How User-Generated Content is Transforming Ad Revenue

Over the last decade, user-generated content (UGC) has transformed the digital landscape, redefining how brands, platforms, and users interact online. UGC—ranging from social media posts, videos, blogs, and reviews created by everyday users—has become a key driver of engagement on digital platforms. Between 2019 and 2029, UGC is not only reshaping content consumption but also significantly influencing ad share revenue across the internet.

The Rise of User-Generated Content

User-generated content began gaining traction in the mid-2000s with the growth of platforms like YouTube, Facebook, and Instagram. However, the real explosion occurred between 2019 and 2023, driven by several key factors:

• Technological Advancements: Improvements in smartphone cameras, faster internet, and the popularity of short-form video platforms like TikTok made it easier for users to create and share high-quality content.

• Platform Features: Social media platforms prioritised UGC by offering features like live streaming, story formats, and collaborative content creation tools.

• Authenticity and Trust: Consumers increasingly favoured authentic, peer-created content over polished advertisements, making UGC a major influence on purchasing decisions.

Shifts in Ad Revenue Share

From 2019 to 2029, UGC will play a central role in reshaping ad revenue share. Let’s break it down: 

2019-2023: Early Adoption of UGC in Advertising

By 2019, UGC had started to gain prominence, but its impact on ad revenue was still emerging. Brands began to recognise the potential of UGC in creating more authentic, relatable marketing campaigns. Platforms like Instagram and TikTok experienced a surge in user engagement, leading brands to allocate more ad dollars to UGC-driven ads.

During this period, UGC-driven ads accounted for about 17-27% of total digital ad spending. This figure grew quickly as UGC ads demonstrated superior performance in engagement, click-through rates, and conversions compared to traditional ads.

2024-2026: Accelerating Growth of UGC-Driven Ad Revenue

By 2024, UGC has become a core component of digital marketing strategies. Platforms like YouTube, TikTok, and Instagram continued to dominate, and new platforms emerged, prompting brands to use UGC to reach younger, more engaged audiences.

According to Group M's most recent report, during this period, UGC-driven ads were projected to account for around 35-45% of digital ad spending. Influencer marketing, a critical aspect of UGC, has become an industry worth billions at this point, with micro-influencers—creators with smaller but highly engaged audiences—playing a vital role in ad campaigns.

2027-2029: UGC as a Major Force in Digital Advertising

By 2029, user-generated content is expected to account for 40-50% of ad revenue. Several factors will drive this trend:

• Growing Trust in Peer-Generated Content: Consumers value authenticity and trust user-generated content more than traditional ads, making reviews, testimonials, and videos central to the buyer's journey.

• Higher Engagement Rates: UGC typically generates higher engagement rates than professionally produced ads. Platforms will likely optimise algorithms to prioritise content that retains users longer, driving higher ad revenues.

• New Monetisation Models: Platforms will develop more ways to monetise UGC, sharing more ad revenue with creators to incentivise content production. YouTube, TikTok, and Instagram are likely to explore new revenue-sharing models to encourage more UGC.

The Future of UGC and Ad Revenue

Looking ahead to the next five years, UGC is set to dominate digital advertising. Brands must adapt by incorporating UGC into their core marketing strategies, whether through influencer partnerships, community-driven content, or leveraging technologies like augmented reality for immersive user-generated experiences.

As UGC continues to grow, the advertising ecosystem will become more decentralised. Brands will collaborate with a diverse range of creators across multiple channels, leading to more equitable ad revenue sharing and greater opportunities for smaller creators.

Conclusion

From 2019 to 2029, UGC is driving a fundamental shift in digital advertising. As it becomes a critical part of the advertising ecosystem, UGC is projected to capture nearly half of digital ad spending by the end of the decade. To stay ahead, brands must embrace UGC’s unique ability to connect with consumers in authentic and meaningful ways.

UGC is not just the future of content; it’s the future of digital ad revenue.

Do you need guidance and a strategy on how to leverage UGC for your brand? Get in touch, we’d love to hear from you.