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Creating real business value with Web 2.0

http://blogs.zdnet.com/Hinchcliffe/index.php?p=14

I run into a fair number of people who are skeptical about the actual business value of Web 2.0.  Sure, they usually agree it’s a terrific new movement There’s a whole aspect of Web 2.0 that can drive genuine business value and significant competitive advantage.in online software that encourages social collaboration, two-way use of the Web, services that are open and repurposable, Web-based applications, and more.  But can you build and grow a real business with these ideas?


Sometimes the trend towards startups in miniature, mashups the size of a feature, open source data sources, and the relentless democratization of content makes it look like everything is becoming free or very inexpensive.  Or so distributed and decontrolled that there’s no place to create value.  That makes the value proposition in this brave new world seem pretty shaky indeed.

Yet the truth could not be more different.

To these concerns I point out that this is only one end of a spectrum.  There’s a whole aspect of Web 2.0 that can drive genuine business value and significant competitive advantage.  To illustrate this argument, I’ve recently started collecting real-world Web 2.0 business success stories that demonstrate this point.

Now, most people following this space are aware that eBay, Amazon, and Google are held up as exemplars and the successes of the Web 1.0 era because they were Web 2.0 before it was fashionable.  The argument is they did this by leveraging user contributions, offering open Web services for others to integrate with, building hard to recreate data sources, etc.

But there are many other interesting new success stories.  And by studying them some common threads can be teased out and we can get a general sense of what’s happening and what works.  Let’s take a look at the ones I’m tracking and what they’re doing, in rough order of commercial success. I am also including two that aren’t a commercial success but demonstrate some techniques with serious potential:

Companies using Web 2.0-style techniques for business advantage

  • NHN’s Naver Search Engine.  Never heard of Naver?  You’re not alone unless you live in Korea.  But the big secret is that Naver is annihilatingGoogle there.  Korea also happens to have the highest rate Internet useof any country in the world.  More importantly, not only is NHN usingWeb 2.0 techniques like gathering collective intelligence and social collaboration to achieve market domination, but they sold over $228 million in online adson their service last year, making their stock go through the roof inrecent months.  These are impressive results and note that much of thisis revenue they’ve directly outcompeted Google for, one of the mostsuccessful Internet businesses in history who has also had asignificant presence in Korea since 2001.
  • Amazon’s Web Services Division:  Currently taking in more than $211 million a year,Amazon’s Web services turns most of its online storefront into a fullblown open platform that supports a large and thriving community ofcompanies that re-use Amazon’s best-of-breed On Demand commerceservices.  This gives Amazon’s partners ready access to vast ITresources in the form of a product that would otherwise be only gettinga single use.  By making this strategic move, Amazon takes advantage ofthe economies of software and resells its services over and over again,recouping their cost many times over and taking advantage of unintendeduses dreamed up by the aftermarket.
  • IBM, Salesforce, and Microsoft Provide Self-Servicing to SMBs:The potential of the Web to offer true customer self-service,particularly to small audiences en masse, still has largely untappedcommercial potential.  This has led to the coining of the term, The Long Tail,a key concept in the Web 2.0 toolkit.  Because automated systems canefficiently provide high-quality unattended customer service online, itenables businesses to profitably serve customer groups they could neverthink of serving before.  The New York Times recently coveredhow both Salesforce and IBM are generating significant new revenue andbusiness results from these smaller markets.  This is not just becausethe Web allows it, but also because of recent progress like pervasiveWeb connectivity, faster bandwidth, more people online, and growingtrust of online software.  As for Microsoft, one of the last bastion’sof market penetration for them is small and medium businesses.  This isthe one market that their new online Office Live products is squarely aimed at self-servicing with Web-based business software.
  • Craigslist and Google Base:  Both of theseservices, like eBay, can only exist in symbiotic conjunction with theirusers.  While gaining control of a hard to recreate data source is animportant Web 2.0 strategy, you need to have a revenue model associatedwith it to be a business success.  This is something that Wikipedia,the classic example of a Web 2.0 data source built by its users, can’tboast.  However, this is something both Craigslist and Google Baseaspire to be, successful commercial services created from their user’sdata.  While Craigslist and Google both have done things occasionallyto create walled gardens of their data, the point is that the more theydo this, the more likely they will hurt themselves.  I don’t haverevenue numbers for craigslist
  • Katrinalist.net and Antbase.org.  Both of theseare completely non-commercial sites that demonstrate the raw power ofharnessing collective intelligence and scalable marshalling ofunderutilized data resources, respectively.  The Katrina List story is amazing in itself and the Antbase.org story comes from a new article in Discover magazine,while partially online describes how a scientific community turnedmassive taxonomy resources otherwise mouldering away in basements aslost specimens into a thriving online database of information that canbe shared by all.  Understanding the success and importance of both ofthese points to intriguing and largely unexploited possibilities that Ipredict will become more common and widespread in the near future.



The whole point of Enterprise Web 2.0 is to put best practices forcreating Web experiences into the hands of business people, Webdesigners, and users so that we make the most of the systems, users,and information that we have.  For example, the vast, aging inventoriesof otherwise userful information is one of the bigger wastes in ITtoday.  Web 2.0 encourages us to put it all online, make it userorganizable, findable, and to build a community around it.  
So too is leveraging the activities of users as they interact withour online systems.  Both first class participation mechansims liketagging, ranking, commenting are important but so are second ordermechanisms that track what users are looking at, saving particularlypopular data sets and making them easily shareable and reusable.
That’s not to say that adding del.icio.us bookmark buttonsto your content will save a failing business model from the eventualextinction, but it’s the first step down a promising new path. Theseare just some of the possibilities and we can now begin to see howearly adopters are using it to considerable effect.  What will you do?
Do you know of other Enterprise Web 2.0 success stories?  Please share!
Giving advice at the right time has to involve a great deal of intelligence.

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