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T E C H N O L O G Y
Web 2.0 and The EnterpriseIts impact on business and strategies to maximize new opportunities
By Victoria Furness
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Victoria Furness
Victoria Furness is a freelance technology and business journalist who has published
work in Marketing Week, Revolution Personnel Today Computer Business Review,
Real Deals, Financial World and Information Age.
Prior to her freelance career, Victoria worked for Marketing Week, and ComputerWire, where she wrote for its flagship magazine, Computer Business Review, the daily newswire Computergram and its research arm on her specialist area of enterprise applications. Victoria graduated with first class honors from Manchester University.
Copyright © 2008 Business Insights LtdThis Manaement Report is published by Business Insights Ltd. All rights reserved. Reproduction or redistribution of this Management Report in any form for any purpose is expressly prohibited without the prior consent of Business Insights Ltd. The views expressed in this Management Report are those of the publisher, not of Business Insights. Business Insights Ltd accepts no liability for the accuracy or completeness of the information, advice or comment contained in this Management Report nor for any actions taken in reliance thereon. While information, advice or comment is believed to be correct at the time of publication, no responsibility can be accepted by Business Insights Ltd for its completeness or accuracy.
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Table of Contents
The impact of Web 2.0 on the enterprise
Executive Summary 12
What Web 2.0 means for your business 12 The enterprise approach to Web 2.0 13 Why Web 2.0 matters 14 Collaboration in a Web 2.0 world 15 Web 2.0 marketing opportunities 16 Vendors to watch 17 Where next: Web 3.0 18
Chapter 1 Introduction 20
What is this report about 20 Who is this report for? 21 Definitions 21 Blog 21 Enterprise 2.0 22 Mash-up 22 Podcast 22 RSS (Really Simple Syndication) 22 Social bookmarking 22 Social network 22 The long tail 23 The ‘wisdom of crowds’ 23 User generated content 23 Web 2.0 23 Web 2.0 company 23 Widget 24 Wiki 24
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Chapter 2 What Web 2.0 means for your business 26
Summary 26 The emergence of Web 2.0 27 A consumer-driven trend 27 Defining Web 2.0 32 Web 2.0 applications and services 32 Harking back to the past… 33 … Looking into the future 34
Drivers behind Web 2.0 35 ‘Enterprise 2.0’ 36 A Web 2.0 workforce 37 Improving business processes and advertising practices 37 Barriers to Enterprise 2.0 39
Security 39 Confidentiality 39 Effectiveness 39 Culture 40
Enterprise 2.0 best practices 40 Barriers to Web 2.0 41 Bandwidth 41 Net neutrality 42 Legal challenges to Web 2.0 43 Will the Web 2.0 bubble burst? 44
Chapter 3 The enterprise approach to Web 2.0 46
Summary 46 IT spending 47 Enterprise adoption of Web 2.0 48 Return on investment 49 Who is driving Web 2.0 in enterprises? 51 Implementing Web 2.0 51 A vertical approach to Web 2.0 52 Government 52
e-Democracy in Web 2.0 world 53 Challenges in a Web 2.0 world 54
The healthcare and pharmaceutical industry 54 Financial services 55
Challenges in a Web 2.0 world 56 Barriers to adoption of Enterprise 2.0 58
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Misperception and confusion 58 Culture 59 IT security and management 60
IT security 60 Application integration 62 Skills shortage 62 Take-up 63
Where next for Enterprise 2.0? 63 Enterprise 2.0 recommendations 64 Re-think traditional information flows and structures 64 Establish policies for Web 2.0 usage 64 Consider areas where new applications could be deployed 65 Don’t abandon offline communication altogether 65 Avoid a disconnect between IT and business 65
Chapter 4 Why Web 2.0 matters 68
Summary 68 Introduction 69 Background 69 How much is ‘Web 2.0’ worth? 70 The Web 2.0 business model 72 Are Facebook and co. worth more than $15bn? 74
Network effect 76 Innovation 76 Using the site as a platform 76 Open architecture 76 Lower infrastructure costs 77 Online advertising is growing 77
Flaws in the Web 2.0 business model 77 The online advertising market isn’t equal 78 Theoretical valuations vs. actual revenue and profitability 79 Web 2.0 isn’t the only sector chasing VC funding 79 Where’s the disruptive technology? 79 Web 2.0 businesses are going bust 79
Is Web 2.0 another dotcom bubble waiting to burst? 79
Chapter 5 Collaboration in a Web 2.0 world 84
Summary 84 Introduction 85 The Web 2.0 opportunity 86
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The benefits of Web 2.0 collaboration 88 The wisdom of crowds 88 The limitations of current communication methods 89 Open, flexible and accessible 89 Genuine knowledge sharing 90 Barriers to Web 2.0 collaboration 90 Losing control 90 The ‘unwisdom’ of crowds 90 Enterprise scalability 91 Appropriate content 91 Securing the enterprise 91 Information sharing 92 Wikis in the workplace 92
Pitfalls of using wikis in the enterprise 93 Blogging in the workplace 94
Pitfalls of using blogs in the enterprise 95 Social networking in the workplace 96
Pitfalls of using social networks in the enterprise 98 Other Web 2.0 collaboration tools 99
Mash-ups 99 Twitter 99 Virtual worlds 100
Information retrieval 101 Tagging in the workplace 101
Tag clouds 102 RSS feeds in the workplace 102 Best practices in Web 2.0 collaboration 103
Chapter 6 Web 2.0 marketing opportunities 106
Summary 106 Introduction 107 The Web 2.0 marketing opportunity 108 The UK outlook 108 The US outlook 109 The social networking opportunity 109 Benefits of advertising in Web 2.0 arena 111 Measurability 111 Cost 111 Reach elusive 18-34 target audience in their environment 112 Target niche audiences effectively 112 Increased choice of channels 112 Challenges of Web 2.0 advertising 113 Intrusive or invasive advertising 113 The next big thing 114 For the sake of new 114
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Audience 114 Control 115 Marketing on social networks 115 Case study examples 116 Best practices 117 Marketing on widgets 119 Case study examples 120 Best practices 121
Chapter 7 Vendors to watch 124
Summary 124 Introduction 125 Which Web 2.0 companies are important? 125 Internet companies 125
Google 125 Yahoo! 129 Others 131
The enterprise IT heavyweights 133 IBM 133 Microsoft 134 Oracle 134 Intel 135 Cisco 137 Newcomers 137
The enterprise approach to buying Web 2.0 applications and services 139 Sales strategies for success 140
Chapter 8 Where next: Web 3.0 144
Summary 144 Welcome to Web 3.0 144 Mobile 146 The semantic web 147 Second Life in real life? 148 Barriers to Web 3.0 148 Computer and bandwidth limitations 148 User reticence 148 Vendor delay 149 Embracing Web 2.0 149 Index 150
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List of Figures Figure 2.1: Categories accounting for the most time spent by UK Internet population – June 2007
28 Figure 3.2: IT spending priorities in large, medium and small enterprises in 2007 47 Figure 4.3: Google’s share of the US search market, April 2008 74 Figure 6.4: Digital vs. offline media, January – June 2007 107 Figure 6.5: Digital media mix in the UK, January – June 2007 108
List of Tables Table 2.1: Categories accounting for the most time spent by UK Internet population – June 2007
28 Table 2.2: Web 2.0 mistakes 31 Table 2.3: Web 1.0 vs. Web 2.0 34 Table 2.4: Enterprise 2.0 in action 38 Table 4.5: Amount invested in Web 2.0 companies ($m) 70 Table 4.6: Most active Web 2.0 investors, globally 2006 71 Table 4.7: Google’s share of the US search market, April 2008 74 Table 4.8: The Millennium dotcom bubble vs. Web 2.0 fever 80 Table 6.9: Top 10 advertisers by estimated spending (US) 109 Table 6.10: UK’s most popular social media websites: Jan 2008 110 Table 6.11: UK’s fastest growing social media websites*: Jan 07 - Jan 08 110 Table 7.12: Core traits of a Web 2.0 company 125 Table 7.13: Would you be more interested in Web 2.0 technologies if offered by a major
incumbent vendor? 139 Table 7.14: Would you be more interested in Web 2.0 technologies if offered as a suite? 139 Table 8.15: A view of the future Internet-driven world in 2020 145
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Executive Summary
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Executive Summary
What Web 2.0 means for your business
Technologies meant for consumers are being brought into the workplace.
Consumer usage of Web 2.0 technologies has implications for how they expect to
use technology and be trained to do so in the workplace.
Web 2.0 is defined in this report as “a term used to describe a group of Web-based
technologies, applications and services that enable participation, the creation of
online communities, easy collaboration, and sharing of content or services.”
Inside the workplace, Web 2.0 is delivering new ways in which employees can
collaborate and communicate with one another more effectively and efficiently, and
also reach out to customers through emerging digital platforms, such as widgets or
social network applications.
Web 2.0 is being driven by greater Internet access, an increasing number of
broadband connections, more computing power and the network effect.
‘Enterprise 2.0’ defines the use of Web 2.0 technologies and services in a corporate
setting.
Barriers to the take-up of Enterprise 2.0 include security, confidentiality, return on
investment and an organization’s culture.
Network traffic congestion could halt the wider roll-out of Web 2.0, as could
arguments over who should pay for increased bandwidth usage and the threat of
legal action online.
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The enterprise approach to Web 2.0
A survey carried out by Bournemouth University in the UK on behalf of IT services
provider, Parity, found that only 32% of businesses had made any investment in
Web 2.0.
The McKinsey Global Survey found that companies were investing in back-end
technologies that enable automation and networking – such as web services (80%)
and peer-to-peer networking (47%) – rather than blogs (32%), podcasts (35%),
wikis (33%) and other collaboration tools.
In the same way that consumers are pushing for enterprise adoption of social
software and other traditionally consumer-focused Web 2.0 applications and
services in the corporate environment, it has tended to be non-IT departments
leading the adoption of Web 2.0 in the enterprise.
Most Web 2.0 implementations start as small pilot projects – whether within a
department or from grassroots e.g. a team wiki – designed to test the viability of
Web 2.0 in the enterprise.
Over time, as Web 2.0 technologies become entrenched in the enterprise, it is
inevitable that business processes for rolling out these applications and services
will become more formalized.
The main reason given by organizations in Bournemouth University’s research for
not using Web 2.0 was senior management’s lack of understanding of the business
benefits associated with these technologies.
The challenge for CIOs in deploying Web 2.0 technologies is that many were not
designed with the same security and performance features traditionally associated
with enterprise software and services.
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Why Web 2.0 matters
Internet-based companies such as Google, YouTube and Flickr have risen to
prominence ahead of the carriers by taking advantage of cheap processing power
and, above all, free bandwidth.
The 2008 Predictions Survey from the National Venture Capital Association
(NVCA) found that nearly three-quarters of venture capitalists were expecting
moderate investment growth in 2008 of between $20bn and $29bn, on a par with
2007 investment levels.
Web 2.0 businesses looking for funding could find that the venture capitalists they
rely on are under pressure, with investment banks unable to provide the liquidity
they need to realize their investments.
Any slowdown in the IPO market could have an equally draining effect on mergers
and acquisitions – another source of funds for venture capitalists looking to offload
their investments.
Web 2.0 companies face very few barriers to market. It is relatively inexpensive to
launch and run an Internet-based business: bandwidth is cheap and there are no
expensive manufacturing costs associated with delivering their services.
With services or products being offered for free, the Web 2.0 business model
follows the publishing business model, with revenue coming from advertisers
paying to reach people visiting the site.
Competitive advantage in the Web 2.0 world doesn’t come from locking out other
platforms and applications; it comes from open standards that give consumers
choice and control over how they manage their virtual world.
In 2007, venture capitalists pumped a record $1.34bn into 178 Web 2.0 deals in the
US, an increase of 88% on the previous year.
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Collaboration in a Web 2.0 world
Web 2.0 technologies such as wikis, social networks, blogs and microblogging sites
like Twitter, have the potential to drive higher productivity gains by enabling
employees to communicate with one another more quickly and frequently, and
share their knowledge throughout the organization more easily.
In the enterprise, Web 2.0 technologies like wikis, blogs and social networks can be
used for information and knowledge sharing, while RSS feeds, tags and
folksonomies assist in the process of retrieving information from the increasingly
large amounts of digital content organizations have created, not to mention the
collective ‘wisdom of crowds’ inside the enterprise.
The benefits of Web 2.0 collaboration include tapping into the ‘wisdom of crowds’,
bypassing email as a communications method, flexibility in creating Web 2.0
applications on an ad hoc basis and genuine knowledge sharing.
Holding Web 2.0 collaboration back, however, are organizations’ fears of losing
control, the idea that majority rule doesn’t always produce the best results,
scalability issues, and concerns for intellectual property and security.
Wikis provides a Web 2.0 alternative to groupware applications, like Lotus Notes.
Blogs can be an effective channel for broadcasting information to a wide audience,
such as company results, and collecting feedback to help refine existing products,
services or promotional methods, for example. In many ways, blogs are the Web
2.0 equivalent of a newsletter or email.
Ad hoc social networks can improve project management or foster a community
around a research idea or topic, for example. In some instances, an organization’s
social network could evolve into an intranet for the Web 2.0 era.
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Web 2.0 marketing opportunities
In the first half of 2007, the UK online advertising market was valued at £1.3bn, an
increase of 41.3% on the same period the previous year. This was at a time when
the advertising industry as a whole only managed growth of 3.1%.
Morgan Stanley predicts an equally favorable outlook for Internet advertising in the
US, with a CAGR of 20% from 2005 to 2010 and an estimated 13% cent market
share by the end of the period.
The necessity for brands to move to a Web 2.0 presence is highlighted by a finding
from the Ketchum/USC study. It identified a disconnect between consumers’ lack
of reliance on corporate websites for information (very much a Web 1.0
phenomenon) and marketers’ strong use of them to convey corporate information
compared to other channels.
Benefits of advertising in the Web 2.0 arena include measurability, cost, the
opportunity to reach the 18-34 age group and niche audiences effectively, and a
variety of channels.
Challenges to advertising in the Web 2.0 arena, however, include being seen as too
intrusive, following ‘the next big thing’, targeting an audience effectively and
ceding control to users.
Marketing on social networks can take the following forms: display ads, corporate
group pages, viral marketing, applications or widgets, and branded content or
advertising within entertainment content.
In 2007, eMarketer predicted around $900m would be spent on advertising through
social networking sites in the US and $335m elsewhere.
For marketers, widgets represent a new advertising opportunity. Rather than simply
piggybacking on an existing piece of content, the widget becomes the piece of
advertising, combining a brand message with a useful function. Alternatively,
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advertising can be run inside a widget, in the same way an ad might appear on a
web page or social network page.
Vendors to watch
Google’s business model is predominantly advertising based – 99% of revenue over
the last few years has come from online advertising – and it has several Web 2.0
products and services, including Google Reader, Orkut, Blogger, Google Sites and
YouTube.
Yahoo! increased revenue in 2007 to $6.9bn. However, year-on-year growth was
only 8% (compared that to Google’s 54% increase) and advertising revenue from
affiliate sites actually fell five%, despite a buoyant online advertising market.
Shareholders are now looking to see how the company will turn itself around and
challenge Google.
In 2007, Yahoo! indicated it was moving into offering web-based office tools with
the acquisition of Zimbra, a provider of email and collaboration software. Zimbra
should help Yahoo!’s push into the enterprise – particularly in SMEs or cost-
conscious organizations – because it is built on open source software.
For enterprises, Twitter offers the possibility of collaborating with one another
quickly via the web or a mobile device.
Web 2.0 Goes to Work is the name of IBM’s Web 2.0 campaign to help enterprises
adopt social media and Web 2.0 technologies inside their organization.
Microsoft’s Web 2.0 strategy revolves around its Office SharePoint server.
Intel has embraced Web 2.0 through a series of partnerships to create SuiteTwo, a
business Internet suite.
As a networking company, it’s little surprise that Cisco’s approach to Web 2.0 is to
combine collaboration with communications.
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Unsurprisingly, a range of enterprise software start-ups have jumped into the Web
2.0 space, with corporate tools based around social networks and other Web 2.0
technologies. What these start-ups have in expertise and innovation, however, they
lack in scale and resources.
Where next: Web 3.0
Mobility might have been cited as the next big thing for the last five to ten years,
but new developments in the sector mean that the humble mobile handset and
anytime communications could drive the next wave of innovation in the enterprise.
In the semantic web, computers can extract more contextual meaning from
information on a document, web page or other online content. For users, it will
make the experience of finding information and interacting on the web far more
intuitive.
It may not happen in the next evolution of the Internet, but virtual reality will
inevitably play a bigger role in the future.
Barriers to Web 3.0 include limited processing power and bandwidth, user reticence
to new technology, incumbent vendors blocking market developments and
organizations’ failure to embrace Web 2.0 properly yet.
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CHAPTER 1
Introduction
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Chapter 1 Introduction
What is this report about
The phrase ‘Web 2.0’ has come to stand for a new wave of Internet applications,
technologies and services that have emerged over the last few years. While there is
much debate in the industry about the nature of Web 2.0 and an exact definition of the
term, there is no denying that the services and technologies it has engendered are
becoming deeply entrenched in the consumer world. Indeed, many of today’s Internet-
savvy consumers – particularly in the 18-34 age bracket – are as comfortable with
social networking, blogging and twittering as they are with using the telephone or
writing an email.
The focus of ‘The impact of Web 2.0 on the enterprise’ report is how the underlying
concepts behind Web 2.0 – and the technologies and services it enables – are filtering
into the corporate world (or ‘Enterprise 2.0’, as some people prefer to refer to it). The
report begins with an exploration of how Web 2.0 has disrupted the Web 1.0 way of
doing things, such as selling and advertising online, or communicating and engaging
with employees. In the third chapter, the opportunities and threats Web 2.0 presents to
the enterprise are examined in more detail, along with enterprise take-up of the various
Web 2.0 technologies and services available so far.
Later chapters analyse the impact of Web 2.0 on the enterprise – namely the
collaboration opportunities Web 2.0 tools such as blogs, podcasts, wikis and social
networks offer enterprises in communicating more effectively; and the new digital
marketing opportunities driven by social networks and widgets. The final chapters in
‘The impact of Web 2.0 on the enterprise’ report examine the vendors offering Web 2.0
services and provide some insight into what Web 3.0 might deliver.
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Who is this report for?
‘The impact of Web 2.0 on the enterprise’ report will have relevant findings for both
enterprises wanting to understand and use Web 2.0, and those vendors wanting to sell
Web 2.0 technologies and services to them, as the report is focused on the business and
commercial opportunities afforded by Web 2.0 rather than the IT requirements of
delivering Web 2.0 applications and services.
For that reason, this report is of interest to any vendors of Web 2.0 technologies,
applications or services, not to mention more traditional software vendors – such as
Microsoft and IBM – that have incorporated Web 2.0 features into existing and new
products and services. In addition, system integrators, managed service providers and
value-added resellers will also be interested in ‘The impact of Web 2.0 on the
enterprise’ report to identify ways of refining their sales pitch. The final chapter on
Web 3.0 might also be relevant to mobile application providers and network operators
interested in finding out how Web 3.0 could influence future services.
Definitions
Blog
A ‘weblog’ (better known as a ‘blog’) was originally used to describe an online diary
entry, with the option for readers to post their own comments and links. In the
corporate arena, an analogy might be an online memo, which other employees or
people outside the organization can contribute to (provided they have the necessary
permissions and access).
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Enterprise 2.0
The application of Web 2.0 applications and technologies in the corporate environment.
Mash-up
A new application or tool created from combining two or more existing data sources.
The first mash-ups combined Google Maps with other sources of data, such as crime
statistics or houses for sale.
Podcast
An audio file distributed online, often by RSS (see below) or another type of data feed.
It differs from a webcast in that podcasts – like blogs – tend to be updated regularly and
are available for automatic download via an XML newsfeed.
RSS (Really Simple Syndication)
An XML feed that notifies subscribers every time a web page has been updated
(whether a new blog post, podcast, Twitter update or wiki contribution, for example).
Social bookmarking
‘Tagging’ blogs, photos, videos or articles using sites such as Digg, Del.icio.us or
StumbleUpon. Combined into a ‘tag cloud’, these tags provide an insight into what is
popular online by arranging tagged words according to size (the larger the word, the
more people are tagging articles with that term).
Social network
A community of online users, often replicating a member’s offline social network.
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The long tail
A phrase coined by Chris Anderson, editor-in-chief of Wired magazine, in 2004. In
statistics, mathematicians use the phrase ‘long-tailed distribution’ to describe a chart
where the line runs to infinity but never reaches zero. Anderson created the noun ‘the
long tail’ to describe the economic model behind successful online businesses such as
Amazon and Netflix, where value comes not just from selling the blockbusters or top
20 films (the ‘head’) but collectively from the millions of people buying small amounts
of what might previously have been considered niche or back catalogue items (the
‘long tail’).
The ‘wisdom of crowds’
A phrase coined by James Surowiecki in his 2004 book, The Wisdom of Crowds: Why
the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business,
Economies, Societies and Nations. In his book, he argues that the collective
intelligence of groups can result in decisions that are often better than those made by
any single member of the group.
User generated content
As its name suggests, content created by consumers and uploaded to the Web –
whether a video posted to DailyMotion, a photo uploaded to Flickr or a user uploading
a book review to Amazon.
Web 2.0
A term used to describe a group of web-based technologies, applications and services
that enable participation, the creation of online communities, easy collaboration, and
sharing of content or services.
Web 2.0 company
Any company whose products or services are based on an aspect of Web 2.0, from
social networking to user-generated content and more.
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Widget
A widget is a bit of code that can be embedded into another website, without requiring
users to have coding knowledge.
Wiki
A web page that users without HTML experience or author rights can contribute to,
edit or link content to. The most famous example is Wikipedia.
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CHAPTER 2
What Web 2.0 means for your business
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Chapter 2 What Web 2.0 means for your business
Summary
Technologies meant for consumers are being brought into the workplace.
Consumer usage of Web 2.0 technologies has implications for how they expect to use technology and be trained to do so in the workplace.
Web 2.0 is defined in this report as “a term used to describe a group of Web-based technologies, applications and services that enable participation, the creation of online communities, easy collaboration, and sharing of content or services.”
Inside the workplace, Web 2.0 is delivering new ways in which employees can collaborate and communicate with one another more effectively and efficiently, and also reach out to customers through emerging digital platforms, such as widgets or social network applications.
Web 2.0 is being driven by greater Internet access, an increasing number of broadband connections, more computing power and the network effect.
‘Enterprise 2.0’ defines the use of Web 2.0 technologies and services in a corporate setting.
Barriers to the take-up of Enterprise 2.0 include security, confidentiality, return on investment and an organization’s culture.
Network traffic congestion could halt the wider roll-out of Web 2.0, as could arguments over who should pay for increased bandwidth usage and the threat of legal action online.
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The emergence of Web 2.0
Web 2.0 is one of the clearest examples to date of a trend for consumers to lead
innovation in the workplace. Previously, it used to be the military or the enterprise that
had the technology headstart; the US Department of Defense created one of the first
iterations of the Internet, for example, while the workplace has driven widespread
uptake of networked computing.
But in the last decade, it is consumers and their increasing uptake of Internet services –
from instant messenger to social networks and sites such as Twitter – that has left the
enterprise playing catch-up, whether in deciding how to manage the use of such
consumer technologies in the workplace or how to implement their own corporate
interpretation. Issues of speed, uptime and security previously distinguished enterprise
computing environments from their inferior consumer counterparts, but now web-based
services hosted by vast data centres, faster Internet connections and usage-based
pricing models give consumers and small businesses the same computing power, access
and security as larger corporates have enjoyed for decades. The Web 2.0 trend for user-
generated content highlights another important change in consumer/enterprise
relationships. Today, consumers have a more important role to play in producing and
creating content, while organizations tend to look retrospectively to identify future
successes based on what has worked in the past.
