Why User Generated Content sites should be paying users for content

TripAdvisor logo
TripAdvisor – should they pay users for content?

My view of the future of the Internet is that many free apps and sites we currently take for granted will soon charge small amounts (nanopayments). I was discussing Facebook with a friend recently who said they won’t join Facebook until Facebook pay people to join. His point of view is that Facebook make their revenue from user generated content (UGC), so they should pay users for that content. It’s an interesting point.

One of my favourite user generated content websites is TripAdvisor. In fact, when I go away from home both with the family and on business travel, I almost always review the place I’ve just been to. And just as importantly, I usually review the place I’m going to on TripAdvisor before I book.

Financially, TripAdvisor is doing well – in revenue growth, profitability and cash flow. According to Yahoo!, the financial highlights are as follows:

Financial Highlights

Fiscal Year
Fiscal Year Ends: 31 Dec
Most Recent Quarter (mrq): 31 Mar 2013
Profitability
Profit Margin (ttm): 25.74%
Operating Margin (ttm): 38.46%
Management Effectiveness
Return on Assets (ttm): 17.24%
Return on Equity (ttm): 36.14%
Income Statement
Revenue (ttm): 809.17m
Revenue Per Share (ttm): 5.71
Qtrly Revenue Growth (yoy): 25.10%
Gross Profit (ttm): 750.89m
EBITDA (ttm)6: 324.35m
Net Income Avl to Common (ttm): 208.26m
Diluted EPS (ttm): 1.45
Qtrly Earnings Growth (yoy): 29.50%
Balance Sheet
Total Cash (mrq): 406.14m
Total Cash Per Share (mrq): 2.83
Total Debt (mrq): 391.31m
Total Debt/Equity (mrq): 48.90
Current Ratio (mrq): 3.35
Book Value Per Share (mrq): 5.58
Cash Flow Statement
Operating Cash Flow (ttm): 253.01m
Levered Free Cash Flow (ttm): 193.45m

TripAdvisor’s business model, which should be called UGBM (User Generate Business Model – I just made this up), demonstrates what my friend was describing – users such as me, providing reviews of where to stay, and earning TripAdvisor literally a couple of million dollars per day.

3 thoughts on “Why User Generated Content sites should be paying users for content

  1. Hey Brad, it’s an interesting concept. Wasn’t this the idea behind Squidoo? I don’t sense that that has really taken off enormously, probably because the value to a publisher of any given piece of run-of-the-mill UGC is basically zilch.

    I suspect that the ‘super users’ who really create valuable UGC will get a payback, just not through a ‘one size fits all’ nanopayments mechanism. They’ll be approached by the publishers direct, or given perks a la Klout.

  2. Hi Brad, I think this is a very interesting concept, that I actually think could help the phenomenon of user-generated content quite a bit. As it relates to my own research, I’m looking specifically at how television stations use user-generated content. I think has grown exponentially in popularity, yet the reasons people send in user-generated content varies greatly. While it may seem small, any type of monetary compensation I think would provide a great incentive to draw more people in to supplying user-generated content, rather than just “being in the right place at the right time” when there is a breaking news story going on, or if a citizen happens to stumble upon something happening while walking their dog at night.

    If each news station had some type of system set up in which to pay citizens for valuable, accurate, and newsworthy information (photos, video/audio of a press conference, a neighborhood source, etc), then these stations could really be setting themselves up for a very successful relationships with the communities they represent.

    1. Whilst the concept of UGC is interesting, it shouldn’t be discussed in isolation. It’s the content that’s important not [always] the source… Content is king and all that… .

      On the other hand, user authentication is vital. Anyone can become a news source, but to put your name to it forever (the digital footprint) adds more credibility. And confirming the person really is who they say they are is going to be the big challenge on the Internet over the next few months if not years. Twitter does this through Verified Accounts, and soon we’ll want everything (and I mean everything) to be attributable to a verified user.

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