The term UGC (User-Generated Content) is one of the latest tags buzzing around in the online world. A great deal of hype seems to be surrounding this acronym but what exactly is UGC? Apparently all the sharing of blogs, pictures, videos, and even emails falls underneath this term and while the free flow of ideas and thoughts may seem to be a positive sign of an ever growing online world, lurking in the background is one impending question.

But before we start delving into such an abyss, it would be wise to dissect UGC. For some reason I cannot stop thinking about the negative connotations the term User-generated content has. It doesn’t inspire creativity nor does it encourage the much promised free flow of ideas. The term ‘generated’ is too mechanical, while the word ‘user’ brings to mind several scenes from the movie Trainspotting. Couple these words with the term ‘content’, which is an oversimplification at best, and you have a collection of terms which promise nothing but vague, poor quality material.

Sure enough not everything that is ‘user-generated’ should immediately be classified as sloppy. Websites like Deviantart.com, which is an online art community, is packed with all types of visual art which is user-generated, and where one can find some proper gems, but this is because being an art community, deviantart.com users try to learn while they share their material, which creates a user imposed standard for submitted artworks (deviants will only submit their best material to be judged and be scrutinised by fellow deviants). The same thing happens with Wikipedia, as all the content of the website is again collaboratively written, edited and monitored by its users.

A distinction should be made between sites like Wikipedia, which only has information in the form of text and photos, and YouTube which deals in videos. While another distinction should be made between DeviantArt, where people post their occasional ‘piece of art’ and Facebook where users can upload a whole album of their latest trip abroad. However the question still remains; where is all this information stored and what are its running costs?

When a friend sends you a link to a video on YouTube saying it’s the funniest thing they have seen in ages, you click and you enjoy, it’s easy and it’s free. But how much would you be prepared to pay to see the clip: 5 cents, 10 cents or 10 Euros a month for unlimited viewing? At the moment there are a lot of heated discussions taking place in boardrooms of companies like YouTube, Facebook and other web 2.0 sites about how to turn the vast number of members and visitors they have into profit. Simply having a lot of traffic to your website doesn’t really translate into profit and every time someone visits, joins or uploads to these websites it’s costing the respective company money.

When Google bought YouTube for 1.65 billion dollars in October 2006, it thought it was buying one of the rising stars on the internet. In some respects Google was right as YouTube attracts over a 100 million viewers per month but the one thing it cannot attract is enough advertisers to turn a profit. Google will not release exact figures but Credit Suisse in a recent report estimated YouTube will lose Google 470 million dollars in 2009. This means, YouTube with its 375 million unique visitors viewing 75 billion videos this year, will lose over a dollar per person: not really a model for success!

The biggest expense is bandwidth, which for a video sharing website that has no user limits is no real surprise. YouTube has to either have to turn to a pay as you play/subscription based model or bring in more advertising. But put yourself in the advertisers shoes; do you pay money to put your advert before an embed of a professionally produced sports clip, knowing it’s going to target a specific demographic and be played at least ‘x’ number of times, or do you delve into the unknown and advertise with YouTube knowing your advert may end up before a homemade video that might attract viewers only if it’s entertaining enough? The latter is the reason why YouTube only attracts advertising on 10% of its videos. If YouTube decides to expand its advertising to all uploaded videos the result might be catastrophic as users may grow tired of seeing a 15 second commercial to view a 30 second clip.

Even when taking a look at the most successful Web 2.0 site, one might think it would least be breaking even, but Facebook is currently estimated to be spending 2 million dollars a week on adding new servers to try and keep up with its members and the constant generation of their content. With the easy technology accessible to everyone today, together with an internet connection, UGC will not be decreasing any time soon. Maybe in a year we will all be paying to access Facebook, and YouTube will have morphed into a website that only allows non-user-generated content. One thing is for sure, prepare to be tweeted to about the latest developments over the coming months.

(published on the Technology Sunday supplement on The Malta Sunday Times)