A consumer-driven trend
The community and participatory aspects of Web 2.0 – brought to life through social
networking services, blogging and other communication tools – have proven extremely
popular with consumers. UK Internet visits to social networks such as Facebook, Bebo
and MySpace overtook visits to Web-based email services, such as Hotmail and
Yahoo! Mail for the first time in October 2007, according to Hitwise, which tracks
Internet searches. With the opportunity for consumers to use social networks to
communicate with other people and share photos, information and news feeds, email is
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no longer seen as the most important communication source online. A separate study
from Nielsen Online put instant messenger ahead of both social networks and email in
accounting for the majority of time Britons spend online (see Table 2.1).
Table 2.1: Categories accounting for the most time spent by UK Internet population – June 2007
Rank Category % of total time Total time (bn minutes) 1 Instant messaging 12.7% 3.4 2 Member communities 9.4% 2.6 3 Email 7.8% 2.1 4 Classifieds/auctions 5.1% 1.4 5 Games 4.8% 1.3 6 Software manufacturers 4.4% 1.2 7 Search 4.2% 1.1 8 General interest portals and communities 3.7% 1.0 9 Multi-category entertainment 3.4% 0.9 10 Adult 2.6% 0.7
Source: Nielsen Online Business Insights Ltd
Figure 2.1: Categories accounting for the most time spent by UK Internet population – June 2007
Instant messaging
23%
Member communities
16%
Email13%
Games8%
Software manufacturers
8%
Search7%
Classifieds/auctions9%
Multi-category entertainment
6%General interest
portals and communities
6%
Adult4%
Instant messaging
23%
Member communities
16%
Email13%
Games8%
Software manufacturers
8%
Search7%
Classifieds/auctions9%
Multi-category entertainment
6%General interest
portals and communities
6%
Adult4%
Source: Nielsen Online Business Insights Ltd
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‘The Internet in Britain: 2007’ study from the Oxford Internet Institute found that
“Against expectations – since women are (stereotypically) assumed to be more
interested in communication – men undertake more communicative activities on
average than do women.” It also found that: “all communication, and especially the
social networking activities, are most popular amongst students and younger people.”
The latter finding is not surprising, especially given that many social networks were
borne out of school and college leavers wanting to stay in touch with one another (such
as Friends Reunited and Facebook).
Viviane Reding, member of the European Commission responsible for Information
Society and Media, summed up the younger generations’ propensity for Web 2.0 in a
speech to the Youth Forum at ITU Telecom World in Hong Kong in December 2006,
when she said: “Young people are open to new technologies. It is also often young
people who invent the new business and social paradigms, who fully exploit the new
possibilities, that ICT offer. The Information Society has repeatedly been built by
young and dynamic people: Sergey Brin and Larry Page, founders of Google, are today
only 32 and 33, the Dane, Janus Friis, co-founder of Skype is still only 30 and Linus
Torvald created Linux in 1991, when he was only 22.”
Research from the Institute for Public Policy Research found that UK teenagers
between the ages of 13 and 18 spend more than 20 hours a week using Web 2.0 sites
such as Bebo, Myspace, Facebook and YouTube – which is three times higher than
previous official estimates. This has implications for the future workplace in how
employees versed in Web 2.0 will expect to use technology and be trained to do so –
not to mention their relationships with older generations, who may be considerably less
technology savvy.
“Our work at the Pew Internet Project shows that an American teen is more likely than
her parents to own a digital music player like an iPod, to have posted writing, pictures
or video on the Internet, to have created a blog or profile on a social networking web
site like MySpace, to have downloaded digital content such as songs, games, movies,
or software, to have shared a remix or ‘mash-up’ creation with friends, and to have
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snapped a photo or video with a cell phone,” says Lee Rainie of the Pew Internet &
American Life Project.
Inevitably, the consumer push for enterprise adoption of technologies they use outside
the workplace, has caused some friction between senior management and employees,
not to mention the IT department which is responsible for delivering, supporting and
maintaining such technologies. Many large organizations have banned outright access
to websites such as Facebook, Blogger and Skype. Others have opened them only for
limited periods of time (e.g. outside 9am to 5pm office hours).
In the area of Web 2.0 services, there have been several high-profile examples of
employees and their employers falling out over the use of such Web 2.0 applications in
the workplace (see Table 2.2).
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Table 2.2: Web 2.0 mistakes Employee/employer Technology Implications Heather Armstrong Blog A former web designer, Armstrong was fired from her job after writing about her co-workers on her blog www.dooce.com. Her firing was one of the first high- profile cases of employees facing repercussions for what they write online. Her advice now is “Never write about work on the Internet unless your boss knows and sanctions the fact that YOU ARE WRITING ABOUT WORK ON THE INTERNET.” Ellen Simonetti/ Blog Simonetti was fired from her job in 2004 after posting Delta Air Lines pictures on her ‘Queen of Sky’ blog that her employer deemed inappropriate. Simonetti has since filed a legal complaint against her former employer. Jan Pronk/ Sudanese Blog A former United Nations’ envoy to Sudan, Jan Pronk Government was asked to leave the country by the Sudanese Govern- ment after launching what the army called “psycholog- ical warfare” after he wrote in his blog that morale was low in Sudan’s army having suffered defeats in the Darfur region. Reckitt Benckiser Blog This was a lesson not so much in how not to blog, but how not to respond to others’ blog postings. One of the agencies that works with Reckitt Benckiser to promote Cillit Bang responded to a personal blog posting by Tom Coates using the fictional marketing character Barry Scott that appears in ads to promote its cleaning product. Coates was understandably aggrieved and publicly sought out the source of the posting via his blog www.plasticbag.org Mark Jen / Google Blog Jen was fired from Google only a few weeks into his job after writing about the company. Despite claiming not to have written anything he deemed inappropriate, his employment was terminated. He now works at Plaxo and still blogs at http://blog.plaxoed.com/ Farm Boy employees Social networks A group of employees at the Canadian grocery store, Farm Boy, were fired after comments they made on the ‘I Got Farm Boy’d’ group on Facebook. Vodafone, Halifax Social network Pulled their ads from Facebook after they appeared Virgin Media and others by a BNP-related page Automobile Club of Social network Fired employees from one of its San Diego offices after Southern California some colleagues claimed of feeling harassed by messages posted on MySpace. Argos Social network A disgruntled employee was fired after creating a group on Facebook that criticised the retailer.
Source: Business Insights Business Insights Ltd
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Defining Web 2.0
The purpose of this report is not to debate an absolute definition of Web 2.0 but to
examine the impact of Web 2.0 on the enterprise. However, it is important to make
clear what we mean by the phrase in the context of later chapters. Therefore, we have
come up with the following definition for Web 2.0: “a term used to describe a group of
Web-based technologies, applications and services that enable participation, the
creation of online communities, easy collaboration, and sharing of content or services.”
The Web 2.0 world is less about observing or passively visiting websites; it is about
canvassing opinions, participating in producing content or using the Internet to share
photos, data and more. In the workplace, Web 2.0 provides a platform for harnessing
the collective intelligence of the organization more effectively, sharing data and
contacts more easily, and collaborating with peers more quickly.
No definition of Web 2.0 would be complete without referring to the man credited with
coining the phrase, Tim O’Reilly. In an article he wrote on the subject, ‘What is Web
2.0 Design Patterns and Business Models for the Next Generation of Software’, he
says: “Companies that succeed will create applications that learn from their users,
using an architecture of participation to build a commanding advantage not just in the
software interface, but in the richness of the shared data.”
Web 2.0 applications and services
Web 2.0 comprises a wide range of applications and services from:
Social networking services such as MySpace, Bebo and Facebook;
Photosharing sites such as Flickr;
Social bookmarking sites, such as Del.icio.us, StumbleUpon and Digg, which
enable users to tag articles according to their own criteria that others can then view
and search;
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Interactive two-way communication via blogs, comments, podcasts and micro-
blogging sites such as Twitter (which asks users to define ‘what are you doing right
now’ in 140 words or less);
RSS feeds and dynamic web services, so users can receive new content whenever it
is updated or create new applications based on existing data and services (otherwise
known as ‘mash-ups’);
User generated content sites such as YouTube, Wikipedia and TripAdvisor where
users can upload, contribute to and edit content.
Harking back to the past…
In many areas, Web 2.0 draws on established Internet and social principles. Users were
establishing social networks offline before Facebook’s youthful founder Mark
Zuckerberg was born, and even online before he was at secondary school (Geocities, an
early community, began operating in 1994). Likewise, groupware applications have
been letting people work together from disparate locations since the pre-Web 2.0 days.
Another trend common to Web 2.0 and Web 1.0 businesses is their reliance on the
‘network effect’. So just as eBay, one of the first successful Internet businesses, grows
the more buyers and sellers it attracts, so too do social networking sites depend on
users inviting friends to sign up to their network and draw in existing members to their
own network.
That said, there are some clear differences between Web 1.0 and Web 2.0 applications
and services, as highlighted in Table 2.3, and the following section.
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Table 2.3: Web 1.0 vs. Web 2.0 Web 1.0 Web 2.0 DoubleClick Google AdSense Ofoto Flickr Akamai BitTorrent Mp3.com Napster Britannica Online Wikipedia Personal websites blogging Evite upcoming.org and EVDB Domain name speculation search engine optimisation Page views cost per click Screen scraping web services Publishing participation Content management systems wikis Directories (taxonomy) tagging (folksonomy) Stickiness syndication
Source: O’Reilly Media Inc. Business Insights Ltd
… Looking into the future
For a start, by opening up their APIs to developers, many of today’s commercial social
networks have enabled the creation of new (although not admittedly, necessary)
applications for users to download. Users have also become producers of content on a
far greater scale – whether producing a Wikipedia entry, writing a book review on
Amazon or rating an article on Digg.
Today’s Web 2.0 applications are also based on richer technologies that do not
typically fall over as soon as users scale up (and in the Web 2.0 world, they tend to
scale up extremely rapidly if/when take-up takes off). The network effect discussed
earlier also means that Web 2.0 services become more effective the more users that
sign up to them. Two recently launched search engines, Mahalo and Wikia Search, for
example, depend on users rating and creating content for different keyword searches to
improve the relevancy of results; therefore, the more people that contribute, the more
relevant the results become to users.
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Drivers behind Web 2.0
Web 1.0 was driven by greater broadband Internet access, the growth in search engines
and offline brands establishing their presence online. Some of these factors have also
been behind the growth in Web 2.0, but, significantly, several new drivers have also
emerged:
Internet access
In 2007, 7% more households in the UK had access to the Internet, taking the total to
15m households and 61% of the population. In the US, The Pew Internet & American
Life Project estimates that 75% of adults are online.
Broadband connections
An increase in the number of Internet users accessing the Web through a broadband
‘always-on’ connection has made it much easier for users to access video and other
bandwidth-intensive services. In 2007, 84% of UK households with Internet access had
a broadband connection in 2007, up from 69% in 2006. This compares to 47% of adult
Americans (The Pew Internet & American Life Project). This gives users access to
richer content, such as video, online TV programs, music and more. We anticipate the
next wave of innovation online to come from the growing number of users accessing
the Internet using mobile devices (see Chapter 8).
Computing power
Not having a fast Internet connection certainly stopped people from enjoying a good
user experience in the Web 1.0 world, but a lack of readily accessible and cheap
computing processing power also held back the rollout of social networking and
communication services. Site crashes might not have been entirely eliminated – witness
the recent downtime from some Web 2.0 sites after Amazon Web Services suffered an
outage – but they arguably happen a lot less infrequently in the Web 2.0 compared to
Web 1.0 world. Likewise, the memory and processing spec of even below-average
computers today surpasses that of most high-end machines five to ten years ago.
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People power
The network effect mentioned above has made the people-centric vision originally
associated with the Internet and Web 1.0 finally possible in the Web 2.0 age. Indeed, it
is rare to find a Web 2.0 site that does not flourish, the more people that use the service.
The reverse would have been true in the early days of the Web.
‘Enterprise 2.0’
Inside the workplace, Web 2.0 is delivering new ways in which employees can
collaborate and communicate with one another more effectively and efficiently, and
also reach out to customers through emerging digital platforms, such as widgets or
social network applications.
Many brands have also incorporated Web 2.0 features into their websites, whether by
re-building their site on AJAX technologies – which enable the creation of rich Internet
applications – or incorporating customer reviews, RSS feeds, blogs, podcasts or ‘mash-
ups’, as Thomson UK has done on its site combining Google Earth with data on its
holiday destinations. Similarly, TripAdvisor, an online travel guide, offers a wiki-based
service called TripAdvisor Inside, which enables users to edit and add their own
content, free from the restrictions that apply to its hotel reviews.
The use of Web 2.0 technologies and services in a corporate setting – despite being
orginally designed for mainly consumer and social use – has led to the emergence of a
new phrase in the industry: ‘Enterprise 2.0’. The practice of prefixing an industry or
business with ‘2.0’ is hardly new or limited to the enterprise, but in the case of
Enterprise 2.0, many commentators believe Web 2.0 has a valuable and long-lasting
role to play inside the corporate arena.
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A Web 2.0 workforce
Many graduates and younger generations entering the workforce today are as familiar
with blogging, wikis and social networking, as they are with using email or SMS
services. Inevitably, this will have an impact on their employers, with many new
entrants pushing for the adoption of Web 2.0 services in the workplace. Even if their
company doesn’t adopt them, expect many to continue using them on the sly – as
initially happened with Instant Messenger. It could even impact recruitment and
retention: if younger employees feel frustrated enough about not having access to Web
2.0 tools and services they consider essential, they might prefer to work for an
employee that values their expertise in this area.
Improving business processes and advertising practices
Organizations that do adopt Enterprise 2.0 applications and services will find it does
more than aid recruitment and retention of younger generations, if properly
implemented. Corporate blogs, podcasts and webcasts offer organizations more
effective ways of communicating with shareholders, the public and employees.
Internally, wikis and tags offer the opportunity to collaborate on documents more
easily. Furthermore, social networks and other emerging digital platforms – such as
collaborating with online producers, in the case of Cadburys Creme Egg and the
fictional Kate Modern drama shown on Bebo – also offer new and innovative ways of
marketing products and services to the hard-to-reach 18-34 age group in particular.
In addition, there’s the opportunity to use Web 2.0 in areas of the enterprise previously
untouched by the consumer phenomenon – such as product development, market
research and sales leads. Table 2.4 highlights some examples of how Enterprise 2.0
can be applied and examples of where it is being used by leading edge organizations,
such as IBM, Dell and Honeywell.
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Table 2.4: Enterprise 2.0 in action Use of Enterprise 2.0 Corporate adopter Project Knowledge sharing and management Collaborative doc production IBM Patent manifesto All-purpose ‘teamware’ Nokia Tech investment research Knowledge management Honeywell Catalogue Internet and intranet Content Knolwedge broadcast Microsoft Partners helping with Visual Studio documentation Intel Share financial highlights, Progress of internal projects Western States Collate and broadcast Intelligence Network crime-fighting information Jonathan Schwartz, Sun Communicate directly with Bob Lutz, General Motors customers on a blog StudioDell Video-sharing site with company and user videos Problem solving ‘War room’ for fast-changing Defense Intelligence Agency Nascent threats and situation situations monitor Sharing computing power Novartis Share raw data on type two and brainpower diabetes to kickstart research Seti@home Net-connecting computers used to find extraterrestrial intelligence Answering questions Dell Answers questions about XPS 700 computers eBay Wiki Information sharing about shipping rates, fraud protection Innovation Broadcast search Colgate-Palmolive Used as innovation tool ‘Crowdsourcing’ iStockphoto Amateur photos at tiny prices Cambrian House Marketplace of ideas and Projects Expressing collective Google Used to estimate metrics, such Judgment as when offices should be open HP Prediction markets in several Business units Collecting customer feedback Dell’s IdeaStorm Users’ product and feature Requests voted on Yahoo! Uses Digg-like voting for customer feedback Collaboration Customer relations General Motors Ads for Chevy Tahoe Transformative ideas IBM ‘Innovation jams’
Source: KPMG International Research Business Insights Ltd
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Barriers to Enterprise 2.0
Security
As with any adoption of new technology or services, there are some security risks
associated with bringing Web 2.0 technologies and services into the enterprise. We will
examine these threats in more detail in the next section.
Confidentiality
When Cadburys allowed its new graduates to blog about working at the company, it
decided to put in place a moderation process that saw these blogs checked by a senior
employee, as many were so excited about the new product area they were working on
they didn’t realise a lot of information they were releasing was not yet in the public
domain.
Bloggers or contributors to wikis and social networks need to realise that rules
surrounding corporate disclosure, discrimination and other regulations apply as much
here as in any other document, email, memo or speech created. In particular,
organizations need to ensure that when an organization is in its quiet financial period,
nothing is disclosed that could put it in breach of financial legislation.
Effectiveness
Employees and customers are extremely cynical nowadays of anything that they
suspect might be false or ‘sales speak’. Therefore, any organizations embarking on a
corporate blog, wiki or other collaboration project needs to plan its strategy very
carefully. As with any project, proper attention needs to be paid and a sound business
case given as to why this technology or service should be used. This will also assist in
achieving senior management buy-in.
Bear in mind too, that Web 2.0 technologies and services are an ongoing effort; a
corporate blog needs to be updated regularly to be effective (more often than the
corporate website) and a podcast is just another webcast if it is not broadcast regularly.
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Organizations might have a different agenda to consumers in their use of Web 2.0
applications and services, but they need to abide by the same ‘rules’ that govern these
technologies and their usage.
Culture
Changing people’s habits is often a bigger challenge than changing established
business processes. Writing in ‘Enterprise 2.0: Fad or Future? The Business Role for
Social Software Platforms’, Gary Matuszak, Global Chair for Information,
Communications & Entertainment for KPMG International, says: “Just as damaging
are institutional cultures or norms that work against sharing information, either because
of concerns about confidentiality or because of hierarchical structures. It is telling that
it was the most senior and the most junior officers who were in favor of Intellipedia at
the Defense Intelligence Agency, while the bureaucrats in the middle were resistant.
One of the reasons for their concern, as Harvard’s Weinberger pointed out, is that
intelligence analysts are graded on the basis of their report writing. If you can’t tell
who edited the wiki or who added the key fact that pointed to a terror cell, then how do
you allocate credit?”
Likewise, employees need to understand why they should share their knowledge with
others through collaborative Web 2.0 application. In a Web 2.0 environment, the
phrase ‘knowledge is power’ should apply to the group rather than the individual.
Enterprise 2.0 best practices
Writing in ‘Enterprise 2.0: The Dawn of Emergent Collaboration’, Andrew P. McAfee,
the Harvard Business School associate professor credited with creating the term
‘Enterprise 2.0’, has four recommendations for organizations that want to capitalise on
Web 2.0 technologies and tools without sacrificing credibility or opening their
enterprise to risk:
Create a receptive culture in order to prepare the way for new practices;
A common platform must be created to allow for a collaboration infrastructure;
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An informal rollout of the technologies may be preferred to a more formal
procedural change;
Managerial support and leadership is crucial.
Barriers to Web 2.0
In addition to the enterprise concerns highlighted in the previous section, organizations
need to bear in mind some challenges to the future of Web 2.0.
Bandwidth
Web 2.0 applications and services are far more bandwidth-hungry than previous Web
1.0 technologies. As more users download videos and games or communicate with
others via Skype, IM and email, the Internet is becoming increasingly congested with
traffic. Doomsayers have gone so far as to proclaim ‘the death of the Internet’ as
Internet speeds slow down.
It’s not just one-way traffic (downloads) either; users are uploading more content to the
Internet, whether photos to Flickr like the Library of Congress (see next chapter) or
press releases and corporate images to a social networking page like Ernst & Young on
Facebook. This is good news for the likes of Cisco and Juniper Networks, which are
seeing an increase in demand for Internet access equipment.
Providers of the Internet backbone – such as BT, AT&T and Verizon – have promised
or are already in the process of upgrading their networks, but users will not see the
benefit of this immediately. Bear in mind too, that while the Internet continues to
cannibalise traditional markets, such as telecommunications, one possible scenario is
that telecommunications providers fail to continue their investment in the next
generation networks that will deliver future Internet services, as their traditional
revenue streams fall. Admittedly, this is a highly unlikely scenario – as many carriers
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have launched new services to meet changing user demands (for example, BT offers
BT Vision, its on-demand TV offering, and BT Fusion, its combined mobile and VoIP
service) – but the possibility cannot be ignored.
Net neutrality
Bandwidth-intensive services have also thrown up another potentially far greater
challenge: should the net remain neutral? One future possibility is that network
providers prioritise traffic to minimise congestion. This could give their own
entertainment-based services an unfair advantage or, as is more likely, result in a fee on
Internet-based service providers (i.e. many Web 2.0 companies) for the amount of
traffic they generate.
For the network providers, this would be more favourable than levying higher prices
directly onto consumers. But it would also remove the entrepreneurialism the Web has
so far enabled, where businesses run on a shoestring budget are able to challenge
established offline businesses. As the editors of Scientific American (July 24, 2006)
wrote in an Op-Ed piece on the subject: “AT&T, Verizon, Comcast and other
companies that own the backbone lines for the Internet would like to prioritise data
streams to make the traffic flow more rationally. If they have their way, the Internet's
next slogan might borrow from George Orwell's Animal Farm: “All animals are created
equal, but some animals are more equal than others.””
Prioritising traffic inevitably could have other repercussions too. For example, in the
UK, some Internet service providers – such as Virgin Media and BT – have said they
will work with the police to help stamp out customers accessing pirated material
through their Internet connection. If they are monitoring traffic in order to prioritise it,
they will have much greater insight into what each user is downloading or uploading.
At the moment, there are data protection implications from seeing this, but if the UK
government’s draft proposals come into effect that forces Internet service providers to
take action against customers who illegally download content, this could significantly
change the role of the Internet service provider.
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Legal challenges to Web 2.0
The Internet has long been seen as a champion of free speech, but the announcement in
February 2008 that a website called Wikileaks.org had been forced to come offline
following a California court ruling, could signal the start of a new wave of litigation
online. Wikileaks was set up as a whistleblowing site by dissidents, journalists,
mathematicians and technologists from the US, Taiwan, Europe, Australia and South
Africa. Users can post government and corporate documents anonymously.
In February a court ruling forced Dynadot, which controls the site’s domain name, to
remove all traces of Wikileaks from its servers and put in place a host of other rules
preventing the site from running on another domain registrar. The case was brought by
a team of lawyers working on behalf of Swiss banking group, Julius Baer, which
wanted some documents removed from the site.
Much in the same way that the UK Government is considering proposals that would
make Internet service providers enforce its legislation, lawyers in the US are turning to
the hosts and domain name registrars that provide Internet services to act as their law
enforcement officers.
Web 2.0 also brings with it potential legal challenges from the creation and
consumption of online content. The record industry estimates that almost 20bn songs
were illegally downloaded in 2005. The problem is that many younger people do not
want to pay for content. The Tech Tribe 2007 report from Face, a youth marketing
agency in the UK, found that 57% of the 2,859 16-25 year olds it interviewed had paid
to download music, versus 81% who downloaded it for free. When it came to film and
TV, 35% and 31% paid for it versus 90% and 91% respectively, who downloaded it for
free.
Those in favour of intellectual property rights argue that without these in place,
creativity wouldn’t be rewarded. At the same time, the development of new business
models, such as open source and mash-up services, are delivering organizations
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significant business value. The challenge lies in finding a path between the two that
recognises and rewards creativity from the owners of intellectual property, while
enabling the users of the Web 2.0 content to experiment and enjoy it.
Will the Web 2.0 bubble burst?
In Chapter 4, we examine this topic in more detail, but it is worth mentioning it in the
context of this chapter as many organizations are uneasy about the Web 2.0 label for
fear that it will turn out to be another Internet bubble with the same repercussions as
the 2000 dotcom boom and bust.
