iSight - Web 2.0
The rise of the e-consumer
In the beginning, before the dot-com bust, many e-commerce companies operated under the assumption that “if we build it, they will come”. In this emerging era of Web 2.0, successful e-commerce operators know better: today, instead of building an individual service that appeals to millions, they are inviting millions of individuals to build services to suit themselves.
The evidence for this new “democratic” approach to the e-consumer is demonstrated by the success of today’s fastest growing consumer Web services. Sites such as MySpace, Flickr, YouTube and the phenomenally popular blogs that have mushroomed around the Internet, are as far removed from first generation”broadcast” Web sites as it is possible to be. Their success is not founded on the appeal of expensively acquired and tightly controlled collections of “content”, or even the power of traditional consumer brands. Instead, they have thrived by empowering consumers to create their own content, and to define how, where, and within whom they wish to share it.
In the world of Web 2.0 it is the consumer, and not content, that it threatening to be King. This revolution – if that is what it truly turns out to be – is still in its infancy, but already there are signs that the supplier/consumer balance of power is shifting toward the latter. Certainly, there is enough evidence of a power shift for some Web 1.0 giantsto begin taking today’s new “social media” seriously enough to pay significant sums to acquire them. Yahoo was one of the first to do so when it paid an undisclosed multi-million dollar sum for the Flickr photo-sharing service in May last year. This was just one of the first in a series of investments in “social media” sites by multi-billion dollar media giants, including the more recent $580 million acquisition of the MySpace.com “youth community” business by none other than Rupert Murdoch’s News Corp.
Shortly after closing the deal, the archetypal media mogul admitted that the MySpace acquisition is part of sea-change in the relationship between business and consumers. There is no longer room “for a God-like figure from above to tell them [young people] what’s important. They want control over their media, instead of being controlled by it,” he said.
Murdoch was commenting about the impact that sites like MySpace, and phenomena of blogging are having on the news business, but that is far from being the only business sector faced by the new e-consumer challenge. Indeed, virtually any consumer venture with a Web dimension is under pressure to respond, and some are doing so more whole-heartedly than others.
In the wider world of media for instance, the BBC is among those major players who seem prepared to accept that the massive broadcast audiences of yesteryear cannot be guaranteed in the future. Auntie, as it is affectionately known in the UK, is responding by working with Apple and Microsoft to develop technologies better suited to the dynamic of Web 2.0: smaller, more focused sites and services featuring rich media content. Others, though, remain ambivalent. One Hollywood studio recently set up a blog for film fans, but ruthlessly censored the postings so that only favourable messages appeared online. Such approaches are unlikely to be a commercial success: the public will see through the spin. Instead,businesses have to respond in the spirit of Web 2.0: that means respond in kind.
“Really smart companies leave the negative comments in the blog and then comment on them in turn,” says Jaap Favier, an industry analyst at Forrester Research. “If the consumer makes the effort to tell you that they don’t like something (about your product) it means that it is important to them. After all, most people don’t bother.”
Smart companies understand this. Web 2.0 is set to change the way consumers interact with each other, with businesses and with the public sector in a number of ways. It is no longer enough for businesses to take a “top down” approach to dealing with their customers or other stakeholders. Instead they need to be willing to listen and act on customer feedback.
This is likely to mean not just being more responsive, but being willing to create products and services that meet the needs of specific communities, subgroups and niches.
“We are likely to see the online equivalent of gated communities emerge, where consumers take power into their own hands,” says Forrester’s Favier. “Communities might establish their own web sites, and companies will be able to come to those sites, but only if they are prepared to live by that community’s rules. You might have communities or individuals that are very strict with their norms and values. They will only invite in companies that respect that. In five years’ time, we will see many more such communities taking control on the Internet.”
Such groups could be geographically-based, grouped around local communities, or driven by a set of shared social values. Favier predicts that groups geared to the needs of the gay community, or motivated by concerns for environmental issues, will be among the first to emerge.
But other groups might also emerge, motivated by simpler shared interests such as sports or pastimes. Some of the fastestgrowing Web 2.0 sites and services, such as MySpace, are based around demographics.
The proliferation of youth and teenoriented sites shows not just that the younger age groups are quick to embrace emerging technologies, but that they are rather under served by the current generation of online services. This subset of the market has also been quick to embrace mobile blogging, photo and file sharing services; it would be wrong to assume that Web 2.0 will be tied to a conventional PC or even TV screen.
“You can download a file to a mobile phone and then transfer it to a computer, or push the file out to a private WAP [mobile Internet] site so others can download it over the air,” says Roberto Bonanzinga, consultant to a number of Web 2.0 ventures including the mobile content service Mobango. “We are seeing a real convergence between fixed and mobile networks.”
Together, the camera phone and blogging software are probably doing more than any technology since the early days of desktop publishing software or the Internet to democratise the media industry. But it is not just broadcasters or media outlets that need to adapt to change. Businesses outside the media can benefit from – but could also be damaged by – the proliferation of niche web sites.
The growth of online discussion forums, covering anything from celebrities to the deep technicalities of computer networking, make it hard for businesses to control public opinion. With the growth of micro-commerce sites such as eBay, it is also becoming harder for businesses to control who is selling their products.
Companies need to embrace the idea of targeting niche groups, using viral marketing and word of mouth, as well as specialised web sites, to drum up interest. Some businesses are doing this very well, and successful examples are not restricted to the business to consumer market.
Few companies are more focused on business to business sales than the aviation giant Boeing, for example. But the company set up a web site and email newsletter for its upcoming mid-range passenger jet, the 787 “Dreamliner”.
