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The Internet grows up: What Web 2.0 means to business

When a big software company releases a new product it often comes with the now ubiquitous "version" number: 1.0, 2.0, etc. In the past few years, a second version of the Web has emerged with the moniker Web 2.0. Not a single technology or product, Web 2.0 is a term meant to encompass many technologies and signifies that the way we use the Internet is evolving. W. P. Carey School professor of supply chain management Kevin Dooley and colleague Raghu Santanam, a professor of information systems, say that the new-and-improved web has very real implications for how we interact with and profit from the web.

2007-05-09

When a big software company releases a new product it often comes with the now ubiquitous "version" number: 1.0, 2.0, etc. When the World Wide Web started in 1990, no one attached a "1.0" to the end of the nebulous network to show that it was at the beginning of its lifecycle. But in the past few years, a second version of the Web has emerged with the moniker Web 2.0. O'Reilly Media is credited with coining the term in 2004.

But is Web 2.0 just another catch phrase? The web's new name suggests that the online universe is evolving, and experts at the W. P. Carey School of Business say that Web 2.0 is much more than a buzz word. Supply chain management Professor Kevin Dooley and colleague Raghu Santanam, a professor of information systems, say that the new-and-improved web has very real implications for how we interact with and profit from the web.

So why no press conference?

If Web 2.0 is the latest version, why wasn't there a marketing roll out? "What we're missing is some critical event that we can point to and say 'Here's where Web 2.0 was born!'" says Dooley.

Part of the reason is that oversight for the World Wide Web falls to a number of boards and organizations who set the technical standards. And the very fact that the Web is a joint venture — a network of independently created content — means that no single organization could take the lead on a marketing campaign.

But that's not the only reason it's hard to fix a launch date. 'Web 2.0' is misleading in that it implies that the whole of the web has changed, the way a 2.0 version of a software package replaces its 1.0 predecessor. But that's not the case with Web 2.0. The web, with billions of web pages and millions of owners, is and probably will always be a mix of old and new online.

Instead, Web 2.0 refers to the Web's usability and the technologies behind it. This so-called new version is defined by blogs, social networking sites (like MySpace), wikis (like Wikipedia) and RSS feeds (delivery options offered by many news organizations). In contrast to Web 1.0, where users were largely restricted to simply reading web pages, Web 2.0 makes for interaction. Consider this metaphor: instead of just reading a book, the reader is helping to write it.

My company doesn't need 2.0 right?

Some business leaders might be tempted to think that 2.0 won't affect their companies — or most other businesses. Indeed, Forrester Research, Inc. in March 2007 polled 119 CIOs at firms with 500 or more employees and found that a lack of current need stopped them from Web 2.0 adoption 47 percent of the time. A little more than half of these CIOs were most likely to view social networking and blogs as unnecessary.

It may have been difficult for them to imagine any utility in swapping celebrity gossip with teenagers, and while they might look something up on Wikipedia, they had no plan to incorporate wikis into their business plans. Managers might think that their company's web site could be jazzed up but it doesn't need a revolutionary redoing. So does this next-generation change even matter?

Remember in the early 1990s when the idea of the World Wide Web (i.e. WWW 1.0) was beginning to show up on the cultural radar? At that time, companies that produced products like cars or pharmaceuticals didn't see the larger ramifications. Some of the largest companies neglected to buy appropriate domain names for themselves.

Missing the boat on Web 2.0 may not be as obvious as missing the web's 1.0 version. And when it happens, the sea change might be subtle.

For example, the shift to 2.0 might be as simple as a move from circulating reports by email to a standard procedure where the team keeps a blog. It may be felt in the unexpected: the company newsletter may lose subscribers but page views might increase as new users subscribe via RSS feeds. Or, a technical support team may collaborate on a troubleshooting wiki that comes packaged with a CRM (Customer Relationship Management) suite. Forrester found that 89 percent of the 119 companies it surveyed were using at least one key component of Web 2.0: blogs, wikis, podcasts, RSS, social networking or content tagging.

But a sea change it is, and smart companies are already acting.

Communicating and gathering information

Arguably the biggest impact of 2.0 short-term will be changes in the way people and companies communicate and gather information.

The 2.0 technology streamlines communications, but before its emergence people could still accomplish these tasks — albeit with more effort. Santanam offers the daily journal as an example. Before blogs, one could maintain an HTML web site and use a text editor to upload changes every day, or one could post on older, more inelastic electronic bulletin boards — it would have been a bit cumbersome, but workable. However, Santanam says that the small, incremental step forward with 2.0 makes a big difference — even if it means using one click instead of three, or taking one minute instead of five, to share information.