There is no doubt that the hype surrounding Web 2.0 has generated a lot of ‘me too’
companies keen to cash in on the label as long as it is valid. It is also inevitable that
there will be some fall-out as a result, as Web 2.0 businesses need users to survive. Not
because they are based on a subscription model, but because advertisers will be more
inclined to consolidate their marketing spend with those sites that put their adverts in
front of their target audience, rather than taking a scattergun approach.
We do not believe though that Web 2.0 is another Internet bubble waiting to burst.
While we expect there to be some consolidation – this is inevitable in any maturing
industry in the technology sector – we do not expect to see the boom and bust of
previous years. See Chapter 4 for more on this topic.
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CHAPTER 3
The enterprise approach to Web 2.0
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Chapter 3 The enterprise approach to Web 2.0
Summary
A survey carried out by Bournemouth University in the UK on behalf of IT services provider, Parity, found that only 32% of businesses had made any investment in Web 2.0.
The McKinsey Global Survey found that companies were investing in back-end technologies that enable automation and networking – such as web services (80%) and peer-to-peer networking (47%) – rather than blogs (32%), podcasts (35%), wikis (33%) and other collaboration tools.
In the same way that consumers are pushing for enterprise adoption of social software and other traditionally consumer-focused Web 2.0 applications and services in the corporate environment, it has tended to be non-IT departments leading the adoption of Web 2.0 in the enterprise.
Most Web 2.0 implementations start as small pilot projects – whether within a department or from grassroots e.g. a team wiki – designed to test the viability of Web 2.0 in the enterprise.
Over time, as Web 2.0 technologies become entrenched in the enterprise, it is inevitable that business processes for rolling out these applications and services will become more formalized.
The main reason given by organizations in Bournemouth University’s reseach for not using Web 2.0 was senior management’s lack of understanding of the business benefits associated with these technologies.
The challenge for CIOs in deploying Web 2.0 technologies is that many were not designed with the same security and performance features traditionally associated with enterprise software and services.
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IT spending
It’s interesting to see below that the top three IT spending priorities of large enterprises
are no different to those of small and medium-sized enterprises, with all organizations
putting most emphasis on IT delivering new functionality to business users.
Figure 3.2: IT spending priorities in large, medium and small enterprises in 2007
1 = Not an objective 4 = Top priority objective
2.4 2.5 2.6 2.7 2.8 2.9 3 3.1 3.2 3.3 3.4 3.5
Deliver new functionality to business users
Raise efficiency
Meet internal service level agreements
Achieve or maintain regulatory compliance
Cut costs
Increase revenues
Using IT to support revenue growth, new products
Increase customer satisfaction
Improve supplier relationships
Align IT with overall business goals
Small enterprises
Small enterprises
Large enterprises
1 = Not an objective 4 = Top priority objective
2.4 2.5 2.6 2.7 2.8 2.9 3 3.1 3.2 3.3 3.4 3.5
Deliver new functionality to business users
Raise efficiency
Meet internal service level agreements
Achieve or maintain regulatory compliance
Cut costs
Increase revenues
Using IT to support revenue growth, new products
Increase customer satisfaction
Improve supplier relationships
Align IT with overall business goals
Small enterprises
Small enterprises
Large enterprises
Source: Business Insights Business Insights Ltd
This is good news for providers of Web 2.0 technologies and services, as one of the
biggest advantages of Web 2.0 is enabling users to work in new, more effective ways,
whether supporting customers or improving behind-the-scenes processes.
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Enterprise adoption of Web 2.0
Enterprise 2.0 – or the application of social Web 2.0 applications and technologies in
the corporate environment – has had a mixed reception so far. A survey carried out by
Bournemouth University in the UK on behalf of IT services provider, Parity, found that
only 32% of businesses had made any investment in Web 2.0 and the majority of these
had done so to attain tangible benefits from enhanced content management, rather than
to embrace the benefits of collaborative working that Web 2.0 can deliver.
In support of Web 2.0, 56% of those organizations implementing Web 2.0 had found it
improves the way workers interact with one another. 53% also said it united workers
across different locations, while half said it created more openness in the organization.
The McKinsey Global Survey, which includes the responses of 2,847 executives,
delved deeper into the types of Web 2.0 technologies being used. It found that
companies were investing in back-end technologies that enable automation and
networking – such as web services (80%) and peer-to-peer networking (47%) – rather
than blogs (32%), podcasts (35%), wikis (33%) and other collaboration tools. Mash-
ups was the trend least referenced in the survey.
Where implemented, the main uses given for Web 2.0 in the enterprise were:
70% of companies rely on them to talk with customers;
51% use them to talk with suppliers and business partners;
75% use them to manage internal collaboration;
One-fifth are using blogs to improve customer service or solicit customer feedback;
Just over half are using the technologies to help manage knowledge internally;
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Just under half are using these tools for designing and developing new products.
In addition, more than half of the executives surveyed said they were pleased with the
results of their investments in Internet technologies over the past five years, and nearly
three-quarters said that their companies plan to maintain or increase investments in
Web 2.0 technologies in coming years (13% said they were disappointed with previous
investments.) Of those companies that rate themselves as very satisfied, 46% are
classed by McKinsey as ‘early adopters’ and 44% as ‘fast followers’.
The McKinsey report notes that 43% of companies are more focused on networking
and collective intelligence technologies than the global average; it concludes that these
companies are more likely than others to be large, working in high tech and based in
Asia. Meanwhile, 22% are much likelier to have invested in RSS, blogs, and podcasts
than others; these companies are more likely to be in industries such as media and
telecommunications and located in North America.
Return on investment
Most users of Web 2.0 technologies believe it is too early to tell whether they will
deliver a significant return on investment, or even whether they will be subject to the
same scrutiny and traditional value metrics as other investments, given that many of the
benefits cited often refer to softer measures, such as improving business processes,
rather than hard metrics (e.g. cutting costs by 20%). Given many Web 2.0
implementations focus on improving business processes or collaboration, the long-term
benefit of these Web 2.0 projects – for example, in terms of reduced product lifecycle –
might not also come to fruition for several months or even years.
The technologies have not been available long enough in most cases to enable a
comprehensive return on investment analysis. Also, many implementations are small
projects designed to test the technology; their results can pale into significance against
IT projects where the business case is based on traditional and relatively
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straightforward metrics (return on investment (ROI) and total cost of ownership, for
example).
This could hold back widespread rollout of Enterprise 2.0, as most CIOs or marketing
directors need to give an indication a project’s expected return to justify investing in
the new technology in the first place. More often than not, it is pressure from
employees using these tools outside work or positive results from small grassroots
projects that drives greater adoption inside an enterprise. Typically, returns are also
greater in organizations where they have implemented more than one Web 2.0 tool or
service.
Bear in mind too, that of those organizations implementing Web 2.0 technologies –
from RSS feeds to blogs and even mash-ups – many have said they improved the
business, whether through customer service, reducing churn or improving product
design and development.
Inevitably, providing a business case for Web 2.0 is easier in organizations that have
embraced the Internet and ‘next-generation’ ways of working. But that does not mean
more traditional ‘bricks and mortar’ organizations have no business case for Enterprise
2.0. Instead, they should consider other means of assessing a project’s outcome –
whether through external focus groups to assess changes to brand awareness, for
example, or employee engagement surveys to find out if Web 2.0 is supporting their
job and how they are adapting to more collaborative working practices. For example,
Web 2.0 is based on principles such as participation and discourse, therefore, users are
more inclined to give their feedback or rate applications and services. The BBC used
these aspects to prove the value of a Web 2.0 project by asking satisfied users of the
bulletin board for their opinions.
Bear in mind too, that firms should be taking advantage of one of the main benefits of
Internet-based platforms – the ability to track and gather data about activities online
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using Web analytics and other software packages – to provide further evidence of the
success of Web 2.0 implementations.
Who is driving Web 2.0 in enterprises?
In the same way that consumers are pushing for enterprise adoption of social software
and other traditionally consumer-focused Web 2.0 applications and services in the
corporate environment, it has tended to be non-IT departments leading the adoption of
Web 2.0 in the enterprise. This highlights the increasingly decentralized and pervasive
nature of technology in the enterprise today. The flexible nature of Web 2.0
technologies also means that they can often be implemented without the need for IT
intervention, unlike most other IT initiatives of the past few decades which have taken
a distinctly top-down approach.
Writing in Business Communications Review (‘Creating Enterprise 2.0 From Web
2.0’, Aug 2007), Irwin Lazar, a Principal Research Analyst and Program Director for
Collaboration and Convergence at Nemertes Research, commented: “…in most cases
individual workgroups were using these tools [blogs, wikis and RSS] for both internal
and external collaboration. In some cases, IT had little knowledge or control. Business
units were taking it upon themselves to obtain the tools they needed to solve their
communications and collaboration challenges, without waiting for IT to create a
strategy.”
Implementing Web 2.0
Most Web 2.0 implementations start as small pilot projects – whether within a
department or from grassroots e.g. a team wiki – designed to test the viability of Web
2.0 in the enterprise. In the majority of organizations, it is triggered by an ad hoc
response to a problem or a new initiative, rather than a strategic enterprise-wide IT
plan. Interestingly, many organizations responding to the McKinsey survey noted that
where an implementation has spread throughout the enterprise, it helped to break down
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hierarchical and functional boundaries, by enabling the passing of information up,
down, and around. For many users of Web 2.0 technologies, this is a refreshing way of
working; to others it is disruptive or even threatening. The McKinsey survey noted that
more prolific users showed a tendency to leap into grassroots efforts, while the light
users took a more cautious and traditional approach.
In many cases, Web 2.0 implementations have been led by customer-facing teams, such
as marketing or customer services. But the use of Web 2.0 extends behind the scenes as
well, to teams working on product development and market research, for example.
Unlike other technologies that have to be brought behind the firewall and integrated on
site, Web 2.0 applications and services, such as blogs or social networks, tend to be
hosted off site. This makes support and maintenance easier, although for some IT
departments it raises issues of control, security and risk.
Over time, as Web 2.0 technologies become entrenched in the enterprise, it is
inevitable that business processes for rolling out these applications and services will
become more formalised. However, organizations should not attempt to make Web 2.0
fit into traditional software buying patterns and support; Web 2.0 is one of several new
ways of delivering applications and services – like software-as-a-service and open
source – and innovation should continue to be supported through grassroots projects.
A vertical approach to Web 2.0
Government
The 2008 US presidential elections have been as hotly contested online – through
blogs, Twitter and YouTube – as they have been offline in polling stations, jampacked
lecture halls and on Americans’ TV screens. Indeed, despite its reputation for being
slow to adopt new trends, government departments and bodies are often ahead when it
comes to Web 2.0 technologies.
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Differences exist around the world though. The UK’s prime minister might have his
own email address and Twitter page, but a report from The Centre for Policy Studies
found that UK politicians have failed to use Web 2.0 technologies as effectively as
their US counterparts. The report’s author, Robert Colville, encourages UK political
parties to explore the web tactics of US Presidential Democrat candidates, Barack
Obama and Hilary Clinton, where “putting existing bloggers on your staff is now seen
as an essential campaign tool.”
The European Union has been more forthcoming online, with a dedicated channel on
YouTube to air audiovisual material (www.youtube.com/watch?v=95CuBI-BL4E).
“This initiative reflects the Commission's commitment to better explain its policies and
actions on issues which concern citizens across the EU – such as climate change,
energy or immigration,” said Margot Wallström, Vice-President for Institutional
Relations and Communication Strategy.
In the US, the Defense Intelligence Agency is using wikis, blogs, RSS feeds and mash-
ups to share information amongst analysts more effectively. More importantly, reports
Computerworld, “The tools are helping the DIA meet the directives set by the 9/11
Commission and other entities for intelligence agencies to "improve and deepen our
collaborative work processes.” Meanwhile, the Congress’ research arm – the Library of
Congress – has launched a pilot project with photo-sharing website, Flickr, to open up
access to its photograph collections and encourage visitors to comment and fill in gaps
on the history of the photos where possible.
e-Democracy in Web 2.0 world
Web 2.0 technologies have not just given a louder voice to politicians, but also the
voting public. In the Web 1.0 days, voters might have written a letter to the newspaper;
now they can blog, edit wiki web pages, email their representative or MP, and sign up
for regular RSS news feeds. It’s not surprising that a recent list of the 50 most powerful
blogs in the world from the Observer newspaper featured more than 10 political blogs.
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Never has there been more opportunity to be kept informed of what is going on in the
world. However, with an estimated 175,000 blogs created every day (according to blog
search engine, Technorati), writing or contributing to a blog does not guarantee an
audience, just the opportunity to express an opinion (in most countries, at least – more
repressive regimes have clamped down on Internet use). So although Web 2.0 might
give voters more tools at their disposal to lobby or challenge those in power, it
arguably has not transformed the status quo to any significant degree.
Challenges in a Web 2.0 world
Tone and style of Web 2.0
The most popular blogs, podcasts and videos online are those that court controversy,
entertain or deliver candid and/or well-informed opinions. Perhaps this is why the most
popular political blogs come from those of outspoken and charismatic political figures.
But for most politicians, this conversational and intimate style does not sit comfortably
with their persona.
Voter apathy
There will always remain a group resistant to the messages of government, whether
delivered online or offline. Likewise, there will always be those voters that do not
know how to use – or are interested in learning – Web 2.0 technologies in the first
place.
The healthcare and pharmaceutical industry
Since the Internet came into existence, it has provided a natural home for healthcare
information (such as online support groups for sufferers and access to research
projects); how much of it is accurate is another matter for debate though. With the
advent of Web 2.0, there has been a rise in user-generated healthcare information and
healthcare content distributed via blogs, RSS feeds and videos. This can be found on
general consumer sites such as YouTube or sites for medical practitioners, such as
Doctors.net.uk, a UK social network with nearly 152,000 registered doctors, where
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they can contribute to debates on the discussion forum about professional situations,
education challenges and so on.
Many of these sites are consumer-driven in nature. By contrast, the University of
Maryland's Ben Shneiderman, a researcher of human-computer interaction, argued
recently in Science magazine that research practices hadn’t kept up with this wave of
innovation. He wants the social sciences industry to rethink the way it conducts
research and has labelled his new method ‘Science 2.0’ because it combines the
hypothesis-based inquiry of laboratory science with the methods of social science
research to understand and improve the use of new human networks made possible by
today’s digital connectivity.
“It's time for researchers in science to take network collaboration like this to the next
phase and reap the potential intellectual and societal payoffs. We need to understand
the principles that are at work in these systems,” said Shneiderman. His view is that
‘Science 1.0’ is “reductionist thinking closely linked to controlled experiments,” a
method that, while successful in explaining natural phenomena “sometimes diverges
from solving practical problems and only occasionally advancing broader goals.” By
contrast, Science 2.0 studies social interactions in the real world. Shneiderman uses the
example of a project he is working on with colleagues to develop 911.gov Community
Response Grid, an emergency response system that will rely on the Internet and mobile
communication devices to allow citizens to receive and submit information about
national security community problems.
Financial services
Web 2.0 offers financial services firms an opportunity to communicate more effectively
with customers and employees; target customers (or potential customers) in their
natural environment and even deliver new services. For instance, MicroPlace (part of
eBay) is a marketplace for microfinance investors; likewise Kiva puts entrepreneurs
looking for finance in developing worlds with people that want to invest and help
others with as little as $25.
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Some retail banks have been particularly forward thinking in their use of Web 2.0 to
reach out to customers. Wells Fargo, for example, has created a virtual world,
Stagecoach Island, and writes several blogs – including Guided by History
(http://blog.wellsfargo.com/GuidedByHistory/) and The Student LoanDown
(http://blog.wellsfargo.com/studentloandown/) – to target customers who spend a lot of
time online. Similarly, The Royal Bank of Canada has a Facebook page and online
forum for students (www.rbcp2p.com) featuring advice from other students on
managing finances through blogs and video blogs (vlogs).
TD Canada Trust also has a group on Facebook for university and college students,
which currently has more than 11,000 fans. In the UK, the Royal Bank of Scotland
joined Yell and other recruiters in attending a virtual careers fair in Second Life last
October. Candidates were able to talk with careers advisers, meet RBS staff (albeit not
necessarily looking as they do in the real world) and get any information they needed
about working at the bank without leaving their laptop. ING also has an interactive
website (http://moveoutmoveup.com) for first-time buyers with videos and games. In
August 2007, US financial services provider, Wachovia, launched its first podcast
(http://www.wachovia.com/misc/1,,1466,00.html), which gives weekly insight into the
economy and topical financial events.
Challenges in a Web 2.0 world
Risk
Financial services firms are more regulated than businesses in other sectors, so
understandably some employers are wary about opening the business up to wikis, blogs
and other employee-generated or user-generated content. For instance, on Wells
Fargo’s Guided by History blog, there is a disclaimer under the ‘About This Blog’
section which says: “As a bank, there are regulations that prevent us from obtaining
some information, hence the restrictions in our blog comments that prevent you from
submitting your full name. Under the Children's Online Privacy Protection Act
(COPPA), you must be 13 years of age or older to provide us any of your personal
information, including your email address… Also, we cannot capture your blog's URL
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in our comments due to concerns about ‘phishing’ – a method of identity theft in which
unsuspecting Internet users are lured to a fake website.”
To minimize risk, many banks have put in place procedures for approving blogs and
only allow a select team of employees to post content on social networks and other
online forums. Other banks, such as Wells Fargo, monitor and filter comments posted
in response to their blogs.
Investment
While Web 2.0 tools and services are relatively inexpensive to create or deploy, for
some financial services institutions the investment required – from a capital and time
perspective – is enough of a disincentive not to bother. Many financial services
providers have dealt with this challenge by putting Web 2.0 content delivery under the
remit of specific employees. Once the infrastructure is in place as well, it can be re-
used for other departments. At the launch of its ‘The Week Ahead’ podcasts, for
example, Juan Silvera, Wachovia’s eCommerce director of emerging trends, said:
"Several other Wachovia business units are exploring the use of podcasts, and we will
continue to partner closely on how to best leverage this new method of content
delivery.”
Tone and style
One of the main challenges all organizations writing a blog, delivering a podcast or
creating any external communications face is avoiding ‘corporate’ language or turning
the content into an advertisement for the company. Adopting the more consumer-
focused approach of Web 2.0 is also daunting for those firms used to institutional or
corporate finance speak. Those firms that succeed in this area do so by creating
imaginative and engaging Web 2.0 content and putting in place proper safeguards
inside their organization to ensure everyone knows what they can and cannot say
through the Web (whether talking on behalf of the organization or as a private
individual).
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As the authors of a report from Deutsche Bank Research (‘Be a driver not a passenger:
implications of Web 2.0 for financial institutions’, July 31, 2007) point out: “Basically,
it is only possible to deploy Web 2.0 applications in corporate communications
management within narrowly defined limits. This may be the case if, for example, there
is close congruence between corporate objectives and those of the Web 2.0 community.
Web 2.0 applications for a firm may also be successful if they are placed and run by
businesses with the right kind of corporate culture. Authenticity, credibility of content
and style, and a straightforward approach to handling negative reactions, e.g. comments
in blogs, are the prerequisites.”
Barriers to adoption of Enterprise 2.0
Misperception and confusion
The main reason given by organizations in Bournemouth University’s research for not
using Web 2.0 was senior management’s lack of understanding of the business benefits
associated with these technologies. Nearly a third of respondents not using Web 2.0 in
their environment blamed the IT department’s open admission of a lack of
understanding about Web 2.0. Other respondents considered Web 2.0 irrelevant to their
industry:
“Entirely irrelevant to our business. As a retailer there are no clear, tangible, hard
benefits (or studies to identify benefits) to implement Web 2.0 technologies either
for our customers or internally”;
“This is not appropriate at present to our business model as a Foundation Trust
Hospital.”
For many enterprises, concerns focus on regulation and the risk that comes from
handing control over to the ‘wisdom of crowds’. The hierarchical structure of many
organizations also provides a natural impediment to widespread collaboration and
sharing.
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If information sharing is not encouraged, implementing a blog or wiki will not
transform the organization overnight. Employees need to be motivated to share
information and collaborate with one another so, in one sense, moving to Enterprise 2.0
is a training and people issue, as much as a technology one.
While some organizations have taken an interest in Web 2.0 because of the excitement
and hype surrounding it, others have dismissed it outright as another fad. Yet as we
shall explore later in examining the application of Web 2.0 technologies and services to
various business processes, aspects of Web 2.0 can be used by any organization in any
sector that wants to collaborate faster, increase business efficiencies and open its
business to new marketing channels.
Culture
The Internet may have driven today’s global 24x7 always-on environment, but too
many organizations have failed to radically alter their business practices and processes
to keep pace. Collaborative working with suppliers, business partners and employees
has been a goal of enterprises since the early days of EDI, but even with the technical
possibilities enabled by Web 2.0, many organizations have failed to adapt their
fundamental working practices to fully capitalize on these opportunities. Essentially,
the hierarchical structures in place are unable to adapt or integrate as fluidly as some of
the technologies available today.
Enterprises also have a tremendous amount of information at their fingertips than ever
before, which rather than helping speed up their operations can be a hindrance. A
consultant at social media agency, Headshift, cites an example on his blog
(http://www.headshift.com/moments.cfm) of “people complaining about being
compelled to block 2 hours a day reading newsletters to keep up-to-date to their
industry trends, because they have never used a newsreader. All these folks are not
average employees. They are decision makers. They spend their days making sure
processes work fluidly, coordinate people to make them work more efficiently, decide
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how things need to be improved to make the whole organization more efficient and
profitable.”
IT security and management
The challenge for CIOs in deploying Web 2.0 technologies is that many were designed
with consumers, rather than enterprises, in mind. Hence, they are not designed with the
same security and performance features traditionally associated with enterprise
software and services. Given the breadth of these concerns, we shall examine this area
in more detail below.
IT security
Almost two-thirds of respondents to a survey by InformationWeek on Web 2.0 take-up
and concerns cited security as a challenge. Web 2.0 is about two-way interaction and
engagement, so if it is easy for a non-malicious user to upload content to a Web 2.0
site, what is to stop a hacker doing the same with malicious content? In April 2008,
BitDefender, an antivirus software company, reported on the use of Nigerian ‘419’
scams being used on the professional social network, LinkedIn; the scam was able to
get past a user’s antispam filters by traveling via a LinkedIn user’s account. Users ran
the risk of infecting their computer (or those of their employer’s) by visiting the
infected sites.
Hacking practices, such as cross-site scripting – which involves an attacker inserting
malicious code into an HTML page – take advantage of vulnerabilities in Web 2.0
technologies like AJAX, which deliver richer site experiences. By the same token, such
code can give a hacker access to an employee’s computer as the browser provides a
backdoor into an organization’s confidential information. It was a vulnerability of this
type that lay behind the worm infecting MySpace in 2005.
There are ways of protecting the enterprise – not enabling users to download unknown
Web applications, for example, or ensuring servers validate all inputs. To prevent
attacks of the XSS variety, CIOs should ensure users cannot use JavaScript and educate
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them on not giving too much information away online, which could open the door to
spam. Where Web applications and third-party widgets are being used (see chapter 6),
the sources need to be trusted and authorized.
Mary Ann Davidson, chief security officer for Oracle and Elad Yoran, CEO OF
Security Growth Partners, suggest that: “Security 2.0 means securing all end points;
establishing simple, secure peer-to-peer connectivity between these end points; and
controlling all data, in whatever form it lives and morphs, throughout its entire
lifecycle, wherever it goes and however it gets there. It also means that each network
entity must self-defend because network and application perimeters themselves have
become mutable and collaborative.” (‘Enterprise Security for Web 2.0’ in Computer
published by the IEEE Computer Society).
