Web 2.0 Success Stories

Web 2.0: A Strategy Guide: Business thinking and strategies behind successful Web 2.0 implementations
Amy Shuen, O'Reilly Media, Inc. (2008)

Web 2.0 is a new business model which is still evolving when the book is being written. Nonetheless, Amy does a good job summarizing the strategies used by some successful web 2.0 businesses. It’s a very insightful book and well worth the time.

A few highlights:

Flickr is the poster child for collective user value and “prosumer” business model: users are producers as well as consumers. They upload photo images and enjoy other people’s contributions at the same time. Viral marketing leads to a rapid expansion of user base while incurring little up-front cost.

Google uses n-sided marketing to create and monetize on positive network effects (in this case, n = 2: both advertisers and users use the Google search platform). With each user search query or ad click-through, Google’s ranking algorithms feed the popularity and frequency info back into the system and increase the relevancy of keyword search. The more people use Google, the more valuable the system becomes. That’s the magic of positive network effects.

Facebook and LinkedIn are social networks built with minimal user acquisition cost. The more your friends use it, the more valuable it is to you. That’s a viral diffusion model. LinkedIn is more focused on professional connections and uses a “freemium” pricing strategy (free + premium): offering free access to build the critical mass and charging recruiters who wish to use the mass.

Web 2.0 also brings about a new wave of innovation when new technologies or markets combine with the old to create new ecosystem partnerships. Jajah, a web 2.0 telephony company, partners with local phone carriers and shares revenue with them, instead of threatening to replace them, as some if its peers do. Apple iPod is a great example of collaborating with media, production, and accessory partners.

There are more case studies on open source development, SaaS, corporate competence syndication, etc. At the end of each chapter, Amy posts strategic questions on: what if you are a CEO or CIO? What decisions will you make? It’s a thought provoking book for those who wish to start a new business or revamp their existing business.