Another small change with large ramifications is a new bottom-up orientation. Rather than a network administrator defining groups, web users now define their own circles. We used to be content just reading about a product, but now we can easily review it, share that opinion quickly and efficiently and even form entire communities around it. This cross-pollination facilitated by 2.0 can be a huge opportunity — or a huge threat — for companies.

Take the recent example of a traveler stuck in Athens whose wallet had been stolen. Forced to call his credit card company, Washington Mutual, through a computer in an Internet cafe, the traveler was able to record the conversation, which documented his tough-luck service experience.

Frustrated, he wrote a blog entry and uploaded the recording — embedding it seamlessly in his text. With a few quick clicks, a friend linked to the blog entry and the incident was soon splashed all across the Internet, leading to a very black eye for WaMu.

The same incident might have produced the same frustrated customer a few years ago, and he might have told anyone who'd listen. But the technologies of Web 2.0 (Voice Over IP calling and an easy-to-use blogging interface) made it effortless to syndicate the episode and quickly reach thousands of people.

The technology can also work to a company's advantage, though. When SleepTracker released its new watch device that tracks sleep cycles, it expected only a few dozen inquiries at first, but instead 8,000 visitors flooded the site on its second day, thanks to a virtual cycle of blog buzz.

It is this epidemic construct which lies at the heart of Crawdad Technologies, Dooley's company, a spin off of his academic interests. Crawdad helps companies track the spread of news and opinion online.

Dooley notes that when the sale of Coca-Cola was banned in parts of India last summer because of a fear that it contained toxic pesticides, it was weeks before the growing threat moved up the media food chain in India, hopped across the world and finally showed up in the mainstream American press. By the time the American market — and presumably the top decision-makers in Atlanta — heard about the crisis, it was hard to contain it.

But, Dooley contends, if Coca-Cola had been tracking the story like an online virus, it could have more effectively interceded to correct the problem before it went global. What happens in the cauldron of online opinion can affect consumers, investors and a company's bottom line.

Collaboration anyone?

Other ramifications may be less tangible but no less important, say Dooley and Santanam. While 2.0's technologies may be changing how web pages are coded, they are also, in a way, changing the way people are programmed.

Thanks to 2.0, sharing ideas is easy. In fact, says Santanam, sharing is becoming part of the Zeitgeist — whether it is development of open source software or Wikipedia pages. The organic growth pattern of Web 2.0 communities is driven by a phenomenon called scale-free networks.

Open source refers to the act of making computer source code available free to the public. Mozilla's Firefox Internet browser, the Linux operating system and the OpenOffice project are examples of the potential of open source. Once public, the code can be amended as anyone sees fit.

The collaboration networks formed by these communities make it possible to combine the small contributions of many people to create something significant, Santanam says. For example, a miniscule portion of the online audience may contribute to the Wikipedia, but the project thrives because so many people participate. Wikis illustrate the cultural shift: no own "owns" the text because it is an altruistic group effort with no overt bylines.

If it is now the norm for people to share their own private moments in blog confessionals and YouTube videos, and it looks like companies may follow. Ford Motor Company has produced a series of online videos which, Dooley says, are "shockingly self-reflective" for a big company. Santanam points to a host of offline-meets-online challenges such as those at InnoCentive that he sees as part of the mindset of a world connected by the web's collaborative 2.0 technologies.

Web 2.0 is not a panacea, and its evolution may not be dramatic in terms of form, but expect it to have far-reaching results. Consumers are rapidly adopting Web 2.0 technologies virtually without thinking, the professors say, but they expect companies to watch the phenomenon for another two or three years before fully embracing the technology themselves. By that time, say Dooley and Santanam, 2.0 will be the norm.

"All technology that is successful eventually becomes invisible," says Dooley. "The irony is that, after a certain point, you hear less about it. That's not necessarily because it's going away — it's because it's becoming common and ubiquitous."

Bottom line

• Web 2.0 is not one technology or one product. Rather it is a term meant to encompass many technologies and signifies that the way we use the Internet is evolving.
• In many cases the new functionalities afforded by Web 2.0 technologies are only an incremental improvement versus what one could do online a few years ago. However, this small change has big ramifications.
• As with many technologies on the web, individuals have put the array of Web 2.0 offerings to good use for years now, creating personal blogs and contributing to wikis for example. Companies are slower to adopt the new technologies — particularly after the over-hype of the dot-com bubble — and it may be two or three years before businesses get onboard.
• Widespread collaboration and sharing that result from 2.0 technologies appear to feed a societal shift towards frankness and collaboration. New reality-style videos from Ford and projects at InnoCentive may be indicative of the trend.
• One of the biggest threats from Web 2.0 is also one of its biggest opportunities: with easy cross-pollination between web sites, the web is more viral now and it is easier for individual customers to have a disproportionate effect on a company or product's image and reputation.

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