Vendors have, on the whole, responded to enterprises’ concerns. As Web 2.0
companies, such as Facebook, have opened their services to corporate clients they have
incorporated more security features, for example. Many Web 2.0 service providers will
also work with enterprises to address their concerns – for example, installing Enterprise
2.0 technologies behind the firewall rather than hosting it externally on a provider’s
servers. This may make it more expensive for the enterprise, but could help sway
senior management buy-in. In addition, the entrance of IT heavyweights such as
Microsoft and IBM to the Enterprise 2.0 market, should reduce CIO fears about
security and control further.
An important point to bear in mind, though, is that too much security and control will
negate the open and collaborative benefits of Web 2.0. IT managers need to be aware
and minimize the security risks as much as possible, but without dissuading employees
from using Web 2.0 tools or giving the impression that it is too complex and technical
to use.
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Application integration
A survey of 100 end-user organizations by Nemertes Research found that more than
half of respondents were still struggling with integrating voice and data architecture
and operations functions. A survey from InformationWeek produced similar findings,
with senior editor, J. Nicholas Hoover, pointing out in an article in February 2007 that:
“even within the Web 2.0 world, vendors haven't paid enough attention to
interoperability. IBM and Microsoft's instant messaging platforms interoperate with
several of the public Internet services, for example, but not with each other. Emerging
business social networks are the same way.”
Skills shortage
Web 2.0 is such an emerging area that most organizations lack the expertise in-house to
understand, assimilate and deploy their own version of Enterprise 2.0. More than half
of the 250 companies interviewed by InformationWeek cited the lack of staff expertise
as a major obstacle to rolling out Web 2.0 tools.
In other organizations though, the speed at which users can quickly pick up Web 2.0
technologies and services is making the role of IT redundant. Mash-ups, for example,
could replace some traditional homegrown IT applications. If developed by non-IT
people to solve a particular business solution, they could meet this need more
effectively than the IT team, which may be too far removed from the business’ day-to-
day operations.
Ken Harris, CIO at nutritional products manufacturer Shaklee, told InformationWeek in
October 2007 that: “We've cut IT staff by 20%, and we're providing a whole lot more
in terms of IT services.” This is because the manufacturer is using more external
suppliers to provide in-house resources, such as ERP and search. While some IT
directors might fear for their job, over-stretched IT teams will see this as good news,
enabling them to hand over tactical tasks to focus on larger or more strategic projects.
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Take-up
For eight of the 13 Web 2.0 tools an InformationWeek survey asked its 250 respondents
about, at least 20% of companies said they had made the tools available but they were
hardly used. This is less an IT problem than a business problem, but such statistics
provide ammunition for recalcitrant CIOs that do not think Enterprise 2.0 worth
investing in.
One argument heard from some CIOs is that there is no need for Web 2.0 tools as
enterprise versions already exist – groupware applications provide a collaboration
platform, content management systems do the job of wikis and so on – and come with
enterprise security and policy controls. Yet, as highlighted earlier in this report, Web
2.0 technologies offer lower start-up costs and simpler long-term maintenance than
many existing collaboration and marketing platforms.
Where next for Enterprise 2.0?
Enterprise 2.0 is not a fad, but a growing trend. Among the executives familiar with the
nine Web 2.0 trends cited in McKinsey’s survey, more than 75% said that their
companies were already investing in one or more of these trends. In addition,
executives from some industries and regions that were slow to invest during the past
five years (such as retail) are poised to move more aggressively now. Similarly, while
executives from China and Latin America typically said that their companies were late
followers or had invested cautiously, they now planned to invest at the same rate or
even faster than companies in Europe and North America.
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Enterprise 2.0 recommendations
Re-think traditional information flows and structures
Traditional top-down hierarchical structures are at odds with the Web 2.0 bottom-up
way of interacting. While Enterprise 2.0 should not be seen as a revolutionary force,
tearing up old ways of doing things, organizations should consider an evolutionary
approach by opening up information flows and enabling employees to give their
feedback through blogs, wikis and other collaboration tools.
Many younger employees are bringing Web 2.0 tools in the enterprise because they
know what will help them do their job better. It is also the success of many small,
grassroots projects that achieve the buy-in for larger department or enterprise-wide
Web 2.0 implementations. For example, Pfizer’s Enterprise 2.0 initiatives took off after
its group of ‘Web 2.0 champions’ ran an internal conference explaining how Web 2.0
could be used inside the pharmaceutical company.
Finally, it is not just the way organizations disseminate information that needs re-
assessing, but also they way they reward performance and incentives employees to
encourage them to share and disperse knowledge amongst employees.
Establish policies for Web 2.0 usage
One of the big risks for organizations in deploying Web 2.0 tools and services is that
they will open their enterprise to security risks – not just from IT attacks – but from
their own employees compromising an organization’s intellectual property or relaying
confidential information, such as new product launches. A survey in 2007 from
security vendor, Clearswift, of 1,000 employees found that 42% of respondents aged 18
to 29 had discussed work-related issues on social media websites.
By drawing up policy guidelines about how employees use and contribute to such sites,
and communicating this to employees at key times (for instance, during the induction
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process for new recruits or whenever information is updated) will help make them
aware of their conduct and appropriate behavior.
Consider areas where new applications could be deployed
Many Web 2.0 initiatives are borne from grassroots initiatives or employees identifying
a gap that a mash-up, social network or other Web 2.0 application could fill. To
promote a culture of innovation and experimentation, organizations should encourage
employees to discuss and share ways of improving the way they work. Google
employees are allowed to spend one day a week working on projects not related to their
official job description and it was this freedom that produced Google’s email program,
Gmail, and its newsfeed reader, Google Reader. In a similar vein, it was a manager’s
claim that social networking was of no use to Morgan Stanley that encouraged one
employee to prove him wrong using LinkedIn.
As well as providing the culture and environment for information sharing, the IT team
needs to provide a modern and flexible infrastructure capable of supporting Web 2.0. A
service-oriented architecture makes it easier to integrate data sources and create
application mash-ups, for example.
Don’t abandon offline communication altogether
Enterprise 2.0 is not a panacea for all ills; in some instances, organizations will find
that Web 2.0 tools and services – such as blogs – are less effective than traditional
communications. Each project should be considered on its merits and Web 2.0
technologies and services not used for the sake of Web 2.0 alone.
Avoid a disconnect between IT and business
Web 2.0 could drive a disconnect between IT and the business by making it easier for
users to assemble and contribute to applications and services without requiring the
input of IT. In some cases, employees have outright ignored IT regulations surrounding
the use of Web 2.0 tools and services. Facetime, a vendor that secures instant
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messages, conducted a survey of 700 employees and IT managers in 2007, and found
that 36% of employees disregard the IT department to download applications like
Instant Messenger and VoIP (voice over IP services, such as Skype).
Such an approach could be dangerous. Any implementation should involve IT from the
beginning in order to minimize risks caused by the leaking of confidential information
or exploitation of loopholes in the IT architecture. At the same time, IT should give
users the freedom to come up with creative solutions to business problems. But, says
Brad Shimmin, a principal analyst with Current Analysis, “Make sure your Web 2.0
software can keep tabs on the composite applications (read mash-ups) created by your
newly empowered users. You must be able to control which assets they are allowed to
mash and monitor the usage levels of all application sources for compliance with stated
key performance indicators and service level agreements.”
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CHAPTER 4
Why Web 2.0 matters
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Chapter 4 Why Web 2.0 matters
Summary
Internet-based companies such as Google, YouTube and Flickr have risen to prominence ahead of the carriers by taking advantage of cheap processing power and, above all, free bandwidth.
The 2008 Predictions Survey from the National Venture Capital Association (NVCA) found that nearly three-quarters of venture capitalists were expecting moderate investment growth in 2008 of between $20bn and $29bn, on a par with 2007 investment levels.
Web 2.0 businesses looking for funding could find that the venture capitalists they rely on are under pressure, with investment banks unable to provide the liquidity they need to realize their investments.
Any slowdown in the IPO market could have an equally draining effect on mergers and acquisitions – another source of funds for venture capitalists looking to offload their investments.
Web 2.0 companies face very few barriers to market. It is relatively inexpensive to launch and run an Internet-based business: bandwidth is cheap and there are no expensive manufacturing costs associated with delivering their services.
With services or products being offered for free, the Web 2.0 business model follows the publishing business model, with revenue coming from advertisers paying to reach people visiting the site.
Competitive advantage in the Web 2.0 world doesn’t come from locking out other platforms and applications; it comes from open standards that give consumers choice and control over how they manage their virtual world.
In 2007, venture capitalists pumped a record $1.34bn into 178 Web 2.0 deals in the US, an increase of 88% on the previous year.
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Introduction
Part of the reason why Web 2.0 has generated so much interest and column inches is
because of the incredibly large valuations given to Web 2.0 companies such as
YouTube, MySpace and Facebook. In this chapter, we shall examine why Web 2.0
companies have received such high valuations, whether this is justified and the
business models Web 2.0 companies are built on.
Background
In theory, it should have been either the carriers that provide the Internet infrastructure
or the Internet Service Providers, which provide the gateway to the Internet, that
dominated the Web 2.0 landscape, rather than a company created by a Harvard
graduate (Facebook) or a search engine started by two self-acknowledged geeks
(Google). After all, they were the ones that controlled who could go online or were the
first point of reference for Internet surfers.
Instead, Google, YouTube, Flickr and other Internet-based companies rose to
prominence by recognizing the power of users and building up audiences by giving
them a tool they wanted to use every day. Nielson Online’s 2007 survey of the ten most
popular Internet brands in the UK (based on audience numbers) found that AOL and
Real had lost their places to make way for YouTube and Wikipedia. Five of the 10
fastest growing online brands in the UK were related to social and professional
networking, such as Facebook, RockYou and Slide (the latter two are providers of
social networking applications), so expect the Internet businesses to be more popular
than the infrastructure providers in the future too.
Internet-based companies such as Google, YouTube and Flickr have risen to
prominence ahead of the carriers by taking advantage of cheap processing power and,
above all, free bandwidth. Users upload entire photo albums onto Flickr, back-up their
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hard drive to online repositories at Apple for an almost insignificant fee (given the
amount of storage that everyone combined is using), and fill up their Yahoo! Mail
inbox thanks to unlimited free email storage. What we shall explore next is whether
Web 2.0 businesses have a business model that is built to last.
How much is ‘Web 2.0’ worth?
Table 4.5 shows how much was invested in Web 2.0 companies between 2001 and
2006. It is interesting to note not only the incredible rise in investment in this area – a
compound annual growth rate of more than 1,000% – but also emerging interest in
investing in this area from Israel and China. That said, in 2006, the US was by far the
biggest investor throughout the period, investing 11 times more than China alone in
that year.
Table 4.5: Amount invested in Web 2.0 companies ($m) 2001 2002 2003 2004 2005 2006 US 67.20 30.15 89.31 231.02 289.33 682.70 Europe 5.63 2.16 6.51 33.28 100.46 Israel 2.00 1.00 China 1.30 2.21 82.60 61.25 Total 72.83 32.31 99.12 233.23 406.21 844.40
Source: Dow Jones VentureOne and Ernst & Young Business Insights Ltd
The 2008 Predictions Survey from the National Venture Capital Association (NVCA)
found that nearly three-quarters of venture capitalists were expecting moderate
investment growth in 2008 of between $20bn and $29bn, on a par with 2007
investment levels. Table 4.6 shows the most active venture capitalists in Web 2.0 in
2006. Given the findings in Table 4.5, it’s unsurprising that the leading investor,
Benchmark Capital, is a US firm (although it also has operations in Israel) and was
active during the first dotcom boom, wisely investing in eBay back in 1997.
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Table 4.6: Most active Web 2.0 investors, globally 2006 Firm name Deals Benchmark Capital 13 Draper Fisher Jurvetson 10 Sequoia Capital 9 Omidyar Network 8 Accel Partners 7 General Catalyst Partners 7 Kleiner Perkins Caufield & Byers 5 IDG Ventures China 4 Index Ventures 4 Mayfield 4 Storm Ventures 4
Source: Dow Jones VentureOne and Ernst & Young Business Insights Ltd
These figures refer to the six years up to and including 2006; given current economic
conditions, it is likely that investment in Web 2.0 will slow down towards the end of
2008 and beyond. The sector may still be performing better than others in 2008 – and
indeed, some businesses could flourish in the downturn if they are able to trim costs
and offer a cost-effective alternative to more expensive enterprise software platforms –
but even the digital sector is not immune to wider macro economic conditions.
Web 2.0 businesses looking for funding could find that the venture capitalists they rely
on are under pressure, with investment banks unable to provide the liquidity they need
to realize their investments. And any slowdown in the IPO market could have an
equally draining effect on mergers and acquisitions – another source of funds for
venture capitalists looking to offload their investments. This could mean that M&As of
the value seen below will no longer be recorded:
News Corp paid $580m for MySpace in 2005;
eBay bought Skype for $2.6bn in 2005;
Google paid $1.65bn for YouTube in 2006;
AOL spent $850m on Bebo in 2008;
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Comcast bought Plaxo for an estimated $150m in 2008;
Yahoo! turned down a buy-out from Microsoft valued at $44.6bn in 2008.
Wider economic considerations have undoubtedly held back many Web 2.0 companies
from racing to IPO; this wasn’t the case in the first dotcom bubble in 2000. LinkedIn, a
social network for professionals, may not become a public company until next year,
reports BusinessWeek, and Facebook even later, in 2010. In the meantime, they plan to
focus on growing their business and developing a solid revenue model.
The Web 2.0 business model
Web 2.0 companies face very few barriers to market. It is relatively inexpensive to
launch and run an Internet-based business: bandwidth is cheap and there are no
expensive manufacturing costs associated with delivering their services. As a result,
businesses that raise venture capital typically find that their funding can go far with
relatively low outgoings.
In addition, the free service model that Web 2.0 businesses rely on means there is no
need for Web 2.0 businesses to spend time building up their reputation or expertise that
people want to pay for access to, which some of the niche financial data websites need
to do. So a Web 2.0 business can be up and running very quickly; indeed, the ‘beta’
model of operations is something that has come to characterize Web 2.0. In his seminal
paper on Web 2.0, Tim O’Reilly wrote: “The open source dictum, ‘release early and
release often’ in fact has morphed into an even more radical position, ‘the perpetual
beta,’ in which the product is developed in the open, with new features slipstreamed in
on a monthly, weekly, or even daily basis… Real time monitoring of user behavior to
see just which new features are used, and how they are used, thus becomes another
required core competency.”
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With services or products being offered for free, the Web 2.0 business model follows
the publishing business model, deriving revenue from advertisers paying to market
their products or services to visitors on the site. But in their attempts to woe or satisfy
advertisers, Web 2.0 companies haven’t always managed their revenue model
successfully. Witness the ‘MySpam’ accusations that have surrounded MySpace or the
angry user response when Facebook implemented its advertising platform, Beacon, at
the end of 2007. Users weren’t responding to the use of advertising on the site per se –
there were ads on user’s profile pages before Beacon was introduced – but what they
perceived as an intrusive advertising model. It was a mistake Facebook’s founder,
Mark Zuckerberg, publicly admitted to in his blog:
“We were excited about Beacon because we believe a lot of information people want to
share isn't on Facebook, and if we found the right balance, Beacon would give people
an easy and controlled way to share more of that information with their friends. But we
missed the right balance. At first we tried to make it very lightweight so people
wouldn't have to touch it for it to work. The problem with our initial approach of
making it an opt-out system instead of opt-in was that if someone forgot to decline to
share something, Beacon still went ahead and shared it with their friends. It took us too
long after people started contacting us to change the product so that users had to
explicitly approve what they wanted to share. Instead of acting quickly, we took too
long to decide on the right solution. I'm not proud of the way we've handled this
situation and I know we can do better.”
Beacon wasn’t just a problem for Facebook; it could be a problem for every other
business wanting to sell advertising on its site if it creates animosity amongst
consumers about giving their details to social networks like Facebook in the first place.
The problem for sites that rely on user numbers to make their business model work is
that if members choose to go elsewhere, inevitably the advertisers will follow. What
every Web 2.0 business strives for is a way of emulating the success of Google, whose
share of the search market continues to grow (see Table 4.7), and make their site the
destination for that particular product or service.
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Table 4.7: Google’s share of the US search market, April 2008 Domain Apr 2008 Mar 2008 April 2007 www.google.com 67.90% 67.25% 65.26% search.yahoo.com 20.28% 20.29% 20.73% search.msn.com 6.26% 6.65% 7.77% www.ask.com 4.17% 4.09% 3.69%
Source: Hitwise Business Insights Ltd
Figure 4.3: Google’s share of the US search market, April 2008
67.90% 67.25% 65.26%
20.28% 20.29% 20.73%
6.26% 6.65% 7.77%3.69%4.09%4.17%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
April 2008 March 2008 April 2007
www.ask.com
search.msn.com
search.yahoo.com
www.google.com
Sha
re o
f the
US
sea
rch
mar
ket (
%)
67.90% 67.25% 65.26%
20.28% 20.29% 20.73%
6.26% 6.65% 7.77%3.69%4.09%4.17%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
April 2008 March 2008 April 2007
www.ask.com
search.msn.com
search.yahoo.com
www.google.com
www.ask.com
search.msn.com
search.yahoo.com
www.google.com
Sha
re o
f the
US
sea
rch
mar
ket (
%)
Source: Hitwise Business Insights Ltd
It’s no easy challenge. The history of social networking sites illustrates how easily
users follow their peers – with Friends Reunited, once the most popular social
networking site, being overtaken by MySpace, and, in turn, Facebook.
Are Facebook and co. worth more than $15bn?
With users proving promiscuous in their loyalty to any one site and advertisers taking a
cautious approach to Web 2.0, is it possible for such businesses to command billion-
dollar valuations?
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Founded in February 2004, Facebook started life as a way for Harvard graduates to stay
in touch with one another before extending the invitation to anyone online. There are
now more than 64m active users and it is the most popular photo-sharing website. In
October 2007, Microsoft purchased 1.6% stake in the social networking site for $240m,
leading many to slap a $15bn valuation on Facebook.
MySpace, now owned by News Corp, is estimated to have around 200m users, but it
was bought outright for $580m – which works out at only 2.5% of what Facebook is
worth, if the industry valuation is taken at face value. This means that either Facebook
is vastly overvalued or News Corp bought MySpace for a bargain price. RBC Capital
Markets analyst, Jordan Rohan, would appear to support the latter view, writing in a
note to clients at the time of the deal, that he believed MySpace could be worth around
$15bn by 2009. Perhaps he wasn’t wrong – Google paid $900m to provide search and
display advertising on Fox’s websites, including MySpace (but excluding
FoxSports.com) in August 2006.
The problem with any valuation in this area is that it is usually based on speculation,
not actual profit or sales. Complicating matters further is the fact that Web 2.0 is such a
nascent market, so putting valuations on firms operating in the space is challenging at
best, impossible at worst. A common dilemma is: can Web 2.0 companies be valued
like other start-ups – even when there are no similar businesses in operation to compare
it to? Others are asking, how much can performance be taken into account when many
of these businesses haven’t been operating for very long or, importantly, operating in a
market that has been going for very long? Can user numbers and traffic translate into
meaningful advertising revenue? Should all traffic be considered equally?
There are no easy answers, so let’s start by considering why sites such as MySpace,
YouTube and Facebook have received such high valuations:
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Network effect
It sounds trite, but social networking sites only work if users use them. Facebook
experienced a huge growth curve because users invited others to join them on the site
or looked up other contacts through the search engine. The incentive was to become
part of the ‘club’.
Innovation
Web 2.0 companies embrace the social and communication aspects of the web, which
was largely lacking in Web 1.0. They may not be helping users do anything new –
people have been making offline networks, creating home videos and sharing holiday
snaps for years – but they are creating new ways of doing things that are quicker, faster
and cheaper. Skype disrupted the telecoms industry by offering free calls over the
Internet, while Digg.com challenged the way the print industry works by letting users
tag and vote for their favorite news stories to create their own ‘front page’ that they
wanted to read.
Using the site as a platform
Where Facebook and MySpace differ from more established social networking sites
like Friends Reunited or GeoCities is in turning their site from being somewhere that
users can look up friends and build a community, to a platform that lets them listen to
new music (MySpace), watch original entertainment (Bebo) or find a new job
(LinkedIn).
Open architecture
Competitive advantage in the Web 2.0 world doesn’t come from locking out other
platforms and applications; it comes from open standards that give consumers choice
and control over how they manage their virtual world. This is why sites such as Ning
(co-founded by Netscape co-founder, Marc Andreessen) and Netvibes, which allow
users to create their own social networks and mash-up homepages respectively, have
received close to $60m in investment from venture capitalists.
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Lower infrastructure costs
Today’s Web 2.0 companies aren’t built on the expensive web infrastructure required
in the Web 1.0 world, which, in many ways, provided the foundations for the industry
today. Writing in his blog, Andreessen says: “…my back of the envelope calculation is
that it is about 10x cheaper to start an Internet business today than it was in the late 90's
– due to commodity hardware, open source software, modern programming
technologies, cheap bandwidth, the rise of third-party ad networks, and other
infrastructure factors.”
Online advertising is growing
With Web 2.0 companies relying on revenue from advertisers, one might assume that
with news of a global slowdown in the economy, online advertising will take a hit. Yet
while TV and print advertising is feeling the pinch, online advertising continues to
flourish, growing by £797m year-on-year in the UK in 2007 to have 15.3% market
share, ahead of direct mail and regional newspapers (according to the Internet
Advertising Bureau). Advertisers are heading online as that’s where users increasingly
are. And with more investment in online, there’s inevitably more room for companies
operating in that environment.
The Internet Advertising Bureau argues in a whitepaper released shortly after Google’s
acquisition of YouTube: “A bubble implies a sudden flux of interest and investment,
but the Internet’s growth and influence has been rapid, but steady… It is the ‘sudden’
appearance of web 2.0, buoyed by a number of new technologies such as RSS and
AJAX the Internet has become a two-way medium, that has fuelled the ‘bubble’
discussions. But the wealth of user generated content online has been steadily building
for a number of years. MySpace and YouTube were preceded by podcasts and blogs
and going back even further the companies that flourished post dotcom crash
incorporated elements of user generated content.”
Flaws in the Web 2.0 business model
Yet despite all this, there are skeptics out there and – with some good arguments.
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The online advertising market isn’t equal
Paid search marketing commands the biggest chunk of the online advertising market
(57.6% of the UK online advertising market in 2007). Display has considerably less
market share, but is predominantly what social networks, blogs, widgets, user-
generated content and other Web 2.0 sites rely on (there is some video advertising, but
this market is still nascent, although growing at 45% in the UK). Anecdotal evidence
from ad networks indicate that there is too much inventory on social networks –
millions of users does result in millions of web pages, after all – and none of it is
commanding a premium. At this stage, it’s also too early to tell whether other
advertising models developed by the social networks – Bebo’s TV programming, for
example or Facebook’s Beacon program – have produced any significant figures.
The Pay Per Click (PPC) model used in search advertising was even brought into
question in February 2008 when comScore released its PPC report and revealed a
seven% sequential decline on December 2007 and flat annual growth in paid clicks for
Google. As comScore’s CEO, Magid Abraham, pointed out: “The information
triggered a flurry of reactions in the media and the financial community that centered
on two concerns: 1) a potentially weak first quarter outlook for Google, and 2) an
indication that a soft U.S. economy is beginning to drag down the online advertising
market.”
This was why shortly after releasing its report, comScore brought out a press release to
clarify its findings, which said: “ …the evidence suggests that the softness in Google’s
paid click metrics is primarily a result of Google’s own quality initiatives that result in
a reduction in the number of paid listings and, therefore, the opportunity for paid clicks
to occur. In addition, the reduction in the incidence of paid listings existed
progressively throughout 2007 and was successfully offset by improved revenue per
click. It is entirely possible, if not likely, that the improved revenue yield will continue
to deliver strong revenue growth in the first quarter. Separately, there is no evidence of
a slowdown in consumers clicking on paid search ads for rest of the US search market,
which comprises 40% of all searches.”
