Web 2.0: A Strategy Guide

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Review

Web 2.0 has been around for some time now but for most people it has either been a buzz word or signified the new trends in web development most notably Ajax. What a lot of people might not know is that there is much more to Web 2.0 then a new way of developing for the web. Web 2.0  is truly a revolutionary new business model that is all about the power of networks, read networks of people, the value of the user, capitalizing on competences and more. In Web 2.0 A Strategy Guide, author Amy Shuen covers these aspects and shows how adopting a Web 2.0 strategy in your business can make your business more competitive.

Chapter 1 - Users Create Value

In this chapter Amy Shuen looks at both Flickr and Netflix and demonstrates how their user's have created value for these businesses. In the Web 2.0 business model users are not just passive consumers but become active participants in uploading and creating content that generates collective user value. One of the main driver of the Web 2.0 business model is the notion of providing "freemium", a word coined by Jarid Luken, services to your users. The author here demostrates, using Flickr, how they build a huge and active user base providing a free service and later introduced a pay-for premium service where their users content additional services, space etc. It clearly demonstrates how effective the freemium business model is and why it is used by so many Web 2.0 businesses.

Amy also covers the six ways in which Flickr created user value through interaction. For example global sharing of the photo's and images uploaded to Flickr, user generated metadata, the formation of groups of users around mutually interest topics, providing tools to enable users to do DIY syndication and making it easy to invite friends and colleagues to join and in so doing expanding the network of people and in so doing driving more traffic and generating more user value. Amy also discusses how to kick-start and fine-tune your business profit engine by looking at points such as the inner workings of revenue sources, key cost drivers, investment size and key success factors.

Looking at revenue streams the author discusses four well known types of revenue streams i.e. Single stream, Multiple streams, Interdependent streams and Loss leader. Other items discussed are calculating a company's value when the value is solely based on the value created by the users. She also discusses the different growth stages and trends in Web 2.0 business and closes of this chapter,as she does with each of the other, with some strategic and tactical question you should ask yourself when evaluating your current business model against a Web 2.0 business model.

Chapter 2 - Networks Multiply Effects

In the brick and mortar world, high levels of traffic is a bad thing that causing great discomfort and frustration for everyone. However, in the Web 2.0 world, traffic is what made the exceptional growth of businesses such as Google, Yahoo!, eBay, Skype, Flickr and others possible. In this chapter this is then exactly what the author looks at. She specifically highlights how Google, a relative late comer, was able to use two-sided networks effects to be the first to gain critical mass in the paid keyword search industry.

This chapter then largely focuses on Google's combination of network effects such as direct search engine network effects, direct advertising network effects, advertiser-searcher cross-network effects and demand-side network effects. She also discusses the various products that Google made available to both it's users and advertisers to increase their success and in return Google's future success and growth.

Chapter 3 - People Build Connections

This is probably, besides Ajax, the most noticeable area of the new business model in the Web 2.0 era, social networks. How does a three year old company suddenly reach a net worth of $15 billion? And how can one calculate the worth of a company that does not actually sell any products? These are some of the topics that come under discussion in this chapter. Who are the different role players in a social network that creates the tipping point? The author here mentioned three:

• Connectors - These are the users that create the social glue, the user who introduces others to your service.

• Mavens - These are the information brokers

• Salesman - The evangelists, the one's who get you to act and convinces you to buy

She goes on to discuss the differences between these offline connectors, mavens and salesman and their online counterparts. The main differences are the amount of people these people can reach and the speed at which they can reach them. Now that we know who the role players are in building a successful social network the next question is how many and how fast to ensure a successful and growing social network. Amy here looks at Rogers Adoption Curve and discusses topics such as relative advantage or how much better the new product is compared to the old. Compatibility or how the new product fits with current values and usage trends. The more compatible, the quicker a larger audience will be gained. Complexity, the easier your service is to understand and use the faster the adoption. Trialability, this is a combination of the old and trusted trial downloads and demos but also introduces the topic of freemium services discussed earlier. The less risk a user has to take in order to use your product or service the higher the possibility of adoption. And last Observability, how visible is your product as well as the impact it has on current users. The author continues to analyze Facebook based on these five measures of adoption.

The remainder of the chapter is an analyses of the success and growth of LinkedIn as well as Facebook. Here Amy looks at the rapid growth of LinkedIn, their trust and degrees of separation methodology, how they monetized their social network by clearly separating their users into relationship managers, connectors and focused searchers. As far as Facebook the author looks at the history and origination of Facebook and then moves on to discuss Facebook's viral growth, the launch of Facebook's application programming interfaces and the inherent viral growth through the applications that was built by third parties.

