Only a small fraction of online video-based advertising will be picked up by user-generated sites like YouTube and MySpace, according to a new report.  Over the next four years, just 15 per cent of the total online video advertising budget, will go to user-sites, according to analyst Screen Digest (Financial Times via Next Generation).

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

“User generated online video will drive the majority of Internet content consumed in the future, but despite its huge popularity with web surfers worldwide, the major players have yet to find a way to generate significant revenues from it,” said Amel.

Peter Chernin, News Corp president recently said, “We do not see big advertisers advertising with YouTube or MySpace. They have concerns about the content. There is very little ability to monetize video advertising on user-generated video.”

“…sites need to diversify to survive,” said Amel. “With the dominance of YouTube and MySpace Video, smaller sites are going to need to offer something different. Emerging alternative offerings include online editing, revenue sharing with content producers and hybrid services which offer both premium and user generated content.”

WillVideoForFood’s 2 Cents:

I find it difficult to reconcile that user-generated content will “drive the majority of Internet content” but not be responsible for more than 15% of online video advertising. If it’s hot, it will sell ads. If it’s delivering 15% of advertising than it can’t possibly be the bulk of content. Surely mainstream video will attract the greater percentage of advertisers (I’m safer placing my ads on ABC.com than YouTube at the moment), but there cannot be a delta that big between content and advertising. It’s basic supply and demand. If people want consumer-generated stuff, advertisers will make it find a way to be there.