Social Media Forecast: Looks a lot like online advertising 1994 - 2000

Mediaweek, citing an eMarketer report, states, "User-generated content on the Web is set to rapidly shift from a budding consumer trend to a serious business over the next five years." For those of us who have watched the adoption of online advertising, we are seeing history repeat itself.

This eMarketer report states that UCG sites will earn $1 billion in ad revenues this year, and $4.3 billion by 2011. Mediaweek goes on to state, "Plus, users have shown no indication that creating their own Web content for others to consume is a passing fad, found eMarketer. By 2011, the researcher estimates there will be 95 million Web users creating content online, up from 64 million last year."

The analogy to Web 1.0 online advertising is this: 1994 is usually cited as the birth of online advertising, and in 1997, the medium's fourth year, the IAB reported $900 million in ad revenue. Arguably, 2005 was the first year of social media, so 2007, the third year of its existence, will see $1 billion. Very similar growth curve. Online advertising hit $4 billion in 1999, its sixth year; UGC will hit this landmark in its 7th year. Since UGC growth isn't being propelled by a bubble that was starting to inflate in 1999, the curve again looks similar.

At the same time eMarketer also published an article "UGC not Critical for Many Marketers" in which only 12% of survey respondents said UGC was "very important" to their marketing efforts. The top reasons according to eMarketer "lack of clear ROI was often named as an objection. Other reasons listed included "management doesn't embrace it yet," "we simply haven't given it enough priority to consider it at this point" and "we've had difficulty in getting the establishment to understand it."

Nonetheless, over 40% are either using it already or considering it for next year. emarketer explains, "respondents understood the benefits of using UGC. A third of respondents said UGC was cost-efficient compared with traditional marketing and advertising, and 31% said it was useful because the credibility of traditional advertising and marketing was declining."

This is really deja vu for me: I wrote the following in an October 2001 Forrester Report titled "Online Advertising Retrenches":

"Marketers wrestle with opposing forces that alternatively urge them forward and hold them back from adopting Web site display advertising. They sense the Web's potential but recoil from the risks of being a pioneer and so wait for proven metrics and ad formats to appear."

In a nutshell, consumer media consumption habits are changing faster than marketers can learn and adapt. But year by year, from dipping a toe in the water, to pilot tests, to full adoption, the shift is on an inexorable course. The only question is whether the shift will be faster or slower than the prognosicators think.

I have an obvious bias, but my money is on it growing faster. Being a former prognosicator, here is how I would think about it:

1. There is no VC-fueled dotcom spending here, so the growth is unlikely to be interrupted for 3 years as happend to online advertising.
2. Senior marketing executives and industry observers like Bob Garfield have woken up to the reality that the age of mass marketing is in decline and they no longer need to be convinced to move beyond the tried-and-true tactics of the past. Traditional advertising spending is slowing and "below-the line" (I've always hated that phrase) on CRM, interactive, direct mail, etc. is growing.
3. Social media represents a bigger change than online advertising was. Banners were another format to push messages through; blogs and social networks require a much more dynamic relationship with consumers.

IMHO, the biggest drag on the growth of online ads in the '90's was lack of urgency because marketers still had total confidence in TV and mass marketing. Without that comfort, marketers will be much more willing to invest in the necessary learning to add new social media tools to their marketing arsenal.