ROI Better on UGC Than “Professional” Video?

My friend ran a digital media buying company and literally wrote a book on internet advertising. He told me three things I never forgot:

  • The best color for a banner ad (from a direct response point of view) is “clear.” That is, whatever blends with the publisher site.
  • It’s hard — if not impossible — to make money if you’re buying advertising to get traffic, and your revenue is purely based on advertising.
  • Setting aside demos, banners perform better on weather and gaming sites than higher-end publishing sites (like the Wall Street Journal). This point perplexed me, but he explained his theory on this maybe counter intuitive discovery. The viewer is less engaged in the games and weather content, thus more likely to ditch it for a relevant online ad. It helped too, mind you, that the CPM for a is presumably much cheaper than a

So as a marketer I’d say — assuming you could reasonably target your demographic — you’ll probably get a better return on UGC (user generated content, or amateur stuff) than professional content.

A Nalts video is less captivating than an SNL skit on Hulu (and admitting that fact came a little easier than I thought). In the next year, advertisers will feel temporarily safer with Hulu because it’s a network site (and God knows the ad networks and reps will be greasing the palms of buyers everywhere). Brainless ad buyers in NYC will clamour for inventory on the “safe” sites, and drive the CPM artificially high. Meanwhile, there will be a growing inventory of amateur content as YouTube rolls out its “partner program” wider than the paranoid advertising market can handle. So it will invariably drop or maintain.

A study (reported here by NewTeeVee) by The Diffusion Group shows a gap on CPM (cost per thousand views) already emerging:

  • CPMs for professional long-form video are about $40 now and predicted to rise to $46 by 2013.
  • CPMs for professional short-form video are roughly $30 now and expected to hit $34 by 2013.
  • UGC vids currently get $15 CPMs and are seen rising a little, to $17, by 2013.

My short-term bet for advertisers? Buy ads against UGC content, but pick your channels carefully. Don’t buy Invideo ads on Nalts if you’re selling cosmetics, but if you’re Coke running a direct-response program via InVideo ads you’ll probably have better luck buying ads against YouTube amateur partners than (she’s actually entertaining to her audience). YouTube may content otherwise, because they have loads of inventory on professional players, and more at stake there.

For that matter, you’ll probably get a better awareness rating on amateur content because we’re less interesting than professionals. You may, however, get a higher attribute rating (as measured by something like Dynamic Logic) if you buy ads on killer content (like Universal) versus another Fred video. Hard to say there.

Note- I’m biased on this analysis for two reasons. First, I’m in the middle of business planning, and my right brain has been completely shut down as a result. I haven’t even watched a video in days. Second- as a YouTube partner, I have an interest in UGC CPMs (I get a piece of the advertising revenue).

Now the good news for creators and advertising. It’s not an “either or” proposition. The Diffusion Group estimates that $590 million video ad market today will be a $10 billion video ad market of the future. I’ll take a smaller piece of that growing pie.


Author: Nalts

Hi. I'm Nalts.

11 thoughts on “ROI Better on UGC Than “Professional” Video?”

  1. I can’t even process this information any more. It’s like the muffled drone of a television set in the living room as heard from the bedroom upstairs. The TV drones on, punctuated periodically with soundtracked guffaws, and I’m sure there is information being broadcast, perhaps good and useful information, but it has less and less (and approaching nothing) to do with me or what I’m doing these days.

    I’m pulling my head out of the internet’s ass. It’s a slow and painful extraction, and often I stick my head back up in that black hole just to see where I’ve been, but I need out. Wish me luck. I hope your CPMs and UGMs and PRQs and whatever else you’ve got spiral to the heavens.

  2. Kevin — I just want you to know that I really appreciate these articles — as I have said before we are starting our Internet Marketing business and this information is very valuable to me!
    Take care,
    Beth (bbkmomma)

  3. This post was lost on the creators but it’s an important message to advertisers- consider the amateur content too. Even if it’s a crazy homeless guy in Texas or some wild gals in LA!

  4. Okay, I just watched nutcheese’s latest video. Then I came here and read that entire article.

    I feel that you both owe me some money.

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