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The User Revolution

User-generated and community sites are predicted to account for over half of internet usage over the next ten years. That's one of the conclusions from a new report into The User Revolution from US investment bank and securities firm Piper Jaffray.

User-generated and community sites are predicted to account for over half of internet usage over the next ten years. That's one of the conclusions from a 425-page report into The User Revolution from US investment bank and securities firm Piper Jaffray.

Noting the fragmentation of people's media consumption, the report observes that only Internet use is growing, both in terms of the attention it receives from users and its advertising spend from companies. Television has seen a drop in advertising spend of almost 20 per cent over the last twenty years and forty per cent of viewers say they watch less television now than they did two years ago.

Use of the Internet; and particularly the use of social media and networking sites, has now become mainstream. The report suggests that these are 'pivotal times' for advertisers, who will not necessarily be the winners in this revolution: "It is the golden era for consumers, and it is already impacting advertising far more profoundly than any other development over the last 50 years".

"The net result," say the authors, "is that advertisers increasingly will need to buy more inventory, from nearly all types of media, especially the Internet, to have the desired impact." Global online advertising revenue is predicted reach $81.1 billion by 2011, representing a 21 percent compound-annual-growth-rate (2006-2011).

The report coins two new words to describe these changes. 'Communitainment' sites revolve around communication, community and entertainment. While utility-based sites such as email and e-commerce locations have traditionally dominated Internet use, the last year has seen the rise of hybrid sites which combine content with functionality. MySpace, for example, allows its users to message each other and form communities in several ways. It also allows users to buy merchandise. The second coinage 'usites' describes sites which have been created by users, with the framework for this activity being almost the only input from these sites' owners. These sites, the report suggests, "are the best new inventory for establishing close connection with users and creating engagement."

Comparing the media world order before and after this revolution, the report suggests a new world where online and offline media are fused into a single medium, where the current dominance of a few, large content providers is replaced by fragmented, multiple sources, vertically focused and where media publishers have lost control of the consumption of this media to the users.

The outlook for traditional media publishers is apparently bleak unless they change to embrace this new world. Their competition, now, is not other publishers but sites created by and for their former audience. "[Publishers] will need to embrace users and transition their business models away from providing content and services in return for advertising to a business model that is focused on creating cohesive communities of users that generate ideas, content, and, most importantly, brands." The traditional 'portal' is all but dead, being replaced by agile and aggressive networks of smaller sites, fighting to become the fittest in a period of 'web darwinism'.

Those companies that have led this online revolution will continue to gain influence, though. Companies to watch, the report says, are Google, Yahoo, Disney, NewsCorp, Warner, Microsoft and Facebook. Google, in particular, is predicted to continue to be a leader for the next ten years:

The role of search is expanding, and Google’s brand (both in search and beyond) is growing in popularity. Google is likely to have a pivotal role in the new environment. We expect the company to continue to be the top innovator in search, as we progress from this early stage to advanced search functionality over the next decade or so.

A press release covering the key findings from the report is available here.