Online ads ‘shun user-generated video’

User-generated video sites such as YouTube and MySpace will earn only a fraction of the advertising budgets available for more professional online programming, according to a study.

Such sites’ advertising revenues stand to grow from $200m last year to $875m by 2010, but this will account for just 15 per cent of the total online video advertising budget, according to Screen Digest, the media analysis company.

“No single user-generated [video] site has really instilled a business model yet,” said Arash Amel, Screen Digest’s senior analyst. “The business model for user-generated sites has been ‘build it and sell it and let someone else worry about the business model’.”

The report follows Google’s $1.65bn acquisition last year of YouTube, the industry leader, News Corp’s 2005 purchase of MySpace and a rush by other traditional media groups to enter the market in search of younger audiences.

The report echoes News Corp’s admission that its Fox movie studio and television content will be more important than home-made clips for capturing online video advertising, a market which Screen Digest expects to expand from $1.1bn last year to $6.2bn by 2010.

Peter Chernin, News Corp president said at a recent conference: “We do not see big advertisers advertising with YouTube or MySpace. They have concerns about the content …and there is no scarcity value for the content …so there is very little ability to monetise video advertising on user-generated video.”

But Mr Chernin added that the migration of video advertising to the web provided “the single most positive story” for News Corp’s professionally produced content such as American Idol.