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Theoretical valuations vs. actual revenue and profitability
Despite its billion-dollar valuation, it comes as a surprise to discover that several
industry estimates only put Facebook’s revenue at about $150m in 2007. It’s not the
only one – Slide was reported to have received more than $70m in funding – with the
most recent round valuing it at $550m, despite having revealed no revenue figures. The
real concern is that these valuations are far higher than any profits or sales the Web 2.0
companies will ever be able to attain.
Web 2.0 isn’t the only sector chasing VC funding
More respondents to the NVCA survey predicted that the clean tech sector would
attract higher levels of venture financing in 2008 than those backing increased
investment in Web-based companies. Investors are also investing geographically too,
with funding in China, in particular, seeing growth.
Where’s the disruptive technology?
Email, Skype and iTunes are all examples of disruptive technologies that have burst
onto the consumer (and corporate) stage over the last 20 years challenging the postal,
telecoms and music/broadcasting industries respectively. But is there really a disruptive
technology amongst today’s Web 2.0 companies? Writing in InformationWeek in July
2006, Rob Preston, editor-in-chief, said: “The plummeting prices of PCs, servers,
storage, memory, and backbone bandwidth have made it easier for Web 2.0 startups to
get in the game, but cheaper infrastructure doesn't always spark ingenuity.”
Web 2.0 businesses are going bust
As expected, the fallout from Web 2.0 has already started to occur, with several
companies looking to sell their assets or running out of funds to continue operations.
Is Web 2.0 another dotcom bubble waiting to burst?
In 2007, venture capitalists pumped a record $1.34bn into 178 Web 2.0 deals in the US
(source: Dow Jones VentureSource). This was up 88% on the amount invested in 2006,
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leading many industry watchers to proclaim the arrival of a second ‘dotcom bubble’.
However, a few extravagant parties and over-enthusiasm for Web 2.0 stock doesn’t
make a bubble on its own. Table 4.8 shows there are many key differences between the
dotcom bubble of the Millennium and today’s hype surrounding Web 2.0: IPOs of Web
2.0 companies are almost non-existent, venture capital investment in Web 2.0 isn’t
nearly as high as investment in other emerging sectors, such as clean tech, and there’s
only been one $billion-dollar acquisition so far when Google bought YouTube in 2006.
The Dow Jones VentureSource report also revealed the number of deals is actually
slowing down, with Facebook alone accounting for 22% of all funds raised in this
sector in 2007. Furthermore, deals from the Bay Area (home to many Web 2.0
companies) declined slightly on the previous year.
Table 4.8: The Millennium dotcom bubble vs. Web 2.0 fever 1999/2000 2007/2008 1) Skyhigh valuations 1) Ditto today, with Facebook valued at $15bn 2) Internet companies promise potentially 2) Web 2.0 companies promise potentially high high returns and a short time from start-up to returns but revenue generation takes longer than revenue generation expected for some companies 3) IPO goldrush: 260 venture-backed 3) The Web 2.0 companies that people are most companies IPO in 1999 and 264 in 2000; excited about are choosing to wait a year or two followed by cut-price IPOs as the bottom before going public; in 2007 80 venture-backed falls out of the market companies went public, compared to 57 in 2006. 4) The median time from start-up to IPO was 4) The median time from start-up to IPO in the first four years in 1999 three quarters of 2007 was nearly eight years. 5) Lots of start-ups 5) This is also true of Web 2.0: 6) Overhyped talk of an Internet revolution 6) Fears about a credit crunch and memories of the
last dotcom bubble provide a more balanced perspective of the Web 2.0 reality
Source: Business Insights/BusinessWeek/NVCA/Thomson Financial Business Insights Ltd
As in any market sector, expect those companies with imagination, sound management
and a product or service people want to thrive, and those companies that jump on any
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bandwagon that’s passing, lack a decent revenue model and declare sensible business
practices boring not to make it past their first birthday. What follows might not be
anywhere near as exciting or adrenalin-fuelled, but for consumers tired of being invited
to join multiple social networks and enterprises wanting to find a business case for
rolling out Web 2.0, common sense can be a useful market correction.
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CHAPTER 5
Collaboration in a Web 2.0 world
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Chapter 5 Collaboration in a Web 2.0 world
Summary
Web 2.0 technologies such as wikis, social networks, blogs and microblogging sites like Twitter, have the potential to drive higher productivity gains by enabling employees to communicate with one another more quickly and frequently, and share their knowledge throughout the organization more easily.
In the enterprise, Web 2.0 technologies like wikis, blogs and social networks can be used for information and knowledge sharing, while RSS feeds, tags and folksonomies assist in the process of retrieving information from the increasingly large amounts of digital content organizations have created, not to mention the collective ‘wisdom of crowds’ inside the enterprise.
The benefits of Web 2.0 collaboration include tapping into the ‘wisdom of crowds’, bypassing email as a communications method, flexibility in creating Web 2.0 applications on an ad hoc basis and genuine knowledge sharing.
Holding Web 2.0 collaboration back, however, are organizations’ fears of losing control, the idea that majority rule doesn’t always produce the best results, scalability issues, and concerns for intellectual property and security.
Wikis provides a Web 2.0 alternative to groupware applications, like Lotus Notes.
Blogs can be an effective channel for broadcasting information to a wide audience, such as company results, and collecting feedback to help refine existing products, services or promotional methods, for example. In many ways, blogs are the Web 2.0 equivalent of a newsletter or email.
Ad hoc social networks can improve project management or foster a community around a research idea or topic, for example. In some instances, an organization’s social network could evolve into an intranet for the Web 2.0 era.
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Introduction
IT, communications and ecommerce are widely recognized to have contributed to
increased productivity in organizations. Manufacturing companies in the UK achieve
an extra 2.2% in productivity for each additional 10% of employees using computers.
In newer firms, this extra productivity effect rises to 4.4%.
The effect associated with Internet use is even greater: manufacturing companies in the
UK achieve an extra 2.9% in productivity for each additional 10% of employees using
the Internet. US-owned firms in the UK are more successful in exploiting IT, with
recent government statistics on international productivity comparisons, showing higher
output per worker for the US compared to other G7 economies.
Web 2.0 technologies such as wikis, social networks, blogs and microblogging sites
like Twitter, have the potential to drive even higher productivity gains by enabling
employees to communicate with one another more quickly and frequently, and share
their knowledge throughout the organization more easily.
Below we shall examine what form of collaboration, knowledge sharing and
information retrieval Web 2.0 offers organizations, which companies are already using
Web 2.0 to improve the way they work and the challenges associated with rolling out
Web 2.0 technologies in the corporate arena.
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The Web 2.0 opportunity
The opportunities offered by Web 2.0 in the enterprise are as broad and varied as the
imaginations of the early adopters trialing the technologies in their workplace. As
reported in BusinessWeek: “LEGO Group uses the Net to identify and rally its most
enthusiastic customers to help it design and market more effectively. Eli Lilly & Co.,
Hewlett-Packard Co., and others are running ‘prediction markets’ that extract collective
wisdom from online crowds, which help gauge whether the government will approve a
drug or how well a product will sell.”
Headshift, a UK-based social software consultancy, has worked with Business Link for
London, a business support service for London-based SMEs, to set up two corporate
blogs aimed at reaching its audience of entrepreneurs more effectively. The agency was
also involved in setting up Patient Opinion, a user-generated content site funded jointly
by the Department of Health and South Yorkshire Strategic Health Authority, which
allows anyone to share their experiences of receiving specialist treatment on the NHS.
Web 2.0 technologies tap into the original idea behind the Web, as a massive network
of collective intelligence. While peer-to-peer technology has harnessed people’s spare
computing power, Web 2.0 taps into their collective knowledge and insight. In the
enterprise, Web 2.0 technologies like wikis, blogs and social networks can be used for
information and knowledge sharing, while RSS feeds, tags and folksonomies assist in
the process of retrieving information from the increasingly large amounts of digital
content organizations have created, not to mention the collective ‘wisdom of crowds’
inside the enterprise.
When it comes to collaboration, Web 2.0 technologies can improve project
management, communicate information more readily and harness the views of a wider
group of people to solve problems. KPMG’s Matuszak highlights the example of The
Western States Intelligence Network in ‘Enterprise 2.0: Fad or Future? The Business
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Role for Social Software Platforms’, which “has adopted wikis to help assemble crime-
fighting information in one place. In the past, this sort of information was shared via
email, and vital intelligence often would fall through the cracks.”
Likewise, he points out how America’s Defense Intelligence Agency is “using an
internal wiki called ‘Intellipedia’ to help analyze security threats. In the past, producing
a national intelligence estimate for a foreign country would have required a time-
consuming, face-to-face meeting of the relevant analysts, but many with an
understanding of the issues would have been excluded due to location. Intellipedia
allows anyone with expertise and an interest, and even a little time, to contribute.” Both
examples demonstrate the application of a consumer technology in the corporate
environment to increase information sharing and problem solving.
Writing in Business Information Review, Luke Tredinnick of the London Metropolitan
University, considers the impact of Web 2.0 on company intranets: “The most
significant feature of Web 2.0 is the way in which it subtly inverts the traditional
conception of information and knowledge that has dominated the library and
information profession since its inception. Web 2.0 by contrast treats information and
knowledge as things constructed in social interaction, and in the interaction between
users and information systems… The key to Web 2.0 is harnessing the ways in which
users use information to add value to information (either through direct or indirect
user-participation) in creating the information sources that they use. In other words,
Web 2.0 reflects collective use over time, rather than reflecting an organization’s
preferred view of itself.”
Likewise, Paul Argenti of the Tuck School of Business at Dartmouth, considers the
influence of Web 2.0 on corporate communications. Writing for the Social Science
Research Network, he points out: “every employee today is a corporate communication
manager on his/her own and a potential publisher through the use of technology.
Through emails, blogs, and social networking sites, people have more ways to share
corporate information than ever before.”
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The benefits of Web 2.0 collaboration
The wisdom of crowds
An organization’s knowledge and intellectual property is what gives it a competitive
edge. So imagine the benefit of being able to tap into that expertise and garner the
opinions of diverse groups around the organization to solve problems that previously
would have been examined by the few. BusinessWeek highlights the experience of HP:
“Hewlett-Packard Co.'s services division was having trouble a few years ago with
forecasts in the first month of a quarter. So Bernardo A. Huberman, director of HP
Labs' Information Dynamics Lab, set up a market with 15 finance people not normally
involved in such planning. They bought and sold virtual stock that represented a range
of forecasts at, above, and below the official company forecast. Their collective bets
yielded a 50% improvement in operating-profit predictability over conventional
forecasts by individual managers.”
Some organizations are even looking outside their four walls to tap into a wider pool of
talent. BusinessWeek reports: “Procter & Gamble's $1.7bn-a-year R&D operation, for
instance, is taking advantage of collective online brain trusts such as Lilly company
InnoCentive Inc. in Andover, Mass. It is a network of 80,000 independent, self-selected
‘solvers’ in 173 countries who gang-tackle research problems for the likes of Boeing
Co., DuPont, and 30 other large companies… More than a third of the two dozen
requests P&G has submitted to InnoCentive's network have yielded solutions, for
which the company paid upwards of $5,000 apiece. By using InnoCentive and other
ways of reaching independent talent, P&G has boosted the number of new products
derived from outside to 35%, from 20% three years ago. As a result, sales per R&D
person are ahead some 40%.”
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The limitations of current communication methods
Email made communications faster – instant messenger made it instantaneous – but
then the problems of spam, email overload and version control with documents flying
back and forth began to appear. Likewise, far from being useful resource tools,
company intranets have become huge data repositories for information that a lot of
people simply don’t use.
With Web 2.0 technologies like wikis, document version control becomes manageable,
and information becomes dynamic and democratic, created by the many rather than the
select few. “Moreover, because the information does not have to be structured up front,
but rather evolves in accordance with the demands placed upon it, a collaborative
document produced using wiki software would likely be more efficient and more
relevant,” writes KPMG’s Matuszak. “IBM operates dozens of wikis within its
enterprise to foster everything from internal project collaboration to software
development. It is also taking part in an experimental project, the Community Patent
Initiative, with others including Microsoft, General Electric, and HP. This initiative
uses the ‘wisdom of crowds’ to help the understaffed U.S. Patent Office review
applications and ensure that only truly worthwhile inventions get 20 years of near-
monopoly protection.”
Open, flexible and accessible
Earlier in this report we touched upon the ease with which anybody in an organization
– not just those with IT knowledge – can use, build and create applications based on
Web 2.0 technologies and tools. Such flexibility and accessibility makes participation,
information sharing and information retrieval open to a wider audience than ever
before.
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Genuine knowledge sharing
Sites like Wikipedia rely on self-regulation to ensure information is accurate. Within
the enterprise, wikis enable people who might not previously have been invited to
contribute or been considered relevant to a subject matter to share knowledge. In this
way, wikis enable genuine knowledge sharing amongst an organization’s employees.
Barriers to Web 2.0 collaboration
Losing control
As discussed earlier in this report, the top-down approach to management doesn’t sit
comfortably in a Web 2.0 world. Internal collaboration through wikis, social networks
and other Web 2.0 tools is horizontal by nature, drawing on the expertise of the
networked many, rather than the elitist few. Even more frightening for some
organizations is the prospect of opening up their organization to external wisdom,
whether from customers, investors or other stakeholders. This will require a radical
rethink of what organizations perceive their role to be and how they retain a
competitive edge when intellectual property has more avenues to ‘leak’ out of an
organization.
The ‘unwisdom’ of crowds
Opening ideas out to the many may bring with it the possibility of new innovation and
opportunities, but does the opinion of the majority always yield the best results?
Therefore, organizations rolling out collaborative Web 2.0 applications in the
enterprise need to consider how they will be managed and how any information gained
will be used to improve the way it works.
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Enterprise scalability
Web 2.0 tools are new, so inevitably they haven’t been tried and tested long enough in
the enterprise to determine how scalable, secure and robust they are in the long term.
Will an internal social network be able to support thousands, rather than hundreds, of
members? How will previous versions of a wiki document be archived? Therefore,
individual team members should work closely with IT to consider the long-term
implications of Web 2.0 tools and ensure they are put to best use.
Appropriate content
As Henrik Schneider points out in ‘Rapid ICT Change and Workplace Knowledge
Obsolescence: Causes and Proposed Solutions’ published by The Berkman Center for
Internet & Society at Harvard Law School: “Certain figures, performance indexes,
technology and process descriptions, or even customer feedback could be considered
valuable corporate secrets, accessible only by a select few authorized users. Online
community knowledge sharing on the other hand is specially built upon the basis of
equal right to information for everyone.”
The challenge for organizations is in finding a way to maximize the benefits of Web
2.0 tools without risking the loss of its intellectual property. Too prohibitive an
approach will destroy the value Web 2.0 tools deliver, but too lax an approach could
compromise the organization’s ‘crown jewels’.
Securing the enterprise
As well as the content of blogs and other Web 2.0 tools, organizations need to consider
the IT security risks of enabling new collaborative working practices. This challenge is
analyzed in more detail in the Chapter 3.
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Information sharing
Wikis in the workplace
A wiki is web page that users without HTML experience or author rights can contribute
to or link content to. Inside the enterprise, it provides a Web 2.0 alternative to
groupware applications, like Lotus Notes. That’s because group-editable Web articles
can be created quickly and distributed easily internally. Any changes made to the
document are instantaneous and can lead to problem solving from an unexpected
source. According to San Murugesan, adjunct Professor in the School of Computing
and Mathematics at the University of Western Sydney in ‘Understanding Web 2.0’
published in IT Pro by the IEEE Computer Society, wikis offer:
Excellent means to annotate information or discuss evolving issues;
Higher communication efficiency and productivity compared to ‘back and forth’
exchanges of emails;
Support for harnessing the power of diverse individuals to create collaborative
works;
Centralized, shared repositories of knowledge and documents for all aspects of a
project – planning, development, implementation, maintenance and management;
Support for the content to evolve, expand and improve incrementally over time.
Wikis can also be put to widespread use: investment bank Dresdner Kleinwort
Wasserstein uses a wiki instead of email for managing meetings, compiling agendas,
distributing minutes, brainstorming, publishing ideas and creating presentations,.
In ‘Rapid ICT Change and Workplace Knowledge Obsolescence: Causes and Proposed
Solutions’, Henrik Schneider says: “A wiki can also be used in conjunction with
information developed outside of the wiki. For example, a wiki-double may be used to
gather notes and comments on the draft of a document. The reason for this set-up is that
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in many corporate knowledge sharing environments (e.g. a repository of project
deliverables or a collection of policies) it might be undesirable to let users directly edit
the original content, but it is still useful to give a concise overview of opinions. Also, a
wiki is a great way to build and share meeting minutes as everyone can add
information; if one thinks there are incomplete or misleading parts in the most current
version contributed by others, he or she can change those parts. This provides a tool for
reaching a consensus that is valuable to refer to later.”
KPMG’s Matuszak reveals that, “Nokia hosts a number of wikis, some of which are
used internally to coordinate technology investment research. And Forum Nokia Wiki
provides a place where issues around Nokia’s phones and software are debated.
Disney’s Family.com site is a wiki that contains features aimed at parents that will
aggregate links to other parenting sites as well as offer tips.”
Pitfalls of using wikis in the enterprise
Content accuracy and consistency
One of the big concerns with group-editable documents is that without one person
responsible for them, the content will be inaccurate or inconsistent. But as Wikipedia
has demonstrated, self-regulation can be even more effective than having a group of
regulators in place to ensure facts are checked, sources are cited and more.
Regular contributors have the dominant voice
In Wikipedia, there is a group of prolific editors that create and edit articles, and
monitor the site to ensure contributors are working to agreed rules. In the enterprise, a
similar ‘hierarchy’ could emerge, with the same regular voices creating and editing,
which could inhibit creativity and knowledge sharing.
This is a problem offline too, with certain speakers dominating meetings, for example.
To minimize this problem with wikis, users should be encouraged to contribute widely,
the ‘group’ should be encouraged to self-regulate as much as possible and
organizations should consider their policy for administering collaborative documents.
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Legal liability and privacy
It should be made clear in any employer policy that certain behaviour and content is
not permitted – anything defamatory, confidential or discriminatory, for example – in
the creation or editing of wiki documents.
Blogging in the workplace
Blogs are big business, with one out of 20 US adults creating a blog and 11% of
Internet users being regular blog readers, according to the Pew Internet & American
Life Project Report. Corporate blogging has also become increasingly widespread, with
several high-profile examples, such as General Motors Vice-Chairman, Bob Lutz.
But blogging doesn’t have to always be to an external audience. It can be used as
effectively internally to broadcast information to a wide audience, such as company
results, product recalls and more. With the opportunity for readers to give their
comments, blogs are also a good feedback tool and can be useful in the areas of R&D
or product development for refining existing products, services or promotional
methods.
In many ways, blogs are the Web 2.0 equivalent of a newsletter or email.
Computerworld highlights the example of health benefits provider, WellPoint, whose
CEO wanted to talk employees about the top issues at work. “The email approach to
keeping up the conversation was cumbersome. Boxer [the CEO] figured there had to be
a better way for communicating on such a large scale, so in June 2007 he tried
blogging. The results have been positive. “It's been a very effective way for building a
community,” Boxer says. “It’s a unifying force.””
According to Henrik Schneider in ‘Rapid ICT Change and Workplace Knowledge
Obsolescence: Causes and Proposed Solutions’ in The Berkman Center for Internet &
Society at Harvard Law School: “There are two dominant ways apparent currently for
businesses to justify the use of blogs in the context of corporate knowledge
management. The first is the value of employee blogs that focus on a very narrow
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topic, thus making them an easy source to search on that issue, without having the
burden of trying to crawl through thick layers of off-topic content… The second way a
company can use blogs in its KM system relates not to internal knowledge
organization, but to customer relations. Blogs can facilitate the acquisition of customer
knowledge and experiences, to be internalised into business processes and product
development.”
Unlike wikis, which are based on a many-to-many model, blogs are a more appropriate
medium for communicating information from one-to-many. That said, there are some
multi-user versions of blogging software available. UK delivery company eCourier
uses Traction's Teampage project management blog software to speed the development
process of its bespoke IT systems between global teams. In this example, blogging
software becomes more like a wiki, with past articles providing access to further
information where necessary.
Like wikis, blogs can help disseminate information more widely throughout an
organization by providing insight into departments or individuals that other teams
might not have known existed. To maximize any learnings from past blogs, it is vital
that they are archived and can be easily searched. Blogs can be used on a project-by-
project or ongoing basis, and are flexible enough to adapt to a variety of corporate
scenarios.
Pitfalls of using blogs in the enterprise
Inappropriate content and style
The personal nature associated with many of the first mainstream blogs – they were
nicknamed online diaries, after all – can dissuade many potential bloggers from using
this channel in the corporate arena. But blogs have moved on significantly since then,
and although personal blogs are still widely popular with some Internet users,
enterprises need to be aware corporate blogs fulfill a different role.
Kelleher and Miller in ‘Organizational blogs and the human voice: Relational strategies
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and relational outcomes’ published in the Journal of Computer-Mediated
Communication point out that the conversational tone of a blog doesn’t have to be a
bad thing either: “The observed advantage of blogs in conveying a conversational
human voice echoes what popular and professional literature on the nature of blogs
already tells us. Blogs are a good place to speak candidly with a conversational style
(e.g., ‘invite people to a conversation’), and this conversational style may be an
important part of the process of building and maintaining computer-mediated
relationships.”
Other corporate concerns have centered on the legal implications of blogging – one
Cisco employee found himself and his company involved in a lawsuit after allegedly
posting defamatory comments about two lawyers on a blog. While external parties will
generally not have access to internal blogs, employers should still ensure that nothing is
posted which could be deemed defamatory, discriminatory or libelous. As with any
other area of information sharing, organizations need policies in place to prevent
misuse, whether intentional or not.
Ongoing input required
Bloggers don’t blog once a year, they blog regularly. Organizations need to
acknowledge that blogging requires ongoing commitment and provide incentives for
bloggers to post regularly. They should also canvass employee opinion about what
works and what doesn’t to continually improve the blogging environment, which will,
in turn, drive up usage.
Finally, organizations wanting to use blogging to best effect need to develop a culture
that encourages transparency, sharing of ideas and feedback.
Social networking in the workplace
Social networks like Facebook, MySpace and Bebo might not appear to have much
relevance to organizations, beyond the fact that employees use them regularly during
work hours, but the concept of social networking could have far greater relevance to
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enterprises than they first realize. Organizations such as Cadburys already use
Facebook to keep potential job candidates ‘warm’, for example.
But they also have a valuable role to play inside organizations. If we return to the basis
behind social networking, essentially they are communities where users come together
– Facebook, for example, describes itself as a ‘social utility’ that makes it easier for
people to communicate with one another. People tend to feel strongly about any social
network they join. The 2008 Digital Future Project published by the Center for the
Digital Future at the USC Annenberg School for Communication found that “a large
and growing percentage of members – now 55% – say they feel as strongly about their
online communities as they do about their real-world communities.”
Organizations can create closed groups on such sites – as Cadbury has done – or they
can build their own internal social network, using third-party software, around a
particular issue, project or team. Ad hoc social networks can improve project
management – users simply log on to find out the status of a project – or foster a
community around a research idea or topic, for example. In some instances, an
organization’s social network could evolve into an intranet for the Web 2.0 era,
housing valuable company information with regular status updates on policy changes
and so on.
As a straightforward communications tool, they also enable geographically dispersed
employees to keep in touch with one another and provide regular updates on what
projects they are working on. Like the Q&A feature on LinkedIn, employees could post
requests and fill skills gaps from within rather than looking externally for assistance.
This could have some financial benefits too in cutting back on recruitment and external
agency costs.