The chapter is closed of by looking at some lessons learned:

• The importance of social networks and network effects.

• User value

• The incredible acceleration provided by bringing all of this to the Web

Chapter 4 - Companies Capitalize Competences

In the fast moving era of Web 2.0 how do companies capitalize on competences? In this chapter the author looks primarily at three businesses and three ways of capitalising competences. These businesses are:

• IBM - Using local and global network effects

• Salesforce.com - Providing software as a service (SaaS)

• Amazon - Competence syndication

Before looking at the first of these capitalization methods the author gives us a quick overview of online syndication, better known as RSS, and how this simple yet extremely effective technology has changed the way information is transmitted and shared with a global audience. SaaS, software as a service, is probably on of the biggest growth markets in today's online economy. One of the main reasons is that SaaS enables developers to reach a much larger audience then shrink wrapped applications because it is instantly distributed across the globe and offers small and medium sizes businesses a much lower initial investment as these services are paid on a per usage basis. The author also highlights the following positives related to Saas:

• Opens up opportunities for customer and traffic acquisition.

• Offers growth and flexibility

• Enables businesses to choose where they wish to concentrate  their efforts

• Allows piggybacking on a myriad of other businesses and applications

IBM has capitalized on competencies across the world by dramatically changing their business model, getting involved in the open source movement by including open source software, contributing to the open source community and adapting the open source philosophy. IBM estimates that this alone has saved the company $1 billion per year. The author also looks at IBM's mentoring endeavors such as supporting the vast group of vibrant start-up companies especially in emerging markets such as China and India. Another way that IBM is capitalizing on competencies is developing ecosystems of partner companies around the technologies that will drive future innovation as they know, these companies' biggest stumbling block will not be hardware, server or storage but sales and marketing, something that IBM can easily offer with their wide global reach of affiliates and partners.

A few years back Amazon gave away the store by opening their zShops supported by the earlier affiliate program Amazon Associates. Recently Amazon has taken further steps to capitalize from their competencies by launching S3, Simple Storage Service, and EC2, Elastic Compute Cloud. Besides these technology services Amazon is also capitalizing on their back office and logistics expertise to offer businesses physical storage space in it's warehouses as well as order fulfillment services.

The last element the author looks at in this chapter is mashups and chooses Google as an example. Amy looks at how businesses such as HousingMaps.com have created value added services to consumers by creating mashups using Google Maps and Craigslist's rentals listings.

Chapter 5 - New Recombines With Old

In this chapter the author looks at how 'old' world business rules and innovation still applies to today's Web 2.0 business model and that it is not a case of the old world halts and the new world begins. The firs point that is touched upon is the different styles of innovation and how some are inherently disruptive in nature. To this end Amy looks at competitive versus collaborative innovation citing samples from ATM networks as well as PayPal. She moves on to looking at the different styles of collaborative innovation from democratized innovation to crowd sourcing, open source, ecosystem and platform innovation.

Next the author uses Apple and it's innovation of the iPod and the iPhone and shows how they used both old world and Web 2.0 strategies to create critical mass and gain huge user adoption of the integrated platform innovations. She closes the chapter by discussing the different approaches undertaken by two very similar companies, Skype and Jajah, and how their choices ultimately effected their success.

Chapter 6 - Business Incorporating Strategies

In this final chapter the author shares with us some invaluable information for anyone thinking of starting-up their own Web 2.0 business or incorporating the strategies of the Web 2.0 business model into their current business. She starts of with the five steps to Web 2.0 and expands on each of the topics:

• Build on collective user value

• Activate Network Effects

• Work through social networks

• Dynamically syndicate competence

• Recombine innovations

The chapter finishes with a complete look at building a business plan for your Web 2.0 business. Really this information alone makes the book worth the read. After outlining the 8 components that will make up your business plan Amy goes into further detailed discussion of each of these topics. After having read this chapter and combined it with the knowledge provided in the previous chapter you will surely be ready to jump start your new business or improve your current business by making use of the elements and strategies that makes Web 2.0 business grow so fast and be so successful.

The book ends off with a chapter entitled 'End Notes'. This is basically a collection of supplemental information for the chapters of the book and provides summaries, additional information and links to some really useful online resources.