Web 2.0 – Hype or Opportunity?
- Article 7 of 7
- iSight, June 2006
The Internet has revolutionised business life. Whether it’s through the use of email to replace phone and fax or of the web to advertise and sell products, the Internet has transformed commercial life over the last decade.
But the Internet revolution is not yet over. The first wave of web technologies revolutionised existing forms of trade and communications. The next wave will revolutionise the Web itself, turning it from Web 1.0 to Web 2.0.
Delivering the keynote address at 3i’s iSIGHT Internet forum “Web 2.0 – hype or opportunity”, Dominique Vidal, managing director of Yahoo! Europe, highlighted the difference between Web 1.0 and Web 2.0. “Web 1.0 was about connecting users and getting access to content. It was about broadcasting information. Web 2.0 is about engagement with these people, understanding them better and what they want. It’s about personalising.”
At its heart, Web 2.0’s focus is on social networks. By involving users and getting them to create their own content, comment on existing content and invest themselves in the site’s development, organisations can see increased customer loyalty and insight as well as increased interest from potential customers. Although it typically also requires new web technologies, such as XML, web services, RSS and AJAX, it is the attitude towards users that is the real hallmark of Web 2.0.
However, as delegates at the forum heard and indeed concluded for themselves through roundtable discussions, “doing Web 2.0 right” is far more than simply setting up a sharing site or a blog and expecting users to participate. Implementing the right features at the right time for the right audience is very much integral to Web 2.0. Famously, Friendster, one of the first social networking sites, soon became irrelevant as a force once its user base found something ‘cooler’: MySpace.com. This, in turn, is starting to lose interest as users look for the next big thing.
Brent Hoberman, co-founder and chief executive of lastminute.com, one of the first UK companies to benefit from the dotcom boom, has implemented Web 2.0 as well as technologically advanced features such as voice recognition at lastminute.com. But, he says, only some of that is for benefits in the short-term. “It’s as much about the kind of company we want to appear like. We need to look slightly more advanced than the mainstream.” Nevertheless, enabling users to comment on and review deals on the lastminute.com web site gives the company valuable feedback as well as increased user involvement.
Similarly, Yahoo! has been able to fight back against the mighty Google using services such as the Flickr photo-sharing system. Although Google has given customers free services such as Google Mail, Google Talk and Google Earth, none of these include true Web 2.0 features. Whether it’s coincidence or causal, Google’s popularity is starting to wane, just as Yahoo!’s begins to ascend again.
Vidal attributes some of the company’s success to the personalisation and sharing features available to its members. “Search has improved a lot over the last five years. But a lot of the time, with classical searches, people weren’t happy with the results. What’s good for me may not be good for you. But if your friends share what they’re looking at and that’s what you’re interested in, we can make results more relevant.”
Indeed, Yahoo! Answers, in which people post questions that other Yahoo! users answer if they can, has created a whole new service for Yahoo! But there is little or no revenue from the service as of yet. For other companies, particularly smaller and newer organisations, finding a way to generate revenue from Web 2.0 is even harder.
Adam Seifer, CEO of photo sharing service Fotolog.net, says that his company has to be extremely careful in creating additional revenue streams from its customers lest it destroy the very things that made its services popular. “It may seem obvious that we let users try to sell their photographs using the service and we take a cut. But if users start to compete, they may stop recommending each other’s photos or they may start to shoot photos for specific buyers.” He’s looking at various options, some of which have already been implemented, such as camera recommendations and e-shops and a coffee table book of the best photos and comments from the service. The opportunity to take commission on services offered by users to other users is also a possible revenue source.
The revenues being generated from services such as Fotolog are small at the moment, making it seem like social networking is a good add-on for some sites, rather than the centre of a business model. Pierre Kosciusko-Morizet, CEO and co-founder of French site PriceMinister.com, has been able to create far greater revenues. Like eBay, itself a perhaps-unwitting pioneer of Web 2.0 concepts, PriceMinister.com enables users to sell their products, services or second-hand goods online. Again, like eBay, PriceMinister.com allows users to comments on vendors so other users can know whether to trust them or not – trust being another concept to Web 2.0 success and one which conference delegates concluded during roundtable discussions was most likely to be gained through the end-user’s experience and through recommendations from friends.
But this “circle of friends” means that the company has only recently expanded out of France into Spain and Italy. Explains Kosciusko-Morizet, “Part of our advantage comes from having a large range of goods to keep prices low and a large number of users.” By focusing on only a few countries at a time, rather than aiming for a simultaneous global push, PriceMinister can increase its user base in each country to the critical level necessary for the service to be viable. But this highlights one of the limitations of Web 2.0 – that without a large enough community, the service will fail. Building this community can require considerable time and investment to overcome, unless, like MySpace, the service somehow taps into a particular part of the ‘zeitgeist’.
Sulake, a Finnish company that has developed virtual meeting places primarily for teenagers called “Habbo Hotels”, has had to fight to be attract and retain interest to its users. “It’s much like publishing a magazine,” says CEO Timo Soininen. “You have to be constantly coming up with new ways to entertain readers or they’ll stop buying [the magazine].” Sulake earns revenues from sales of virtual objects, such as drinks and party room decorations, which visitors use to impress friends or improve the game experience. So, the Habbo Hotels require constant upgrades and new services to maintain their visitor numbers and be a good place to ‘hang out’. In particular, each country has its own hotel with content and interface written in the country’s native language and specifically targeted at teenagers. “You can’t expect to write content that’s cool for a London teenager from an office in Helsinki,” says Soininen.
For a Web 2.0 community to work, it needs to have as few barriers as possible to user involvement, ways for users to ‘bond’, and as many reasons for them to take part as possible. It’s unlikely that these reasons will stay constant over time, so organisations will need to continue to develop and enhance their services to maintain their users’ interest, all without destroying the very things that interested them in the first place – a challenge for anyone.
Web 2.0 isn’t for everyone however – at least not externally. As part of the roundtable discussions that rounded off the conference, delegates came to the conclusion that many companies have yet to experience the benefits of web 1.0 nor would they have the external user community necessary to support Web 2.0 capabilities, even if they achieved board approval. However, for internal use in knowledge sharing, the techniques of social networking could prove invaluable for many organisations, provided they could overcome certain psychological obstacles.
Key to any social network is the need for unfettered communication and the ability to trust the other participants. Organisations need to be able to persuade participants in the networks that they are trustworthy and are not involved simply to exploit their customers through another mechanism. This will inevitably result in conflict with marketing, communications and legal departments – sometimes with good reason, since there are huge possibilities for copyright, trademark and libel problems with unfettered user interaction. If an organisation is incapable of overcoming these concerns, it will never be able to fully take advantage of Web 2.0.
For some Web 2.0 will be an evolution, not revolution. For others, it will open up whole new ways of doing business and whole new types of business. And for a select view, it will have almost no effect at all. Unlike Web 1.0, which was very much a one-way communication, Web 2.0 is far more susceptible to changes in users’ sensibilities and is far more capable of going wrong quickly. But Web 2.0 also offers far greater opportunities for customer insight and loyalty than Web 1.0 ever did. Finding the right way to use and implement its features will be the challenge.