In some sectors, industry-wide social networks have been created to foster greater
partnership. For example, UnLtdWorld, is a social network for ‘social entrepreneurs’,
designed to increase information sharing between social entrepreneurs and relevant
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bodies. “Our aims are to connect socially-minded people and enable them to share
content and build collaborative value, raise the visibility of ideas, issues and projects
and ultimately help generate greater positive impact in the real world,” reads a press
release from the site. Other organizations – such as McDonalds – are simply looking to
social networks to increase knowledge sharing amongst employees; social network
profiles can be an effective way of raising awareness of employees’ areas of expertise
and disseminating published articles or research out to a wider audience.
Pitfalls of using social networks in the enterprise
Scalability
As anyone familiar with the exponential growth in social networking will know, social
networks need to be able to scale upwards quickly. The good news is that many third-
party social networks have been developed with enterprises in mind, so scalability is a
priority, as is security and performance.
Inappropriate content
Many of the pitfalls associated with social networks also plague other Web 2.0
collaboration tools, such as misuse. As before, enterprises can minimize employee
misuse and risk by creating policies that outline how the company expects the
employer to behave and act on such collaborative sites.
Ownership of contacts
In what is likely to be the first of several cases globally around ownership of contacts
managed through personal networking profiles, Mark Ions, a former consultant with
UK recruitment firm Hays was ordered by the High Court in June 2008 to disclose
business contacts built up on LinkedIn. The court ordered Mr Ions to disclose his
LinkedIn business contacts and all emails sent to or received by his LinkedIn account
from Hays' computer network. According to Ions, Hays had encouraged Ions’ use of
the site and his solicitor claimed unsuccessfully that once professional contacts had
accepted joining Ions’ network, they ceased becoming confidential property of his
employer. While Hays won the case, it nonetheless highlights the degree to which
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networking sites can blur confidential commercial information or contacts with the
public domain and future areas of conflict between employers and employees.
Other Web 2.0 collaboration tools
Mash-ups
Mash-ups have pioneered some useful consumer tools – letting users identify the
location of houses for sale in an area, for example – but they also have a valuable role
to play in the corporate environment. In ‘Understanding Web 2.0’, in IT Pro, published
by the IEEE Computer Society, San Murugesan, Adjunct Professor in the School of
Computing and Mathematics at the University of Western Sydney in Australia, says:
“An enterprise can use mash-ups internally to collect information from different
sources and combine it in intelligent ways to help people make smarter decisions. For
example, executives can use mash-ups to gain a deeper understanding of customers and
sales, and thus to make better decisions. Mash-ups also find application in areas such as
payroll, customer relationship management, logistics, procurement, marketing and
ecommerce.”
He sounds a note of caution, however, for enterprises using mash-ups based on third-
party APIs: “Although a mashup makes it easy to draw on multiple data sources or
services to create new applications quickly, there are also risks in using someone’s
mashup service or API, in terms of their continued support, reliability, security and
scalability. Developers and enterprises that deploy and use mash-up applications
should be aware of the risks and limitations and choose dependable services.”
This microblogging site might seem frivolous at first glance – with some users
delivering inane comments in 140 words or less on their life – but it has the potential to
enable greater collaboration amongst employees in the workplace. An obvious use is
for project teams to deliver real-time status updates to one another. Users can close
their postings to outsiders, so only those ‘Twitterers’ allowed to join receive the
postings.
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Organizations are also using it to communicate with customers, or citizens in the case
of the Los Angeles Fire Department, which uses it to communicate real-time fire
information to residents signed up to ‘follow’ its postings. In the UK, the government
has signed up to Twitter and uses the site to send out updates on the Prime Minister’s
activities. Market researchers are using it to identify consumer trends in real time,
according to BusinessWeek, which also reports that Dell “claimed to have boosted sales
through these efforts [searching for mentions of its business on Twitter and jumping
into the conversations] by $500,000 in recent months.”
Virtual worlds
Recruitment advertising agency, TMP, held what it billed the world’s first virtual
careers fair inside Second Life in 2007. Employers such as Yell, KPMG and the Royal
Bank of Scotland were able to meet with candidates virtually and discuss career
opportunities in a relatively anonymous environment.
Besides recruitment, virtual worlds can provide a destination for geographically
dispersed project groups to meet and discuss projects or brainstorm ideas. It is
significantly cheaper than paying travel fares for delegates to attend face-to-face
meetings and also easier than communicating to several team members over email.
Attending delegates are provided with the coordinates of where the meeting is held,
ensuring that only the invited parties attend.
Virtual worlds also provide an opportunity for role play in a simulation environment:
for example, Toyota, is encouraging avatars in Second Life to buy its cars and gain
valuable insight into what customers want based on how they customize their models.
Other organizations are using virtual worlds for training new recruits or employees in
new practices.
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Information retrieval
Web 2.0 doesn’t just have benefits for information sharing, but also information
retrieval, with technologies such as tags, folksonomies and RSS feeds helping users to
find information they are looking for or identify trends in data.
Tagging in the workplace
In the consumer world, sites such as Del.icio.us and StumbleUpon, provide an online
repository for people’s ‘social bookmarks’ – web pages are ‘tagged’ and can then be
managed, stored and organized through the site. Inside the enterprise, tagging a digital
document held in an information repository with some descriptive text could make
information retrieval much simpler and quicker.
Writing in ‘Rapid ICT Change and Workplace Knowledge Obsolescence: Causes and
Proposed Solutions’, Henrik Schneider says: “… if tags were added to these knowledge
items by readers as well contributors, a more practical and natural method of
categorization could emerge from the dynamically evolving tag pool. These new
categories would most probably fail to comply with the ‘mece’ (mutually exclusive and
collectively exhaustive) criteria, but could organize the knowledge to much more
nearly approximate practical experience, and could also provide the possibility of
continuous evolvement for the categories.”
David Weinberger, a Fellow at the Harvard Berkman Center for the Internet and
Society outlines the benefits of tagging in ‘Tagging and Why It Matters’: “Tagging, on
the other hand, doesn’t require a team of Information Architects to argue for years over
whether the right term is ‘natural language processing,’ ‘language parsers,’ or ‘nlp.’
Users can use whatever term works for them. This may lower the barrier sufficiently to
engage corporate users.”
He also points out the benefits of ‘folksonomies,’ a term invented by Thomas Vander
Wal in 2004: “A folksonomy is an emergent grassroots taxonomy. For example, if I’m
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about to tag a photo of San Francisco that I’ve found, if the application tells me that
5,000 people have already tagged it, and most have tagged it as ‘San Francisco’ and
only a few as ‘Frisco,’ that encourages me to tag it (and future photos of San Francisco)
the popular way.”
Tag clouds
These rank topics by size, so the most tagged topics appear in larger type. Tag clouds
could be used inside the enterprise to identify trends in data, such as common causes of
absence at work or popular insurance claims.
RSS feeds in the workplace
RSS feeds provide updates on when a web page has been updated – with a new blog,
news item and more. RSS feeds save time by sending information to users rather than
making them go search for it. In the enterprise, this could speed up information
retrieval, by sending users updates when group edited documents or other web pages
have been amended or changed, instead of relying on them to check a central repository
or email documents back and forth. RSS feeds can also cut through a lot of superfluous
information by only sending users updates on those documents they have selected to
receive feeds from.
Henrik Schneider sums up the benefits of RSS feeds inside the enterprise in ‘Rapid ICT
Change and Workplace Knowledge Obsolescence: Causes and Proposed Solutions’:
“The amount of information in company legacy systems and data warehouses is
tremendous. The ability to customize and focus the view on that information is critical.
Feeds and aggregators offer an easy and personally customizable way to construct that
view. When personal requirements change (certain sources lose importance, while
others emerge), it is easy for individuals to modify their preferences to best fit their
current needs.”
He continues: “Best of all, the feeds themselves can be integrated. One person may be
better at collecting and arranging sources and data about a particular topic, while others
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are better in different areas. If participants have access to the collections of their peers
too, everyone will have much better overall access to the best sources than they would
if everyone had organized everything separately. In a corporate knowledge
management environment this way of leveraging a social network has great potential.
According to studies, most people find business knowledge through other people in
their social network and not directly from the system (Ives, 2005 quoting Anklam,
2005). Aggregating news and information from existing external knowledge sources
can aid business intelligence efforts, and creating collective pieces of data about
internal knowledge items helps employees more quickly locate required knowledge and
keep informed about interesting new submissions.”
Best practices in Web 2.0 collaboration
Before leaping into a Web 2.0 environment, organizations should consider a list of best
practices for ensuring any initiative is a success:
Consider what is right for your organization – if you have a geographically
dispersed workforce, what Web 2.0 tools would make information sharing easier?
How easy is knowledge transfer already inside the workplace? Likewise, if the
workforce is fairly mature and not computer-based, then social networking might
not be a good investment;
Create a culture where knowledge sharing and creativity is encouraged; if this is
uncommon to the organization, consider ways of incentivizing people to contribute
their ideas and lend their support to other teams;
Create a policy for how the new collaborative working practices will be managed,
make sure to outline any behavior that will not be allowed and communicate this to
existing staff and new recruits as they come on board;
Ensure there is cross-departmental support for any new initiatives and IT is
involved from the start, as inevitably they will be the first port of call should any
technical issues occur;
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Train staff in how to use these new tools – it doesn’t have to be a lengthy process,
but give them the tools to understand how they work and what insights they could
deliver them;
Remember this is an enterprise, not consumer initiative – and make sure that the
network can cope with large numbers of users contributing to group documents at
the same time, social networks can scale upwards and enterprise security is not
compromised by any web-based communications;
Learn from any mistakes, test out different Web 2.0 tools to find what works best
for different projects and encourage teams to pass on best practices in information
sharing and retrieval. Bear in mind too that new Web 2.0 tools and technologies are
continually emerging, so read the trade press and relevant blogs to keep up to date
with this rapidly evolving area.
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CHAPTER 6
Web 2.0 marketing opportunities
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Chapter 6 Web 2.0 marketing opportunities
Summary
In the first half of 2007, the UK online advertising market was valued at £1.3bn, an increase of 41.3% on the same period the previous year. This was at a time when the advertising industry as a whole only managed growth of 3.1%.
Morgan Stanley predicts an equally favorable outlook for Internet advertising in the US, with a CAGR of 20% from 2005 to 2010 and an estimated 13% market share by the end of the period.
The necessity for brands to move to a Web 2.0 presence is highlighted by a finding from the Ketchum/USC study. It identified a disconnect between consumers’ lack of reliance on corporate websites for information (a Web 1.0 phenomenon) and marketers’ strong use of them to convey corporate information.
Benefits of advertising in Web 2.0 arena include measurability, cost, the opportunity to reach the 18-34 age group and niche audiences effectively, and a variety of channels.
Challenges to advertising in the Web 2.0 arena, however, include being seen as too intrusive, jumping on ‘the next big thing’, targeting their audience effectively and ceding control to users.
Marketing on social networks can take the following forms: display ads, corporate group pages, viral marketing, social network applications or widgets, and branded content or advertising within entertainment content.
In 2007, eMarketer predicted around $900m would be spent on advertising through social networking sites in the US and $335m elsewhere.
For marketers, widgets represent a new advertising opportunity. Rather than simply piggybacking on an existing piece of content, the widget becomes the piece of advertising, combining a brand message with a useful function. Alternatively, advertising can be run inside a widget, in the same way an ad might appear on a web page or social network page.
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Introduction
The Internet is used by most organizations for sales and marketing. This is driving
growth in the online advertising market, with many industry commentators predicting it
will overtake TV advertising in the UK in 2009. For the first half of 2007, Internet
advertising in the UK had 14.7% market share, putting it above direct mail, outdoor
and radio advertising.
Figure 6.4: Digital vs. offline media, January – June 2007
TV21%
Press - display20%
Press - classifieds16%
Internet15%
Direct mail12%
Directories7%
Outdoor5%
Radio3%
Cinema1%
TV21%
Press - display20%
Press - classifieds16%
Internet15%
Direct mail12%
Directories7%
Outdoor5%
Radio3%
Cinema1%
Source: IAB and PricewaterhouseCoopers Business Insights Ltd
Yet within the online advertising sector, new advertising channels continue to emerge,
most recently through Web 2.0 and opportunities on social networks, social network
applications and so-called ‘widgets’.
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In this chapter, we examine the opportunities Web 2.0 presents marketers and how
organizations are using these new channels to reach consumers in ever more creative
ways. We also highlight best practices in this area and pitfalls to watch out for.
The Web 2.0 marketing opportunity
The UK outlook
In the first half of 2007, the UK online advertising market was valued at £1.3bn, an
increase of 41.3% on the same period the previous year. This was at a time when the
advertising industry as a whole only managed growth of 3.1%. Figure 6.5 breaks down
spending on digital advertising by display, classifieds, paid search and email
marketing.
Figure 6.5: Digital media mix in the UK, January – June 2007
Display22%
Classifieds21%
Paid for search56%
Solus email1%
Display22%
Classifieds21%
Paid for search56%
Solus email1%
Source: IAB and PricewaterhouseCoopers Business Insights Ltd
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The US outlook
Morgan Stanley predicts an equally favorable outlook for Internet advertising in the
US, with a CAGR of 20% from 2005 to 2010 and an estimated 13% market share by
2010. Despite the wider economic conditions – which normally hit advertising
expenditure – Morgan Stanley predicts that the relative transparency and high ROI of
Internet advertising may make it less “economically sensitive” than other advertising
areas. Furthermore, analysts predict that the large gap between Internet advertising
spending and Internet usage is “a positive indicator for future growth opportunities”,
estimating Internet advertising spending per user will grow from $64 in 2005 to $139
in 2010. Table 6.9 shows the top spenders on online advertising in the US.
Table 6.9: Top 10 advertisers by estimated spending (US) Rank Advertiser Total estimated spending Impressions (000s)* 1 NexTag $58,908,000 29,001,642 2 Experian Group $54,110,300 24,983,807 3 Netflix $37,325,600 12,018,955 4 InterActiveCorp $31,365,700 7,340,837 5 Vonage Holdings Corp $23,608,100 10,502,164 6 Verizon Communications $19,525,600 3,911,431 7 General Motors $17,895,200 2,979,960 8 Apollo Group $12,828,600 4,522,496 9 AT&T $12,294,200 2,729,374 10 Scottrade $11,902,600 2,321,756 *An impression is counted as the number of times an ad is rendered for viewing
Source: Nielsen Online Business Insights Ltd
The social networking opportunity
Advertising spend online is driven by a number of factors, notably the growing number
of people moving online and spending increasing amounts of time once connected.
While not a major driver of online advertising expenditure, the UK Internet Advertising
Bureau believes social networking sites have influenced online advertising spending by
generating higher consumer demand for fast broadband, increasing time spent online
and boosting overall consumer confidence in the online experience. “This is likely to
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increase advertiser interest in the medium and lead to a continued growth in advertising
expenditure for years to come,” it predicts. Table 6.10 highlights the UK’s most
popular social media websites in January, while Table 6.11 reveals which might be the
most popular social networks in the future.
Table 6.10: UK’s most popular social media websites: Jan 2008 Rank Rank Website UK Unique UK Unique Change in Social media J08 J07 Audience Audience UA Jan07- type (000s) J08 (000s) J07 -Jan 08 1 2 YouTube 10,426 6,667 56% Video 2 1 Wikipedia 9,557 7,758 23% Information 3 18 Facebook 8,513 1,048 712% Network 4 4 Blogger 5,145 3,697 39% Blogging 5 3 MySpace 5,026 5,513 -9% Network 6 8 Bebo 4,090 2,670 53% Network 7 16 Slide 3,355 1,092 207% Add-on tool 8 10 Yahoo! Answers 3,319 2,111 57% Information 9 6 Windows Live Spaces 3,127 2,716 15% Network 10 9 TripAdvisor 2,364 2,186 8% Travel review
Source: Nielsen Online, UK NetView, home & work data, including applications, Jan 2007 – Jan 2008 Business Insights Ltd
Table 6.11: UK’s fastest growing social media websites*: Jan 07 - Jan 08 Rank Website* Change in UA UK Unique UK Unique Earliest Social J07 (unless Audience Audience measurable media Stated) –J08 (000s) J08 (000s) in 2007 month type measurable (period of mon in 2007 change) 1 PerfSpot 713% 260 32 April 07 Network 2 Facebook 712% 8,513 1,048 12 months Network 3 vidShadow 639% 281 38 Nov 07 Video 4 Veoh 595% 799 115 12 months Video 5 Youku 524% 306 49 April 07 Video 6 RockYou! 516% 2,207 358 12 months Tool 7 Imeem 331% 237 55 12 months Music comm’ity 8 Bunnyhero Labs 321% 295 70 12 months Tool 9 Tudou 250% 252 72 March 07 Video 10 Video Jug 247% 371 107 July 07 Video *Minimum UK Unique audience of 100,000 in Jan 08
Source: Nielsen Online, UK NetView, as above Business Insights Ltd
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According to Nielsen Online, 20.8m Britons – 63% of Britons online – visited at least
one of the ten most popular social media sites in January 2008, 21% more than visited
at least one of January 2007’s top ten social media sites.
The necessity for brands to move to a Web 2.0 presence is highlighted by a finding
from the Ketchum/USC study. It identified a disconnect between consumers’ lack of
reliance on corporate websites for information (very much a Web 1.0 phenomenon) and
marketers’ strong use of them to convey corporate information compared to other
channels. This does not mean that Web 1.0 is to become extinct, rather that it can be
refreshed with the judicious use of new concepts and innovations, including those that
have made Web 2.0 services increasingly popular.
Benefits of advertising in Web 2.0 arena
Measurability
One of the oft-cited benefits of online advertising is that advertisers can track the
success of campaigns far more effectively than they can do offline using web analytics
and other online advertising tools. Beyond measuring clicks through to their site
though, they can also track user behavior across multiple online touchpoints to build up
a profile of users visiting their website. So instead of being a drain on resources – as
John Wanamaker famously quipped ““Half the money I spend on advertising is wasted.
The trouble is, I don't know which half” – advertising can become more targeted and
profitable.
Cost
Targeting users via social network platforms is considerably cheaper than using other
channels – in some cases, it’s free, for example, the only cost involved in creating and
maintaining a corporate profile page on a social network is the time required to do so.
For small businesses, this provides the opportunity to get in front of customers they
might normally struggle to hit and improves their reach at considerably lower cost than
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other advertising method. It’s also an effective way to maintain communication with
existing customers, whether a small or large company.
Reach elusive 18-34 target audience in their environment
Marketers often moan about the difficulties of reaching the elusive 18-34 age group.
They seem immune to advertising through traditional channels, like TV or the press.
But head online, and it’s a different story. A study from the Online Publishers
Association found that 18-34 year olds are far more likely to go online (46%) than
watch TV (35%), listen to the radio (three%) or read a newspaper (also three%).
Many of today’s Internet-savvy 18-34 year old consumers are as comfortable with
social networking, blogging and twittering as they are with using the telephone or
writing an email. As are those even younger: research from the Institute for Public
Policy Research found that UK teenagers between the ages of 13 and 18 spend more
than 20 hours a week using Web 2.0 sites. The hope by marketers is that if they reach
them in their natural environment with advertising that is engaging, entertaining,
maybe even useful, they may be more receptive to advertising messages.
Target niche audiences effectively
Alongside the big generalist social networks like Facebook, MySpace, Bebo and
LinkedIn are plenty of smaller social networks based around a community of shared
interests. For marketers interested in targeting a particular audience, such as the over-
50s or healthcare workers, these offer an effective way of getting in front of niche
audiences.
Increased choice of channels
With TV advertising, marketers’ options are pretty limited, by time slot and choice of
channel, for example. But online, the choice of advertising formats is far more varied:
display, video, banner ads and sponsorship replicate advertising found in the offline
arena, while exclusively online channels include social networking applications,
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widgets, pop-ups, podcasts and games. There are significantly more ways of getting at
online content too, whether through PDAs and digital set-top boxes, as well as PCs or
laptops. For marketers, the possibilities are exciting, even if they bring with them new
challenges.
Challenges of Web 2.0 advertising
Intrusive or invasive advertising
Just because there are more opportunities to advertise in the Web 2.0 world, it doesn’t
automatically follow that it will be any easier to reach consumers in the offline
environment. A study by Kyp Systems found that more than more than half of 13 to 49
year olds on Facebook never trusted the marketing material they receive, while 46%
said Internet advertising was driving them “insane”. The same survey also found
anecdotal evidence that users are increasingly unhappy with social networks using their
details for marketing.
In the same way that advertisers using email marketing have to be extremely careful to
provide users with information they want to read or services they want to use,
marketers using social media need to tread a very fine line between being helpful and
being intrusive. For many users, social networks represent their space; they don’t want
to hear advertisements directed at them unless they’ve requested to do so. This is why
when Facebook first launched its Beacon advertising system it jarred with users.
Members had gone from being in a position of perceiving their information to be theirs
– even if that isn’t technically the case or they chose to share it with hundreds of other
people – to discovering that whenever they bought something, the information was
shared with everyone. It was considered a step too far and provided a very timely
reminder to marketers of the need to tread carefully in advertising on social media sites.
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The next big thing
It is hard not to be carried away on the hype of Web 2.0 – or even Web 3.0 if industry
commentators are to be believed – but marketers should not lose sight of the basic
principles of running a marketing campaign. Web 2.0 might provide new opportunities
for advertising, but the same rules apply as in any other campaign and possibly some
new ones too – such as not being seen as too invasive.
Another problem with advertising on Web 2.0 sites or social media sites is that
marketers will always find they are chasing the next big thing. Five years ago it was
Friends Reunited, two years ago it was MySpace, now Facebook is the site du jour. The
answer is to build content or applications based on open source tools, so it can be
applied across multiple social networks or social media sites. Google’s social
networking platform, OpenSocial, for example, lets developers create applications that
will work across participating social networks (such as Bebo, Orkut and Plaxo to name
a few). With more names expected to join as OpenSocial continues its development,
the trend for building open source applications and services will become even more
evident.
For the sake of new
Marketers shouldn’t automatically assume that new advertising platforms are the best
way to convey their message to consumers. Experimentation can be good; but only if
it’s based on research that users will want to buy through these new channels. Bear in
mind too that Web 1.0 advertising still has a strong role; search marketing, for
example, accounts for the majority of online advertising spend, and advertisers are
unlikely to radically rethink their marketing mix any time soon.
Audience
Marketers should consider carefully if their audience is likely to be using Web 2.0
platforms before launching a full-scale advertising assault. A report from Forrester
Research found that only 44% of Americans online used what it called ‘social
technologies’, such as social networks. It is easy to get overexcited about technologies
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that might for the majority of demographics and age groups still be considered only
suitable for early adopters.
Control
One of the overwhelming challenges for marketers in a Web 2.0 age is understanding
that control largely lies with the consumer – whether they use an application, spread a
video virally or create user generated content that touches a brand. Web 2.0 is about
participation, interactivity and creation for consumers; for brands, that means it is about
influencing, sharing and communicating. Marketers cannot control their brand online;
for example, many may not want a presence on a social network but find themselves
there anyway (Primark apparently decided not to create a Facebook page because the
unofficial Facebook group – with more than 94,000 members – was already doing so
well).
Marketers can, however, tap into user opinions and tastes, get closer to their buyers and
build ties with their brands. Research from Microsoft Digital Advertising Solutions
found that a third of users on social networks forwarded an ad to a friend; if targeted
successfully, marketers could find their customers do their marketing for them.
Marketing on social networks
Advertising opportunities on social networks take multiple forms:
Display ads on web pages;
Corporate group pages;
Viral marketing (through videos and other content passed on from member to
member);
Social network applications from creators such as iLike, Slide and RockYou
downloaded free by users;
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Branded content or advertising within entertainment content (such as Cadburys
Creme Egg on the Kate Modern drama series on Bebo).
