Developing a Web 2.0 business plan

web 2.0 strategy guide

Book Review
Web 2.0: A Strategy Guide.
By Amy Shuen.
O’Reilly, 2008. 243 pp.

This book explains how successful Web 2.0 companies do what they do.

Author Amy Shuen says the biggest challenge to a company’s success in this area is to convert from an engrained culture of competition to a culture of collaboration.

As a strategy researcher and an authority on Silicon Valley business models, Shuen speaks at industry conferences, venture capital events, and business school seminars. She offers this book to provide theory and practice behind the concepts of collective user value, capitalizing on social networks, and collaborative innovation.

Amazon.com provides an excellent model to follow, Shuen says. Amazon “integrates Web 2.0 approaches into every page of its bookselling site. It tests new possibilities constantly.”

Shuen says Amazon founder Jeff Bezos has creatively repositioned the company to play many different syndication roles. Amazon Associates syndicates its online store to the web sites of its affiliates. Affiliates provide specialized content and organize product listings for a specific audience or community. So thousands of non-employees act as a virtual sales force that gets paid only on a success-fee basis when a sale is realized.

What’s new about Web 2.0, she says, is that both businesses and individuals can make money by providing services to customers for free. How? Web 2.0 allows online users to interact, combine, remix, upload, change, and customize content for themselves. This online DIY self-expression benefits businesses and other users. For example, Flickr bases its photo sharing and storage site on a “freemium” business model. Flickr leverages collective user value, positive network effects, and community sharing. WordPress and Technorati are similar in that they have created tools that millions of users can play with for free. Oh, and by the way, they offer really cool premium features you can use for a small fee.

How did relative latecomer Google beat out its many search engine competitors? By figuring out how to monetize the long tail of the search market. In October 2000 Google introduced AdWords, which opened up online advertising for small and mid-size companies that had never done so. Shuen says Google’s direct positive network effects result from aggregating the “wisdom of the crowd” as measured by popularity and frequency of user-created links, site visits, and advertising click-throughs.

In the collaborative innovation model, Shuen says, the entire perspective of innovation changes. In the old days, companies competed in an industry to capture new and old markets using different kinds of innovative technologies. Now, big and small companies orchestrate collaboration, often across industry boundaries, in innovative ways. Consider Apple’s iPod. Apple conceives, designs, and oversees the innovation and creativity of many external suppliers, creators, affiliates, and partners to support an innovative product and service.

Shuen’s “big three big takeaways” for developing a Web 2.0 business plan:
Online network effects are a powerful multiplying force.
A few active uploaders can create online critical mass and community.
Viral distribution and cooperative advantage can build eco-systems rapidly.

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3 Responses to Developing a Web 2.0 business plan

  1. Morgan says:

    Hi Paul,
    The description looks good, but I’m curious: did you learn anything new? Were you inspired? As someone who’s been around the block with social media and Web 2.0, I often find lots in books and articles that spend lots of words on the basics or old news. Are their fresh ideas here? Thanks for your thoughts!

  2. paul says:

    Hi.
    There is certainly information that won’t be new to seasoned Web 2.0 people. This book is aimed at managers who need to know how the web is changing business and their competitive environment. What I enjoyed most, as a user of Flickr, LinkedIn, Facebook, iTines, Amazon, NetFlix, and Google, was reading Shuen’s analyses of how these services devised profitable formulas.

  3. bedazler says:

    The biggest problem is corporations are still having troubles making the transition from competition to collaboration. Lets take for example one of the most popular pages on facebook…the Coca-Cola page that wasn’t even created by the Coca-Cola company, but by two fans! Corporation r not getting it…They are still hiding in their privacy bubbles. Now with the success of twitter it is clear that the age of transparency has arrived. Companies that don’t engaged will be left behind.

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