The site, Newairplane.com, recruited members of the public to Boeing’s World Design Team, and offered exclusive previews to members at key stages of the plane’s development, as well as online chats with Boeing officials. The site contains key information for airline officials – Boeing’s market – but also appeals to frequent travellers, aviation enthusiasts and even children. The result created a buzz around the aircraft even though it is still several years from its first commercial flight.
“Some organisations are starting to realise what is possible,” says Steve Prentice, at analysts Gartner. “The majority of large organisations are still struggling to take advantage of Web 1.0.
“They have not really got their head around the change, and the interactive model, and the sort of things people will be able to do. Enterprises are struggling to find ways to respond. Most of what is being done, is being done by end users. There are all these things the end user can do, but as soon as they try to interact with a large company, it is like going back to the dark ages,” he says.
But the challenge Web 2.0 presents to businesses is not just a creative one. Blogs and highly personalised sites might be fun, but they do not scale up to meet the needs of large organisations.
Blogs in particular succeed or fail because of the enthusiasm of the writer. Few companies outside the media can devote as much time and resources to creating online content than an enthusiastic individual, let alone checking and editing external contributions.
And when it comes to content and especially, service-driven web sites, companies are finding that Web 2.0 is changing the fundamental bargain struck between a consumer and a business.
To create effective and personalised sites, companies need to gather personal information. But this is information many consumers are wary of sharing. Citizens might be willing to give highly personal information to a health provider because the pay back, in terms of better care, is obvious. But consumers will be far less comfortable sharing sensitive data with a book store, supermarket or even a local government department.
“The more that we do online, the more sophisticated all the web sites are in terms of determining what motivates our buying patterns,” says Garter's Prentice. “That poses some quite challenging and troubling questions about who holds what information about me.”
Web sites and services are gathering an ever-wider range of personal information from their users, for personalisation and for e-commerce or statistical purposes. Some of his is information users knowingly give to the site operator, but much of it is detailed information built up from transaction records.
But as more personal information is held online, so the repositories of such information become more attractive to cyber-criminals and fraudsters. It is not just the systems of the online services themselves that are under threat.
A consumer’s own PC becomes a rich target, if a hacker can harvest identity information and then take over the user’s persona online. This is leading some observers of the Internet to suggest that a consumer version of Web 2.0 will only really flourish alongside far stronger measures to protect identity and security (see box: security online.).
The proliferation of online services – commercial, social and from government – also poses some practical questions for consumers.
Web sites that rely on personalisation to be effective need users to sign on with a unique identity. Consumers face a growing burden from the need to manage a plethora of log on and password details, with sites requiring differing levels of security and authentication.
As individuals sign up with more services across more sites, each with quite different requirements for security and identification, it becomes harder for consumers to keep
control of their identities.
Moves towards biometrically-backed identity documents are afoot in some countries, but in others, these remain controversial.
National ID cards might be acceptable in much of Europe, but such measures remain an anathema to many in the United States. Attempts by banks and service providers to
introduce strong authentication and identity management are being hampered by a lack of standards. And many of the standard identity documents – passport, driver’s licence, National Insurance number or bank card – are not available to the fast-growing teenage market.
One answer might be for portals to provide a way for consumers to manage their relationships with multiple services. The notion of relying on a portal to provide services might seem to go against the idea of Web 2.0, but portals have started to embrace the type of grass-roots technologies that make Web 2.0 appeal to customers, whilst providing convenience and the security of dealing with a known brand. Yahoo!, for example, recently bought Flickr and MySpace is now owned by News International.
Services such as Yahoo! or Google could ride the Web 2.0 wave by creating or facilitating sites and services dedicated to specific communities, with rules set by the community and the portal providing the technical services, such as account management, suggests Forrester’s Favier. So an environmental group could turn to Yahoo! to run a Yahoo! Green portal on its behalf.
“Microsoft did try [to create a single online identity] with Passport but nobody was interested,” says Favier. “But once you get to the point of Yahoo! Green managing a
closed community, its members will have to give their details to Yahoo, that would be part of the deal.” If portal sites can provide convenience to consumers without
appearing monolithic, then they will play a critical part in the development of Web 2.0.
If there is a sting in the tail of Web 2.0, it is around security and privacy. Consumers are increasingly aware of the dangers of identity theft, spam and phishing (where a pammer solicits personal information using a falsified email, typically appearing to come from a bank).
Consumers face two problems in the interactive environment of Web 2.0. The first is that the more they transact online, the more fraudsters are likely to target the Net, either by attacking commercial sites or trying to spy on users’ computers. The second is that most web services, outside the fields of Government and banking, cannot afford to invest in strong security and authentication measures. As a result, a criminal could quickly build up a picture of an individual’s life on line by discovering a few simple user names and passwords.
The answer might lie in some form of federated identity management, where users’ identities are verified by a third party, or through aggregation, where users access services through a single portal that has the resources to use strong authentication and identity management, possibly using smart cards, tokens or biometric ID.
“Consumers might well have 10 to 20 online accounts, says John Worrall, global head of marketing at security specialists RSA. “If you have multiple accounts, how do you protect them. One way is to link these identities to a primary account with strong authentication; the second is to federate the credentials, so you can use a single token for authentication, but with different user names and passwords.”
From a technical point of view, this is possible today. The challenge for the e-commerce industry is to agree on a commercial form of federated identity management, rather than each company building its own solutions - or worse still, relying on weak identity and security. Such co-ordination will not be easy, but if it is not done, security concerns will remain a limit on the value of online, consumer transactions.