This list isn’t exhaustive; advertisers and developers are continually devising new, ever
more ingenious ways of reaching consumers in their space.
In 2007, eMarketer predicted around $900m would be spent on advertising through
social networking sites in the US and $335m elsewhere. In 2008, the total was expected
to increase from $1.2 billion to $1.7bn as social networking became more established
outside the US. Likewise, research sponsored by TNS media intelligence/Cymfony,
found that 95% of senior marketing executives believe social media will grow in
significance over the next five years. Respondents endorsed it as a strategic tool to gain
consumer insights (37%), build brand awareness (21%) and increase customer loyalty
(18%).
Case study examples Travel firm, STA Travel, has profiles on both Facebook and Bebo, and for
Facebook has created a trip planner application. It has also built some widgets –
available on Facebook or its own website – which let travellers count down to their
trip, find special offers, compare weather forecasts and more;
Victoria’s Secret PINK page has more than 350,000 fans and was created before
the product line was launching, apparently helping to build up advance sales;
Charles Schwab has created a Money & More community, where users can discuss
anything from buying a home to taking out a credit card or starting their own
business. As InformationWeek revealed, “… the richest information came from the
free-form online discussions. Even without Schwab’s asking about debt, for
instance, the conversation revealed people’s worries and desire to eliminate debt”;
In 2007, O2 sponsored a group on Facebook to find the ‘UK’s favourite university’.
Within 11 days it had attracted 63,000 members, as students posted up pictures and
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comments about their university. The university with the most activity after 30 days
won a £50,000 O2-branded party on their campus;
According to Computerworld, Intel is using an online community model to gather
feedback for use in next-generation chip development projects;
The Humane Society ran a successful campaign based around a MySpace profile
for a seal that was at risk;
Fox News used Twitter to provide director’s commentary during the premiere of
‘Drive Show’;
MTV launched a virtual world based around its popular show, ‘Laguna Beach’;
Buckley’s, a Canadian cough medicine, has a presence on MySpace and encourages
consumers to submit the best picture of them consuming the product;
In 2007 Proctor & Gamble launched Tampax's first social networking campaign on
Takkle.com, a high school athletics social networking site, and asked cheerleaders
to submit videos of their best cheers;
Anheuser-Busch developed a photo-sharing campaign with 300,000-member social
networking site MingleNow, inviting users to share photos of themselves clinking
beer bottles when out.
Best practices Look beyond your own website – marketers have to follow their customers and with
70m active users on Facebook alone, that’s on social networks, in blogs, on
YouTube videos, in Second Life or in software applications;
Build trust – too much intrusion into what they perceive to be their private space
and users will be put off from interacting with a brand;
Listen and take on user feedback – it might just influence what products or services
an organization rolls out, or how it is advertised in the future. Remember in 2007
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when the pleas of thousands of people on Facebook resulted in Cadburys reviving
the Wispa chocolate bar?
But don’t always believe what you’re hearing – as in meetings in the offline world,
some voices will always dominate. Brands need to listen – loud voices might be
complaining about poor customer service on a blog, for example – but use other
research to back up any findings discovered online;
Tone of voice – this comes down to the age old maxim of ‘know your audience’. In
the social networking environment, where consumers have come to socialize, an
overt sales pitch should be avoided at all costs. Marketers should familiarize
themselves with target websites to understand its user base and tailor their message
accordingly;
Web 2.0 doesn’t have all the answers. As IAB PR and marketing manager, Amy
Kean, points out in ‘Moving beyond a 'web 2.0' and making sense of social media’:
“Web 2.0 is not a mythical beast that must be tamed, or exploited, in order to make
your brand a ‘real’ contender in a digital age. It’s not a magic bullet that will
automatically re-engage an audience of disheartened consumers and renew their
faith in the power of mass marketing”;
Be inventive – As the IAB’s Kean says: “The inescapable fact is that unless you
have a strong creative idea that suits your brand, the mode of delivery and level of
interactivity is pretty irrelevant”;
Give users an incentive to participate – marketers need to create a buzz around
their product or service to create interest and get users participating in their
community; in social media, it’s not a case of build it, then wait and see if anyone
turns up. O2’s competition was successful as it tied in with other marketing
initiatives around its favorite place tariff, had a huge incentive for members to sign
up and also injected a healthy dose of competition into the proceedings;
Sharing media (with and between consumers) is perhaps the easiest entry point into
Web 2.0. Social network advertising is perhaps the trickiest, but offers the best
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prospects for building relationships and generating positive word-of-mouth
recommendations.
Marketing on widgets
A widget is a bit of code that can be embedded into another website, it’s a type of
website within a website. Widgets work the same way, autonomous of their
environment – whether a desktop, web page, social network or personalised web page
(such as Netvibes). What’s more, they don’t require any technical knowledge to be
downloaded; users only have to click to install it.
Widgets are designed to be useful, informative and engaging. They can also be short-
term by nature (such as STA Travel’s trip countdown widget or Dell’s Christmas
promotional tool); users don’t mind how permanent they are so long as they serve a
purpose, and are easy to download and delete.
One might ask, why do widgets matter? In short, they make life easier by enabling
users to perform tasks – such as a flight search or stock price quote – quickly from the
destination they use most frequently (whether a customized iGoogle page or the
desktop, for example). They also pool information into one place, such as a Facebook
page, so users don’t have to navigate to different sites or visit several destinations to
get what they need.
For marketers, widgets represent a new advertising opportunity. Rather than simply
piggybacking onto an existing piece of content – be it a website, search engine or social
network page, for example – the widget becomes the piece of advertising, combining a
brand message with a useful function. Given their portability, widgets can become
viral, relying on users to transport a company’s marketing message.
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Alternatively, advertising can be run inside a widget, in the same way an ad might
appear on a web page or social network. Unlike other display advertising though, using
widgets exposes a brand to a potentially larger audience if the widget takes off virally.
Clearspring, an ad network for widgets, promises distribution to 25 social networks, for
example.
Organizations should bear in mind too that widgets could be a potentially useful tool
for their own website, incorporating third-party share charts into the investor relations
page, for example. More transactional widgets are also emerging that let users purchase
goods and services without leaving the site. Expect to see more of this type of
functionality incorporated as standard in websites soon.
Case study examples STA Travel has widgets for travellers that can be downloaded either to their
desktop, for Facebook, for iGoogle (a personalised version of the search engine) or
onto a user’s own website;
In support of its website www.YoursIsHere.com, which Dell launched in the run
up to Christmas 2007, Dell created a widget that users could download to their
Facebook or MySpace page to track their progress. The website enabled consumers
to select the Dell computer they wanted for Christmas, add a video of a celebrity
doing a sales pitch for the product then send it onto family and friends. The widget
let them track if anyone receiving the email then contributed to a PayPal account
set up for the occasion;
eBay To Go is a widget that users can download to share items they have found or
are bidding for online. At the time of writing, users could not transact through the
widget, but this functionality will surely come soon;
Honda created a widget to promote the 2008 Honda Civic Tour featuring videos,
news and more;
AMV BBDO created a ‘Get Some Nuts’ widget for Snickers, which featured Mr T
from the A-Team and let users play a game or ‘Get T’Look’;
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Virgin Mobile provided in-widget sponsorship of a Futurama widget.
Best practices The ad as a tool – As BusinessWeek points out in its ‘CEO Guide to Widgets’
“Right in that little box, without switching sites, users should be able to browse
products, customize orders, and eventually make a purchase”;
Make users want to engage and spread the content on – there are more than 14,000
widgets available for download on Facebook alone, so marketers should consider
what would make their widget stand out or what would make a good brand fit to
advertise with. In the Web 2.0 world of engagement and participation, content is
king, so advertisers need to support, not attempt to take over, user conversations
online;
Widgets that serve a purpose – expect to see some user fatigue with gimmicky
widgets that involve games, videos or quizzes. The widgets that users will return
again and again to are those that enable them to do something quickly and more
easily than they could elsewhere online;
Ease of use – the patience of users online can be measured in seconds; if a widget
can’t be downloaded or spread virally in a few clicks, users will go elsewhere;
Be aware of users’ security concerns – in January, FortiGuard, a security company,
sent out a warning about a Facebook widget, which appeared as a friend request
‘secret crush invitation’ (later changed to ‘my admirer’). Far from being a simple
bit of fun, the widget was created by Zango, a company known to have spyware;
Make widgets part of a wider campaign – don’t expect that with one ad-sponsored
widget or homegrown widget, users will come flocking. Viral marketing can be hit
and miss; what works is when a message is reinforced across multiple channels. So
widgets have a valuable role to play in the channel mix, but shouldn’t be the
channel;
Is your widget reaching the right demographic? Marketers should try to place their
viral widget campaign so it reaches the people they’re trying to reach;
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Look for a return on investment – estimates vary widely about how much return
they can deliver, so it’s worthwhile researching the market thoroughly first to
create a business case for rolling out a campaign.
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CHAPTER 7
Vendors to watch
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Chapter 7 Vendors to watch
Summary
Google’s business model is predominantly advertising based – 99% of revenue over the last few years has come from online advertising – and it has several Web 2.0 products and services, including Google Reader, Orkut, Blogger, Google Sites and YouTube.
Yahoo! increased revenue in 2007 to $6.9bn. However, year-on-year growth was only 8% (compare that to Google’s 54% increase) and advertising revenue from affiliate sites actually fell 5%, despite a buoyant online advertising market. Shareholders are now looking to see how the company will turn itself around and challenge Google.
In 2007, Yahoo! indicated it was moving into offering web-based office tools with the acquisition of Zimbra, a provider of email and collaboration software. Zimbra should help Yahoo!’s push into the enterprise – particularly in SMEs or cost-conscious organizations – because it is built on open source software.
For enterprises, Twitter offers the possibility of collaborating with one another quickly from the web or a mobile device.
Web 2.0 Goes to Work is the name of IBM’s Web 2.0 campaign to help enterprises adopt social media and Web 2.0 technologies inside their organization.
Microsoft’s Web 2.0 strategy revolves around its Office SharePoint server.
Intel has embraced Web 2.0 through a series of partnerships to create SuiteTwo, a business Internet suite.
As a networking company, it’s little surprise that Cisco’s approach to Web 2.0 is to combine collaboration with communications.
Unsurprisingly, a range of enterprise software start-ups have jumped into this space, with corporate tools based on social networks and other Web 2.0 technologies. What these start-ups have in expertise and innovation, however, they lack in scale and resources.
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Introduction
There are thousands of companies calling themselves ‘Web 2.0 companies’. In his
seminal essay on Web 2.0, Tim O’Reilly outlined what he saw as the core
competencies of Web 2.0 companies.
Table 7.12: Core traits of a Web 2.0 company Services, not packaged software, with cost-effective scalability Control over unique, hard-to-recreate data sources that get richer as more people use them Trusting users as co-developers Harnessing collective intelligence Leveraging the long tail through customer self-service
Software above the level of a single device Lightweight user interfaces, development models, AND business models
Source: Tim O’Reilly Business Insights Ltd
For the purposes of this report, we have confined our examination of companies
working in the space to those that offer some elements of Web 2.0 applicable to the
enterprise. For that reason, the report doesn’t include most of the Web 2.0 start-ups in
operation unless they have developed a tool or service for Enterprise 2.0.
Which Web 2.0 companies are important?
Internet companies
Background
Google has been one of the Internet’s most remarkable success stories. It was founded
in the mid-1990s by two Stanford University graduate students, Larry Page and Sergey
Brin, who were interested in finding a way of retrieving relevant search information
from the web. Initially their aim was to license the search technology and continue with
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their Phds, but David Filo, a friend and founder of Yahoo! persuaded them to grow the
business themselves.
Growth came quickly: by 2000, the business had moved to its current headquarters in
Mountain View, California, forged partnerships with Yahoo! and others, and
introduced AdWords, its auction-based, keyword-targeted advertising program. Other
key milestones for the company included:
Eric Schmidt became CEO in 2001;
Google’s commercial search offering was released in 2002;
In 2003 it bought Blogger and launched AdSense, its display advertising program;
Local search and Gmail followed in 2004, and the company went public;
In 2005, Google Video launched, as did Google Maps for North America, Google
Earth, Google Talk and Google Analytics;
A year later, AdWords was integrated with Google Analytics, Google signed a deal
with Fox Interactive Media to provide search and advertising to MySpace, Google
Checkout arrived, Google bought YouTube and finished the year with the launch of
Google Docs and Spreadsheets, a web-based word processing and spreadsheet
program, and the acquisition of JotSpot, a wiki platform;
In 2007, Google bought DoubleClick, partnered with Echostar and Astound Cable
on a TV ads trial, acquired Zenter giving it online slide presentation capabilities to
add to Google Docs and Spreadsheets, and began a move towards delivering a
universal search model.
Google stood for all that was modern and different about the Internet from its
unconventional approach to raising money on the stock markets down to its ‘Don’t be
evil’ corporate values. However, as it has grown into a billion-dollar company –
revenue in 2007 was $16.6bn – with a market cap of around $180bn, just over $14bn in
cash and 17,000 employees, some dissenting voices have started to criticize Google for
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turning into a monopoly and intruding on their privacy, such is the pervasiveness of
Google in a lot of people’s lives.
With nearly 70% share of the search market, Google’s critics have some justification
for their argument; its acquisition of DoubleClick could give it a headstart over rivals
in the display advertising market, for example. But Google has also engendered
incredible respect for the way it has entered markets and changed the rules of
engagement – it used to be Microsoft that companies feared would enter their sector;
now it’s Google. It has also taken steps to improve consumer privacy – making search
logs on its servers anonymous after 18 months, for example, and changing the cookie
expiration date to two years, rather than 2038.
There’s also a philanthropic side to Google – through Google.org, the Google
Foundation and the owners’ pledge to make Google carbon neutral by the end of 2007
– even if cringe-worthy, its owners claim to have set out to improve, not take over, the
world. And lets not forget that Google is also more effective than other search engines.
A study by Alan Rimm-Kaufman, a marketing consultant, as reported in the Economist,
found that Google's ads “converted” more often into actual sales, which tended to be
larger than those originating from Yahoo! or Microsoft.
Web 2.0 credentials Google’s business model is predominantly advertising based (99% of revenue over
the last few years has come from online advertising);
Google Reader is its free news aggregator service for RSS feeds. Users can receive
updates from multiple websites and share the content with others;
Orkut is Google’s social network, enabling users to create, join and manage their
own online communities, personal mailboxes, photos and profile;
Blogger is a web-based publishing tool that Google acquired and which it uses
internally behind the corporate firewall to track meetings, share information and
code. In 2006, it made it more suitable for enterprises with new privacy features –
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so people posting blogs can determine who can read the blog – and allowed
individual feeds for comments to each separate post;
Google doesn’t wait to release a definitive version of its services, instead releasing
them in Beta and providing continual improvements and updates;
Google is a predominantly web-based business delivering services, rather than out-
of-the-box software. For enterprises – particularly small and medium-sized
businesses –Google Docs and Spreadsheets provides a free way of enabling users to
create, save, share and edit documents wherever they can find an Internet
connection. This also makes use of the substantial investment Google has made in
data centers and hardware to provide this ‘cloud computing’ method of application
delivery (which applies to its any new service it might want to launch too). This
model also means that even if a service receives unexpected demand, processing
power is automatically redirected from another of the data centers to ensure
consistent service uptime and accessibility;
Google’s acquisition of YouTube brought with it user-generated content (Google
Video did the same but YouTube saw far greater growth) and Google has said it
wants to build on the community and social networking aspects of video;
Google’s acquisition of JotSpot provided the basis for Google Sites, a wiki-based
tool for creating web pages that can be edited, uploaded with attachments, import
information from other Google applications (like YouTube or Google Docs) and
shared amongst designated users (the publisher can control who has access to the
site).
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Yahoo!
It’s fair to say that 2008 has not been the pinnacle of Yahoo!’s 16-year history. The
company was founded by another two Stanford University graduates, David Filo and
Jerry Yang, in February 1994. They began by creating a portal where users could
categorize the Internet. Today, Yahoo! is a global company with communications,
media and ecommerce services in its portfolio.
Key milestones for the company include:
1995 – begins serving ads;
1996 – launches personalized version of Yahoo!, goes public and launches Yahoo!
News;
1997 – launches Yahoo! Chat and Yahoo! Mail;
1998 – introduces Yahoo! Calendar and Yahoo! Address Book;
1999 – acquires Geocities (considered the first social network) and broadcast.com,
and launches Yahoo! Messenger;
2000 – launches Yahoo! Photos;
2001 – launches Yahoo! Groups;
2002 – introduces Yahoo! Maps and acquires Inktomi;
2003 – introduces first music subscription service and new Yahoo! search, and
acquires Overture;
2004 – acquires Kelkoo;
2005 – launches Yahoo! 360 (its social network, which has since closed), acquires
Flickr and launches Yahoo! Widgets;
2006 – launches Yahoo Video and new search advertising platform;
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2007 – delivers range of mobile services, acquires RightMedia, replaces CEO Terry
Semel with Jerry Yang and launches ‘SmartAds’.
So far this year, Yahoo! has built up its mobile portfolio and, more importantly,
defended itself from a Microsoft bid – the two companies are now deciding whether a
combination of their advertising businesses might make it easier to fight Google.
Despite a lot of negative press about its performance, Yahoo! did increase revenue in
2007 to $6.9bn. However, year-on-year growth was only 8% (compare that to Google’s
54% increase) and advertising revenue from affiliate sites actually fell 5%, despite a
buoyant online advertising market. Shareholders are now looking to see how the
company will turn itself around and challenge Google.
Web 2.0 credentials Yahoo! may have recognized the importance of widgets early, but these can only be
downloaded to a user’s desktop at present, rather than a personalized web page or
social network;
Yahoo!’s purchases of Flickr and Del.icio.us, a social bookmarking site, indicate
that it recognised the future was going to be based on user generated content;
in 2007, Yahoo! indicated it was moving into offering web-based office tools with
the acquisition of Zimbra, a provider of email and collaboration software. Zimbra
should help Yahoo!’s push into the enterprise – particularly in SMEs or cost-
conscious organizations – because it is built on open source software. Zimbra’s
technology also lets users create mash-ups (‘Zimlets’) connecting web services to
email;
Pipes is a free online, hosted service from Yahoo! that lets users create mash-ups
from different data feeds without having to write a line of code. When the service
launched, Yahoo! was seen as scoring a first over Internet rivals; the real test for
the service will come in user take-up. For enterprises, Pipes offers a way of creating
new web-based applications on the fly to solve problems around collaboration or
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integrate data from existing applications. It is also being used with some existing
enterprise applications, such as Oracle Application Express.
Others
AOL
Formerly known as America Online, AOL has been transitioning in recent years from
an Internet Service Provider to a content and advertising-driven business, following
recent acquisitions of Advertising.com, Tacoda and Buy.at. These acquisitions have
been rolled into a new entity called Platform A, which AOL hopes to turn into the
world’s largest advertising network.
More recently, AOL acquired Bebo, in March 2008. Speaking at the announcement of
the acquisition, Randy Falco, Chairman and CEO of AOL, said: “What drew us to
Bebo was its substantial and fast-growing worldwide user-base, its vision of a truly
social web, and the monetization opportunities that leverage Platform-A across our
combined global audience. This positions us to offer advertisers even greater reach and
marketers significant insights into the desires and needs of consumers.” For advertisers,
the deal gives them access to a network of 80 million unique users (a combination of
Bebo’s members with AOL’s online messaging system, AIM, and ICQ network users).
Other opportunities come through the creation of widgets for the AIM nework.
Twitter, the microblogging site that asks users to answer the question: ‘what are you
doing right now’, is currently the toast of Silicon Valley after raising $15m at the end
of May 2008 in its latest round of funding.
For enterprises, Twitter offers the possibility of collaborating with one another quickly
from the web or a mobile device. One organization is already using it as another
channel to communicate information to its employees – alerting them to new HR
policies, for example. Twitter is also being used as a news feed by the UK government,
the BBC, Guardian and public safety organizations such as the LA Fire Department.
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However, for it to become a regular broadcast channel for enterprises, it needs to tackle
some of its performance issues. With no limits currently applied to the number of
people that can follow a user, the frequency with which messages are sent and posts are
updated has put a tremendous strain on its infrastructure.
eBay
Online auction company, eBay, is an Internet success story, selling nearly $60bn of
goods on its trading platforms in 2007 and generating $7.67bn in revenue. For
enterprises, the main attraction of eBay comes from its acquisition in 2005 of Skype, an
Internet communications service, that lets people make free voice and video calls
online. Skype has been building up its enterprise capabilities – giving IT managers
much greater control over the behaviour of Skype in a corporate network, for example
– and could offer a very effective form of real-time collaboration for SMEs in
particular.
Social networks: Facebook, MySpace, Bebo
For enterprises, social networks offer the opportunity to create virtual communities
amongst their workforce and also to advertise their products and services, according to
their target market. The advertising opportunities are varied (see Chapter 6) but social
networks can also be a useful collaboration tool, enabling the broadcast of information
to a large group of people, fostering a sense of shared identity or targeting hard-to-
reach groups (such as graduate trainees while they finish their studying), for example.
Challenges in advertising lie in targeting audiences effectively, while in collaboration
they are focused on maintaining content on the social networks and keeping up to date
with trends in this area (on which social network are most of its employee based, for
example?) We expect to see more companies making use of their own corporate social
network – a bit like a 21st-century version of the company intranet – created from social
network tools, such as Ning or enterprise equivalents from IBM or Microsoft in the
future.
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The enterprise IT heavyweights
With the buzz surrounding Web 2.0 it was inevitable that the enterprise IT
heavyweights – IBM, Microsoft, Oracle and Sun to name a few – would make a move
into the market at some point. The advantages they have are size, huge customer bases
and the genesis of many Web 2.0 technologies, such as Web 1.0 collaboration
platforms. The challenges they face are adapting to a new way of delivering software
and being able to innovate as much as start-ups in this area. 2.0. Some fundamental
differences in the delivery of Web 2.0 services still remain too – products from the
enterprise software vendors, for example, aren’t in beta version, but come tested and
ready to ship. The next section will look at the approach of each vendor, their products
and what they might do next.
IBM
Web 2.0 Goes to Work is the name of IBM’s Web 2.0 campaign to help enterprises
adopt social media and Web 2.0 technologies inside their organization. It is based on
three components – Economic Impact, Community Value and Enabling Technologies –
and technologies that fall under these banners include Lotus Connections, Lotus
QuickR and its WebSphere portfolio.
Connections is essentially social networking software for companies with profiles,
communities, blogs, widgets and bookmark features. Quickr is a team-based
collaboration tool that enables content sharing and editing. It is also designed to
include blogs, wikis and templates for pre-built ‘team places’ where users can share
projects.
New additions to WebSphere include Web 2.0 features in Websphere Commerce that
enable customers to filter shopping attributes such as price, and drag-and-drop
navigation to make it easier to compare products. In February 2007, IBM partnered
with Google to create the IBM Portlet for Google Gadget, which lets employees
customize their own web pages using Google Gadgets, these are applications created
by users such as maps, translators and YouTube video players.
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Organizations can also create mashups using IBM Mashup Center – a web-based tool
that enables non-technical users to easily create enterprise mashups and include out-of-
the-box widgets suitable for businesses – and WebSphere sMash, for the technical
developer. According to IBM: “An early Mashup Center customer is already using
these capabilities to improve their sales force effectiveness. The company is combining
core enterprise ERP and CRM data with a line of business application to show accounts
by region, sales history, customer service incidents and projected sales pipeline by
product line. Sales reps can then upload their own planned travel and spreadsheets of
account forecasts into IBM Mashup Center, which generates feeds to allow them to
plan their most effective customer engagement strategy with better insight about the
account including external Web-based information on the customer's business
environment and even competitor activity.”
