By: Bruce Byfield
Web 2.0 is a popular buzzword, but nobody seems altogether sure what it means. It has something to do with user-driven content and interaction among users, but is there more to it?
There must be, given deals like Google's $1.65 billion purchase of YouTube. With that kind of money on the table, every mainstream business executive is eager to become a part of Web 2.0. And like the dot.com prospectors at the turn of the millennium, many of them imagine that, if they build their business, then the users will come.
Unfortunately, the reality is more complicated. The openness of Web 2.0 requires a rethinking of business tactics that most executives aren't prepared to undertake. They can learn some of the new tactics from books like Wikinomics and The Cluetrain Manifesto -- or they can start here, with some basic points to ponder:
If you're starting now, you're already behind
The Web 2.0 success stories you've heard about have been the result of several years of work. The big winners were the pioneers, and while the gold rush isn't over, most of the best claims are already staked out. If you're just starting now (especially if you're not part of the technical community or have never taken part in a social network) you're starting from a distinct disadvantage.
That doesn't mean that success is impossible. You can still strike it rich, particularly if you're already used to interacting with customers through email or newsletters and can lure them to your new site. However, you probably have to scale your fantasies to fit reality. The odds are that a multi-billion deal isn't going to happen for you. Shoot for profitability or a comfortable revenue stream and you're less likely to be disappointed.
You're engaged in a contradiction
Face it: what you learned in business school or at your small city meetup is at odds with the values of those who participate in social networking. Business convention teaches you to protect your interests, while social networking favors sharing. Somehow, you're going to have to learn to reconcile the contradiction between your interest in the bottom line and the values that are likely to prevail in the community that you're hoping to form. It won't be easy, and any signs of cynicism will be quickly seized upon by your potential customers.
Your more realistic users will accept that your company needs to make money, but evidence of predatory business practices will discredit you faster than anything else. Remember: you're not the first one to think you can make money from Web 2.0, and many members of your community are as smart as you are.
You're not in a position of privilege
Executives are used to information flowing largely from them to customers. When customers deliver information, traditionally executives tightly control it. But in the social networking of Web 2.0, you lose that control. Customers will criticize you if they feel like it. If you try to control or delete the criticism, your efforts will only become another source of complaints.
On the Internet, customer interactions are conversations, and you have to accept the inevitable give and take. Instead of resisting this inevitability, learn to be politely attentive. Develop a sense of when to act on a criticism. Usually, if most of the community is saying the same thing, or an influential member is saying it, you'll need to act. If only a minority or a known trouble maker is criticizing you, then most likely you can ignore it.
You need to walk the walk
In any community, fair dealing is respected. Web 2.0 is no exception. So far as you can, you need to demonstrate that you share those values -- not just in your interactions online, but in your other business practices as well. Too many inconsistencies, and your community will desert you as a hypocrite.
For instance, one company thinking of taking the Web 2.0 plunge loudly proclaims its charitable activities while relying heavily on interns. It defends this practice as a way for the interns to gain valuable experience while paying them $4.50 an hour, and hiring more interns than full-time staff. You want to predict how long it will take for the community of users to draw parallels between itself and the interns?
Forget protecting your content
If you plan to offer content generated by your company, your first impulse may be to copyright it. One site, for example, offers articles giving career and business advice that it paid contractors to write. Following standard business logic, it has carefully included copyright notices on the site.
The trouble is, in the context of Web 2.0, you can not only expect users to ignore the copyright, but to condemn the standard business logic as well. Instead of struggling against the inevitable, look at the Creative Commons licences that allow you to define how you will share content. The licence has provisions for everything from wide-open sharing to stricter control of circumstances, so you should be able to find some variation that is acceptable to you. The stricter controls may still be ignored, but violators will be fewer and you'll at least get points for trying.
Building a community takes effort and time
Even if you have existing customers, building a site is unlikely to be enough. Most successful Web 2.0 sites are built with successful advertising, sometimes of the traditionally sort, but more often of the word-of-mouth sort typified by blogs and mail forums. Without being too obvious, you have to nurse this type of support to start your community. Otherwise, you'll have an empty site that no one uses.
Building good will is an ongoing process
You may need a while to learn how to interact with your community. However, once you establish good relations, you need to keep them. Don't be like one site that, after establishing friendly relations with its community, neglected its needs until the goodwill was lost and the most active community members established a rival site.
Always be thinking of something new
Like virtual Web hosting in the '90s, Web 2.0 is a low cost of entry business. In other words, you don't need a lot of expertise or development to become a player, especially if you ramp up with FOSS. However, what is an asset when you're starting becomes a liability when you are trying to keep the loyalty of your community. In the few years of Web 2.0's existence, communities have proved themselves to be fickle, migrating to each trendy site that comes along. To stem the loss, you can't just stop when you've completed your site. You need to be thinking of new features that will attract and keep users.
The trouble is, the simpler the concept of your site, the progressively harder new features will be to invent. Unless your site is innately valuable in itself, like del.icio.us, you may reach a point where you'll have to change the site's direction entirely to keep in business.
Know your revenue stream
The rhetoric of Web 2.0 is idealistic, and balancing it against the bottom line is difficult. Almost anything you do is likely to be denounced by part of your community. If you sell ads on the site, users will complain that they are distracting. If you charge for complete participation on the site, like Classmates.com, you handicap the creation of the community you hope to profit from.
The truth is, making money is the one part of the Web 2.0 model that nobody has quite figured out. I know of one company that put a million dollars over four years into a business networking site, yet was unable to produce a tenth of that in yearly revenue. When the company recently went on the block on eBay, the starting bid was $60,000.
The most assured revenue stream, of course, is growing a community large enough to attract a buyout, and, even then, you can't count on making back your investment. And even if you do earn a profit, you're only passing the problem of how to make money off your site to the buyer.
Conclusion
If these tips sound pessimistic, then you've got my drift. As a business phenomenon, Web 2.0 is difficult for executives to grasp and likely to be as fleeting. Vast fortunes have been made from it, and smaller ones are probably still waiting to be made, but at some point in the next year or two, the end will arrive. If you want to profit from Web 2.0, you need to get in fast and develop your community even faster. By this time next year, Web 2.0 could be history. Some of the sites that sprang from it will still be around, but most of them will be making only modest profits and some will be loss-leaders to draw attention to other things. Go into the trend with your eyes open, and you won't be disappointed when Web 2.0 comes tumbling down.
Bruce Byfield is a computer journalist who writes regularly for NewsForge, Linux.com, and IT Manager's Journal.