-in effect plays an important role as a switching barrier for users due to high and already made investments (time, money, effort). One advantage of monetizing UGC is the low marginal cost. Although there are high first-copy costs, at the same time low reproduction costs due to the digital nature of all goods. Other business models include specializing in individual services or products in order to tap into niche markets on the basis of precise or pointed target group and core business definitions. Understanding the new role of the customer (“from consumer to prosumer”) also counts towards business models.