Microsoft
Microsoft’s Web 2.0 strategy revolves around its Office SharePoint server. In 2007, it
enhanced its SharePoint server with Web 2.0 collaboration and communication
features, such as templates for wikis and blogs, a MySite portal, social networking
features and enterprise search. SharePoint integrates with Office Communicator, a
unified communications client, as well as other Microsoft applications such as
Exchange and Office.
Oracle
The internal driver behind Oracle’s foray into Web 2.0 is Oracle AppsLab, “a think
tank developed to drive adoption of new web patterns and technologies across Oracle’s
business and products.” Oracle has also developed several Web 2.0 tools for its own
users: The Official Oracle Wiki is based on WetPaint’s wiki platform and Oracle Mix
is a social networking site for customers. Oracle also has a social network for
employees called Connect. According to GigaOM, which interviewed Jake Kuramoto,
Oracle’s product strategy director working on Connect and Mix, “Our plans are to
build momentum with Mix and eventually join the two systems, longer term. This has
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been our vision from the beginning, i.e. a network of work contacts seamlessly joined
to collaborate.”
For enterprises, Oracle offers its WebCenter suite – part of the Fusion Middleware
product family – which helps developers incorporate Web 2.0 tools such as blogs,
wikis, RSS feeds and mash-ups with Oracle’s business applications. The benefit, says
Oracle, is that it means users don’t have to have several desktop and web-based
applications open, but can access everything they need through one interface. It also
has the Oracle Collaboration Suite, offering collaboration and unified messaging tools.
Intel
Intel has embraced Web 2.0 through a series of partnerships to create SuiteTwo, a
business Internet suite. This comprises wikis from Socialtext to “build a Wikipedia
Inside”; the NewsGator RSS aggregator to pool content feeds into one place; RSS from
SimpleFeed to syndicate different content sources; Six Apart’s blogging tool, Movable
Type; and SpikeSource, an integration platform that enables all the applications to
work together. All services have been integrated with a single sign-on and rich user
interface, and Intel will build on it in the future with podcasting, business networking,
mobility and other features.
Compared to other enterprise IT companies, Intel displays a refreshing approach to
Web 2.0, allowing internal bloggers to post their opinions on Web 2.0, even if it
doesn’t seem entirely ‘on message’. Here’s an extract from Jeff Moriarty’s blog on
November 14, 2006, just after Intel had launched SuiteTwo. He was formerly a social
media advocate for Intel IT before moving to the post of community manager for
Intel’s mobile developer community:
“Intel’s culture is still one of separated groups and deep structure. We could be an
immensely more agile company if we had more open, dynamic dialogues, both
internally and between us and our customers. Yet we struggle with the most basic
elements. Our internal blogs get little use, and the few managers that do “blog” mostly
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just have their assistants put up press-releases once a month. (Moriarty is one of the
exceptions). Not much discussion there. We have an internal wiki that is doing well,
and just celebrated its 1st Birthday, but is grossly underutilised for a company like
Intel. Even these external blogs arrived only after fierce battles and crazy amounts of
approvals and red tape. The people inside Intel that see the value of these tools and
free-flowing information are pushing hard, and change is starting to come, but I can’t
help but think how much further along we would be if people weren’t expecting
glorious shining lights and fresh minty breath just by being in the same room as this
stuff. I laughed out loud when we announced our SuiteTwo Web 2.0 package. We’re
Web 2.0, are we cool yet?”
His honesty and open attitude towards Web 2.0 – not to mention the problems large
companies face in trying to open themselves up or enable greater information sharing –
should be familiar to many of Intel’s customers. And despite Moriarty’s disgust for the
hype surrounding Web 2.0, he recognizes that it has a valuable role to play in the
enterprise, even in the way he works and collaborates with colleagues. Writing a
couple of months later in early 2007, he wrote in his blog:
“Yet inside Intel I see our blogs connecting people in new ways. In the past week I’ve
talked about enterprise search with someone in Poland, cultural differences with
someone in Russia, and corporate ethics with someone in Penang. I didn’t know any of
these people the week before. I’m using our internal wiki to collaborate on RSS
deployment with people on three different continents and across six time zones. There
are just some great tools and ideas here if you can get past all the sugary frosting.”
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Cisco
As a networking company, it is little surprise that Cisco’s approach to Web 2.0 is to
combine collaboration with communications, whether video, Telepresence (its high-
definition videoconferencing system) and other unified communications technologies.
Its sales approach will also resonate with large enterprises, focusing on issues of
scalability, reliability and security.
Cisco is testing out new Web 2.0 ways of working inside its own organization first
through what it calls ‘the Communications Center of Excellence’. It promises that any
best practices developed here will be shared with customers. Currently in Beta testing
is Directory 3.0 – the next iteration of Cisco’s internal employee directory, which lets
employees look up experts in different areas more easily than they can now and how
they can be reached through one one click – and WebEx Connect (from Cisco’s
acquisition of WebEx in March 2007), its solution for shared workspaces and business
collaboration, which pools collaborative applications – such as chat, online meetings
and document management – into one interface. Other applications being tested include
a video wiki, C-Vision, with rating functionality; a wiki for innovation called Idea
Zone or I-Zone and a finance network. If a lot of these tools seem to be wiki-based,
that’s because wikis have proven to be one of the most popular, business-relevant Web
2.0 tools so far within Cisco, with new wiki pages expected to top 300,000 in the
organization this year.
We can also expect to see some social networking capabilities for enterprises from
Cisco soon, following its acquisitions in early February of Five Across, a white label
provider of social networking technology, and Tribe, a consumer social network.
Newcomers
Unsurprisingly, a range of enterprise software start-ups have jumped into this space
with corporate tools based on social networks and other Web 2.0 technologies.
Enterprise software provider, Worklight, for example, claims to bring “a secure and
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highly personalized ‘Web 2.0’ computing experience to the enterprise” by delivering
“Web 2.0-style” access to corporate data stored behind the firewall. Likewise,
Awareness Networks and Tacit deliver Web 2.0 software suites, with Awareness
focusing on communities and Tacit specializing in collaboration through expertise
location software. ConnectBeam, meanwhile, is a hardware option, offering what it
calls a “social computing appliance.”
VisiblePath – acquired in January by Hoovers and powering its professional social
network, Hoovers Connect – judges a user’s social network based on his or her email
correspondence and meetings, and creates a type of social graph for organizations
based on its users’ connections. Meanwhile, Community Server provides the back-end
infrastructure for corporate social networks at National Geographic and Mazda MX-5
to name a few. Other social media tools for enterprises come from KickApps, Onesite
(a white label social network, which bought Social Platform in February 2008,
indicating the start of consolidation in this area), Leverage Software and Pringo
Networks.
What these start-ups have in expertise and innovation, however, they lack in scale and
resources. Many of their applications still rely on the platform infrastructure provided
by enterprise IT heavyweights, such as IBM and Microsoft. As a result, expect to see
further consolidation in this space as the enterprise IT companies build out their
offerings and the credit crunch tightens.
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The enterprise approach to buying Web 2.0 applications and services
Enterprises, particularly those with thousands of employees, are understandably
cautious about introducing Web 2.0 technologies into the enterprise more commonly
associated with the consumer space. This is why the entrance of the enterprise IT
heavyweights is welcome – they bring some familiarity and reassurance to
organizations that might already have their IT systems built on their technology. A
survey from Forrester Research found that 71% of large organizations prefer to buy
from incumbent vendors (see Table 7.13). After all, they want Web 2.0 technologies to
integrate with the systems already in place; they also want the support and maintenance
they are used to receiving.
Table 7.13: Would you be more interested in Web 2.0 technologies if offered by a major incumbent vendor?
Percentage of More interested Doesn’t matter Less interested Don’t know 119 US CIOs 71% 26% 3% 1%
Source: Forrester Research Business Insights Ltd
Table 7.14: Would you be more interested in Web 2.0 technologies if offered as a suite?
Percentage of More interested Doesn’t matter Less interested Don’t know 119 US CIOs 74% 22% 3% 1%
Source: Forrester Research Business Insights Ltd
Organizations should be wary, however, of buying an ‘enterprise 2.0’ suite; Web 2.0
technologies aren’t designed to come out-of-the-box and be controlled in the manner of
previous software platforms. Web 2.0 tools from the likes of SocialText, Tacit or
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ConnectBeam may provide a useful enhancement to existing collaboration software
packages and tools, but at essence they herald a new way of working based on
collective wisdom, continual improvements and tactical problem solving. The pace of
development associated with Web 2.0 also means that development times are shorter,
so software packages claiming to offer the latest technology are behind the trend before
they’ve even hit the shelf. That’s why the model of software delivered as a service is so
effective for these technologies.
This Web 2.0 view of the world might not fit in with the IT department’s planned and
ordered view of a company’s IT infrastucture, but it is the way users increasingly want
to use technology. IT should be the enabler, rather than the straitjacket that makes users
conform to a prescribed way of doing things.
Sales strategies for success Enterprises are looking for a return on investment (ROI) – even if many of the Web
2.0 tools have ‘softer’ benefits, such as improving employee productivity. But,
where possible, IT managers should relate the business case to hard figures e.g.
reduced costs associated with product development, costs saved from collaborating
virtually through wikis than by flying overseas and so on. With advertising, the
business case can be more easily made using web analytics and other tracking tools
that show the effectiveness of different online advertising campaigns;
Provide case study examples to show how Web 2.0 can address business problems;
ask for customer testimonials and consider Web 2.0 ways of allowing your own
customers to communicate with one another through an informal social network or
wiki-based FAQs;
Consider that buyers will feel differently about these Web 2.0 tools. In ‘Whose
space? Differences among users and non-users of social network sites’ published in
the Journal of Computer-Mediated Communication, the author found that:
“Students with varying backgrounds select into different services, potentially
limiting the extent to which they will interact with a diverse set of users on those
services. Additionally, social context of use and experiences with the medium have
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predictive power when it comes to explaining both specific and general levels of
SNS adoption, suggesting that students who have more resources are spending
more time on these sites and have more opportunities to benefit from them.”
Although the findings relate to the consumer space, vendors should be aware this
could influence how IT managers or users in an organization take up Web 2.0
technologies;
Consulting and training of users is required – not just in how to use Web 2.0
technologies (if not doing so already outside work), but how Web 2.0 technologies
can work for them. A report last year from The Pew Internet & American Life
Project, found that 49% of Americans fell into the category of being technology
laggards or luddites, with few (or no) gadgets and either inexperienced or
indifferent attitudes towards them. Like the study above, the Pew project shows the
dangers in generalizing about technology usage and take-up, and the importance of
educating users about the benefits to overcome concerns with technology;
Avoid selling an ‘enterprise-wide’ solution – most Web 2.0 applications work best
amongst teams of employees or groups set up to manage a particular project. There
are exceptions – Twitter alerts could be sent to all employees, for example, or a
social network could deliver company-wide updates – but most successful Web 2.0
projects so far have started at the grass roots level and spread through word of
mouth and the sharing of best practices. The technology may be applied across the
enterprise, but how groups adopt it should be up to their departmental or group’s
needs. Should CIOs not listen, expect to see users bringing the consumer
technologies they’re familiar with, into the enterprise anyway.
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CHAPTER 8
Where next: Web 3.0
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Chapter 8 Where next: Web 3.0
Summary
Mobility might have been cited as the next big thing for the last five to ten years, but new developments in the sector mean that the humble mobile handset and anytime communications could drive the next wave of innovation in the enterprise.
In the semantic web, computers can extract deeper contextual meaning from information on a document, web page or other online content. For users, it will make the experience of finding information and interacting on the web far more intuitive.
It may not happen in the next evolution of the Internet, but virtual reality will inevitably play a bigger role in the future.
Barriers to Web 3.0 include limited processing power and bandwidth, user reticence to new technology, incumbent vendors blocking market developments and organizations’ failure to embrace Web 2.0 yet.
Welcome to Web 3.0
To be writing about Web 3.0 before most organizations have even grasped Web 2.0
technologies might seem a little overzealous or even to be encouraging hype in this
area. But already developers, engineers and CIOs are looking to what might be the next
big thing. Table 8.15 reveals findings from a Pew Internet & American Life Project
study into what users expect to be doing with technology in 2020. Some of it might
sound familiar to readers already – virtual reality addiction, for example – while some
scenarios are too frightening to comprehend. As well as revealing what the future
might look like, Table 8.15 is interesting for highlighting some of the concerns people
have about technology use in the future.
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Table 8.15: A view of the future Internet-driven world in 2020 Exact prediction language, presented in the order in which the Agree Dis- No scenarios were posed in the survey agree response A global, low-cost network thrives: By 2020, worldwide network 56% 43% 1% interoperability will be perfected, allowing smooth data flow, authentication and billing; mobile wireless communications will be available to anyone anywhere on the globe at an extremely low cost. English displaces other languages: In 2020, networked 42% 47% 1% communications have leveled the world into one big political, social and economic space in which people everywhere can meet and have verbal and visual exchanges regularly, face-to-face, over the Internet. English will be so indispensable in communicating that it displaces some languages. Autonomous technology is a problem: By 2020, intelligent agents 42% 54% 4% and distributed control will cut direct human input so completely out of some key activities such as surveillance, security and tracking systems that technology beyond our control will generate dangers and dependencies that will not be recognized until it is impossible to reverse them. We will be on a “J-curve” of continued acceleration of change. Transparency builds a better world, even at the expense of 46% 49% 5% privacy: As sensing, storage and communication technologies get cheaper and better,individuals' public and private lives will become increasingly “transparent”globally. Everything will be more visible to everyone, with good and bad results. Looking at the big picture - at all of the lives affected on the planet in every way possible – this will make the world a better place by the year 2020. The benefits will outweigh the costs. Virtual reality is a drain for some: By the year 2020, virtual 56% 39% 5% reality on the Internet will come to allow more productivity from most people in technologically-savvy communities than working in the “real world.” But the attractive nature of virtual- reality worlds will also lead to serious addiction problems for many, as we lose people to alternate realities. The Internet opens worldwide access to success: In the 52% 44% 5% bestseller The World is Flat, Thomas Friedman writes that the latest world revolution is found in the fact that the power of the Internet makes it possible for individuals to collaborate and compete globally. By 2020, this free flow of information will completely blur current national boundaries as they are replaced by city-states, corporation-based cultural groupings and/or other geographically diverse and reconfigured human organizations tied together by global networks. Some Luddites/Refuseniks will commit terror acts: By 2020, the 58% 35% 7% People left behind (many by their own choice) by accelerating information and communications technologies will form a new cultural group oftechnology refuseniks who self-segregate from “modern” society. Some will live mostly “off the grid” simply to seek peace and a cure for information overload while others will commit acts of terror or violence in protest against technology. Results are based on a non-random Web-based survey of 742 Internet users recruited via email
Source: Pew Internet & American Life Project Survey, Nov. 30, 2005-April 4, 2006. Business Insights Ltd
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The rest of this chapter will be spent exploring some of the possible developments in
‘Web 3.0.’
Mobile
Mobility might have been cited as the next big thing for the last five to ten years, but
new developments in the sector mean that the humble mobile handset and anytime
communications could drive the next wave of innovation in the enterprise.
For a start, devices come with more built in functionality, blurring the distinction
between mobile phone and computer. Second, the mobile Internet experience is
steadily improving, aided by new handsets, such as the iPhone, which provide a
familiar interface for accessing the Internet via the mobile phone.
The mobile advertising market is still nascent, used mostly by vendors selling products
related to entertainment or the handset itself, such as ringtones. But the possibilities
offered by GPS and mapping functionality integrated in handsets, such as the Nokia
N95 8GB, could herald a new wave of relevant advertising when combined with
targeted advertising messages. UK mobile operator, Blyk, which launched in 2007,
offers a select amount of text messages and call minutes free in return for users
receiving six text ads a month. Users have to be between 16 and 24 years old and give
information on their hobbies and habits when signing up, enabling marketers to reach
this hard-to-reach audience with tailored advertising messages. When one takes into
account the mobile advertising opportunity – there are more mobile phones in the
world than laptops, for instance – it’s easy to see why marketers are so excited about
this up and coming channel.
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The semantic web
The semantic web may not look much different to today’s Internet, but it will be far
more intuitive than today’s version. It is the vision of the web espoused by World Wide
Web inventor Tim Berners Lee. In the semantic web, computers can extract deeper
contextual meaning from information on a document, web page or other online content;
with the current web, humans need to join the dots. But humans won’t be needed to
provide the context with the semantic web; computers will be intelligent enough to do
it automatically – or rather, the information being searched will be tagged in a way that
gives it richer meaning. For users, it will make the experience of finding information
and interacting on the web far more intuitive. Computerworld explains how this might
work in practice:
“With a robust semantic Web, for instance, one might have an application (an ‘agent’)
that can understand not only how to search for information on bobbins, but also how to
parse the information to see that per-bobbin prices have dropped by 10% in Southeast
Asia this week – 7% in the past 24 hours alone. If you're a person who cares about your
bobbins, you'd probably have your agent configured to alert you that there's a situation
in progress. A good agent might even be able to connect the dots between the bobbin
crisis and an editorial in yesterday's Bangkok Post advocating a bobbin embargo, or the
release of a revolutionary Bobbin 2.0 that'll make all current bobbins obsolete.”
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Second Life in real life?
It may not happen in the next evolution of the Internet, but virtual reality will
inevitably play a bigger role in the future. In one sense, virtual reality is a next step on
from the social media, participatory world of Web 2.0 – providing a face for the
predominantly text-based interactions so far. The popularity of Second Life and online,
multiplayer virtual reality games, such as World of Warcraft, suggest user interest has
already been piqued.
Some organizations are already using Second Life to test job candidates’ abilities in
role play scenarios. Furthermore, some of the tools available today, such as Cisco
Telepresence, which bring geographically dispersed groups together through advanced
videoconferencing technologies, provide a precursor to the types of virtual meetings
organizations might be hosting on a regular basis in the future.
Barriers to Web 3.0
Computer and bandwidth limitations
The processing power required for computers to support numerous virtual worlds or
dig deeper into the Internet isn’t available yet. Also, these Web 3.0 services could
seriously slow down Internet connections. With concerns already being raised about
bandwidth-intensive services (see chapter 2), it’s not just the computers but also the
network infrastructure that will need to be significantly more robust before Web 3.0
services can happen.
User reticence
Remember the 49% of American Luddites highlighted in the Pew & American Life
Internet Project survey in the previous chapter? They could be the biggest barrier to the
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development of richer Internet interactions and new technologies if their wariness or
lack of understanding about technology is symptomatic of a larger global group.
Bear in mind too that some users – and they are a very vocal group – are also extremely
worried about their privacy online. They have cause for concern: identity theft is
becoming a bigger problem, with many people blasé about posting information about
themselves, their families and their company on social networks, blogs and other Web
2.0 sites. The trend towards cloud computing, where data and applications are stored
virtually on someone else’s servers, brings with it some privacy fears about who has
control and access to this information. Consequently, vendors will have to work hard to
reassure enterprises about such concerns and demonstrate the security and reliability
measures they have in place.
Vendor delay
Market incumbents often provide one of the biggest barriers to enterprise adoption of
new technologies and behaviors. In the UK, for example, it’s well near impossible to
run mobile advertising campaigns based on a user’s location. This is partly because it is
too expensive to do so at present, but also, crucially, because the mobile network
operators have been very slow to make it possible. Most are still mulling over how best
to make money through mobile advertising. In addition, although the operators hold
details on every customer’s location (based on the address they give when first signing
a contract), most have yet to get customers’ permission to use their data for the
purposes of mobile marketing.
Embracing Web 2.0
Before even considering the next phase of the Internet or Web 3.0, the majority of
enterprises need to first grasp the concept and opportunities offered by Web 2.0. As
this report has revealed, there is still considerable work to be done in this space and
organizations need the support and assistance of vendors to keep apace with
innovation.
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Index
AdSense, 34, 126
Advertising.com, 131
AdWords, 126
AJAX, 36, 60, 77
Amazon, 23, 34, 35
AOL, 69, 71, 131
Apple, 70
AT&T, 41, 42
Awareness Networks, 138
Beacon, 73, 78, 113
Bebo, 27, 29, 32, 37, 71, 76, 78, 96, 112, 114, 116, 131, 132
Benchmark Capital, 70, 71
Blog, 21, 56
Blogger, 17, 30, 124, 126, 127
Blyk, 146
BT, 41, 42
Buy.at, 131
Cisco, 17, 41, 96, 124, 137, 148
Clearspring, 120
Comcast, 42, 72
Community Server, 138
ConnectBeam, 138, 140
Del.icio.us, 22, 32, 101, 130
Digg, 22, 32, 34, 76
Doctors.net.uk, 54
DoubleClick, 34, 126, 127
eBay, 33, 38, 55, 70, 71, 120, 132
Facebook, 27, 29, 30, 32, 33, 41, 56, 61, 69, 72, 73, 74, 75, 76, 78, 79, 80, 96, 97, 112, 113, 114, 115, 116, 117, 118, 119, 120, 121, 132
Flickr, 14, 23, 32, 34, 41, 53, 68, 69, 129, 130
Friends Reunited, 29, 74, 76, 114
Geocities, 33, 129
Gmail, 65, 126
Google, 14, 17, 22, 29, 34, 36, 38, 65, 68, 69, 71, 73, 74, 75, 77, 78, 80, 114, 124, 125, 126, 127, 128, 130, 133
IBM, 17, 21, 37, 38, 61, 62, 89, 124, 132, 133, 134, 138
iLike, 115
Instant Messenger, 37, 66
iPod, 29
iTunes, 79
JotSpot, 126, 128
Juniper Networks, 41
Kate Modern, 37, 116
KickApps, 138
Kiva, 55
Leverage Software, 138
LinkedIn, 60, 65, 76, 97, 112
Mahalo, 34
Mash-up, 22
microblogging, 15, 84, 85, 99, 131
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MicroPlace, 55
Microsoft, 17, 21, 38, 61, 62, 72, 75, 89, 115, 124, 127, 130, 132, 133, 134, 138
MingleNow, 117
MySpace, 27, 29, 32, 60, 69, 71, 73, 74, 75, 76, 77, 96, 112, 114, 117, 120, 126, 132
Netscape, 76
Netvibes, 76, 119
NewsGator, 135
Ning, 76, 132
Onesite, 138
OpenSocial, 114
Oracle, 61, 131, 133, 134, 135
Orkut, 17, 114, 124, 127
Plaxo, 72, 114
Podcast, 22
Pringo Networks, 138
Real, 69
RightMedia, 130
RockYou, 69, 115
RSS, 15, 22, 33, 36, 49, 50, 51, 53, 54, 77, 84, 86, 101, 102, 127, 135, 136
Second Life, 56, 100, 117, 148
SimpleFeed, 135
Six Apart, 135
Skype, 29, 30, 41, 66, 71, 76, 79, 132
Slide, 69, 79, 115
Social network, 22, 32, 96, 98, 115, 118, 132
Socialtext, 135
SpikeSource, 135
StumbleUpon, 22, 32, 101
Sun, 38, 133
Tacit, 138, 139
Tacoda, 131
Tag cloud, 102
Tagging, 22, 101
Technorati, 54
TripAdvisor, 33, 36
Twitter, 15, 17, 22, 27, 33, 52, 53, 84, 85, 99, 100, 117, 124, 131, 141
UnLtdWorld, 97
User generated content, 23
Verizon, 41, 42
Virgin Media, 42
VisiblePath, 138
WebEx, 137
Widget, 24
Wiki, 24, 93, 134
Wikia Search, 34
Wikileaks, 43
Wikipedia, 24, 33, 34, 69, 90, 93, 135
Worklight, 137
Yahoo!, 17, 27, 38, 70, 72, 124, 126, 127, 129, 130
YouTube, 14, 17, 29, 33, 52, 53, 54, 68, 69, 71, 75, 77, 80, 117, 124, 126, 128, 133
Zenter, 126
Zimbra, 17, 124, 130
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