How Will User Generated Content Disrupt The Future of Brands?

You may have heard the classic advice, “Fix the roof when the sun is shining.” This means getting ahead of something before it becomes a bigger issue. This wisdom is particularly relevant when considering the impact of UGC creators on the future of brands. If brands don’t move alongside this trend and adapt accordingly, they risk being left in the dust of the digital wild west, a place where brands that recognize the value of their UGC creators and grow alongside them could see the most growth. Those who fail to see their value, however, might find themselves outpaced.

In our latest episode of The Forward Podcast, we spoke with Catherine D. Henry, best-selling author and one of the world’s top experts on the Metaverse and Web3. Catherine’s work has earned her recognition as one of Campaign Magazine’s top 40 leaders in US media and tech (2022-2023) and one of AdAge’s top 20 Web3 Marketing Leaders (2023). Her book, Virtual Natives, explores the future of AI, Gen Alpha, and Web3.

“For brands, the greatest challenge is that they are likely to be disrupted by UGC creators who understand the platforms extremely well and know what makes people tick on those platforms,” Catherine explains.

But first, some background. UGC was a big buzz concept that emerged alongside the rise of social media and online publishers. Its value has grown as the world has shifted toward seeking out authentic, non-overly-branded content. This, coupled with the rise and popularity of Web3 spaces, presents both opportunities and threats to brands.

Grabbing hold of this opportunity, the gaming industry. Just last year, Epic Games’ announced their “Creator Economy 2.0.” , a new system that would pay out 40% of Fortnites net revenues to creators who engaged with their islands . That means 40% of the money Epic makes from things like V-Bucks, its Fortnite Crew subscription, and in-game outfits (like for crossovers like YouTube superstar MrBeast and Resident Evil characters) — would go into the pool, creating very attractive payouts and incentives for engagement.

During this time, Epic Games went a step further and launched Fab. A marketplace that gives all digital content creators a single destination to discover, share, buy and sell digital assets. With a mission is to inspire and enable the next generation of creators to build the emerging metaverse together.

So, in general, what influence do UGC creators have now?

According to recent statistics shared by Billo, 79% of people say user-generated content highly impacts their purchasing decisions, and UGC drives 6.9 times higher engagement rates than brand-generated content. Additionally, 70% of consumers trust UGC more than traditional advertising.

So what does all of this mean for everyday brands, retailers and small businesses?

Aziza: In retail, it feels like we’re entering our Sims era. The distance between virtual and physical experiences is minimizing, and as you mentioned, those trap doors have opened with so many big brands kicking off this domino effect of new hardware coming to the market. When we look at how consumer trust can be anchored within the opportunity to experience immersive technology and hardware, what happens to smaller brands that may not have the budget for all of this? What challenges will they face as we hurtle towards peak season and retail is under a microscope?

Catherine: Well, first of all, I love the idea of the Sims era. I think that’s fantastic, and the domino effect here. However, the massive difference between these online worlds and the physical world, especially if we’re thinking about the internet era 2.0, the social media era of big Facebook, big Instagram, and TikTok, is significant. Some of the issues that evolved at the time were the abuse of power by those specific platforms to manipulate and dominate conversations.

What we’re seeing now in the virtual space is that many predominant platforms like Roblox and increasingly now Fortnite and VR spaces like VRChat are dominated by user-generated content (UGC). This means that anyone, more likely your little brother or my cousin, can go on there and create worlds, content, and outfits and sell them. The challenge for brands is that they can’t control these environments. Why is Adopt Me so popular? I can’t explain it, but people who use that platform a lot in Roblox understand perfectly well why it is.

As a digital anthropologist, it’s really important to understand what drives people in these spaces. For brands, the greatest challenge is that they are likely to be disrupted by UGC creators who understand the platforms extremely well and know what makes people tick on those platforms. The Roblox and Fortnite economies are burgeoning, and if you know what’s important to the people on those platforms and how they like to flex, you can deliver it there.

I don’t think a lot of people understand what that is. So what’s the solution? Spend more time online, nurture your brand community online, and listen to your brand mods or people creating your brand in these spaces. Trust me, if it exists in the physical world, it exists online. Embrace it because that’s part of the lore and excitement around your brand and let people create something around it. How do you co-opt and nurture that fandom? This is definitely up to brands to step in because those will be your biggest competitors in the future.

Aziza: Yeah, it’s interesting because brands typically look at each other for competition, but you would never expect it to be your own customers or anyone at home.Before we hit record, we were talking briefly about different terminologies and how it may be difficult for customers with the new terminologies emerging in the digital world. You made a really good point that I’d like to bring up. I had said it would probably be difficult for customers, but you said it’s actually the brands that need to keep up. Can we talk about that in terms of how brands can become more tech-literate as they try to keep up with their customers?

Catherine: Yeah, I understand the struggle. As a managing principal at a major global engineering firm, it’s difficult to stay on top of trends and also get the daily work done. Brands are challenged when it comes to Web3 concepts, metaverse platforms, and gaming. But guess what? That’s your job. Brands need to pay more attention to this. Recently, I saw a statistic that said Gen X and Boomers, who are at the top of most companies, consider platforms like Google new media and thus allocate the most media spend there. They are still spending too much money on platforms like Google when TikTok has usurped it. They are still spending too much on Instagram and Facebook ads.

We need to make a shift in how we reach future customers. Gen Z represents 50% of the global workforce and will be at the beginning of their peak earning years by 2030, which is just four and a half years away. We need to think about how we will prepare for this new generation. Gaming is a fundamental part of where our customers are. Brands also need to understand the concept of reciprocity. They need to let go of more of their IP, messaging, and content creation. What does reciprocity look like for your brand? Instead of crafting a perfect message, maybe let your audience create something new with it. Let people play and enjoy your brand.