International Study Urges Businesses to Adapt to Web 2.0 “Phenomenon”
First-of-its-kind Booz Allen survey shows that online interaction is changing consumer behavior worldwide.
Web 2.0 is a massive phenomenon applicable to all users regardless of age, social class, gender, or education, concludes a survey conducted by Booz Allen Hamilton’s Munich office.
In addition, “the Web 2.0 community controls work well and effectively by voluntarily monitoring content and removing misinformation and inaccuracies,” says Booz Allen principal Dr. Michael Peterson, who co-authored the study with vice president Stefan Eikelmann.
Thirteen million users in Germany now use interactive and participative applications such as blogs and virtual meeting places. And, says Peterson, this is dramatically changing the lifestyles and purchasing behaviors of broad swathes of the population.
“Of those 13 million, half of them use recommendations from Web 2.0 forums when deciding on purchases,” he says. “People have a great deal of trust in Web 2.0 platforms regarding the use of information. Most prefer relying on recommendations from anonymous online sources rather than from public sources.”
The Booz Allen survey revealed that more than half of all Internet users already rely on advice from a massive worldwide user community, indicating a wide acceptance of new ways to form opinions and make buying decisions. Privacy concerns have also diminished; 70% of MySpace users in the U.K. create their own content to share, but only 39% restrict public access to materials intended only for themselves or their acquaintances.
Because this is the first survey to address consumer behavior and its impact on the industry, it has important implications for companies across sectors, Peterson says. “Web 2.0 is not yet well understood by the public, but these findings will help Booz Allen clients underscore the key advantages of customer service. It’s a mass phenomenon, and companies ignore it at their peril.”
Penetration of Web 2.0 sites in the total population is 49% in the U.S., 45% in Germany, and 26% in the U.K. Web 2.0 is contributing to a robust worldwide Internet market currently worth €40 billion, with profits originating primarily through advertising and e-commerce. With unlimited potential growth in the Internet economy, the study predicts that turnover from Internet services in Germany will rise from €17.1 billion in 2005 to €44.2 billion in 2008.
Internet Users Often Defer to Anonymous Online Sources for Advice
The catch-all term “Web 2.0” describes online activities, sites, and applications that support interaction with online communities, including the exchange of information and creation of user content. Web 2.0 technologies include podcasting, flash video, and wiki, which has replaced contact management systems as the current user-preferred technology for editing online content.
“Web 2.0” also describes new ways in which people use the Web, such as writing blogs and social networking instead of creating personal sites, or accessing voice-over-Internet protocol (VoIP) rather than using landline phone services. It is generally accepted that anyone who has used the Internet to develop photos or share a computer file with an online friend has used a Web 2.0 activity.
Web 2.0 is distinguished from “old” Web technology by the wide-scale harnessing of collective intelligence and enlisting of virtual users as content co-developers. “Part of the phenomenon of Web 2.0 is unparalleled oversight,” Peterson says. “Communities rely on self-organization, and any attempts by external bodies to influence perceptions are discovered immediately.”
As an example, Peterson notes that prospective and former hotel guests now exchange information among themselves as to the quality of service at many hotels. If a hotel tries to influence the information exchange, the online community will discover and delete the hotel-generated information and alert the community. The hotel will then suffer a reduction in business because the community will not use them in the future.
“If there’s a flawed product on the market, it will be revealed quickly,” he adds. “Companies will eventually have no recourse but to provide better service and products.”
The Booz Allen findings applied to all age groups. Newer sites such as MySpace have predominantly young users, but the more established the site, the more balanced the age group using it. For example, about one-quarter of Amazon.com users in the U.K., U.S., and Germany are over age 50. Over time, sites such as MySpace and YouTube are expected to see a similar age spread.
Eight hundred participants in four markets—the U.S., U.K., Brazil, and Germany—were interviewed for the survey, totaling 3,200 participants; each uses at least one of the top 10 social communities, which include MySpace, Hi5, Classmates.com, and Friendster.
A Shift in Core Competencies is Needed for Business Survival
The survey predicts both opportunities and problems for new business models and the emergence of new applications for the telecom, Internet, media, and entertainment sector.
The study provides concrete evidence of a threat to conventional media businesses and telecom providers from Web 2.0 applications and IP-based communications channels like Internet telephony and instant messaging. Eikelmann says, “In Western Europe, €11.8 billion in turnover for the traditional telecom providers is at risk. Voice services, and especially ‘messaging’ such as SMS and e-mail, are increasingly being conducted via the Internet, bypassing the traditional providers.”
Peterson concurs. “The core competencies of many companies will have to shift in order for the business to survive. Product development must center on smaller innovations relevant to customer input and support. The companies that can then get the product to market the fastest will be more successful.”
Despite overwhelming consumer acceptance of Web 2.0, says Eikelmann, challenges remain. “We should not forget that the new offers do not create much in the way of additional value-adds. The money continues to be earned through advertising. Essentially, Web 2.0 is resulting in a shift of turnovers within a growing Internet market and, to some extent, also to cannibalism of turnovers in traditional Internet services.”
In the long term, the survey concludes, successful business models will be those that acquire and retain users through consistent alignment of their offer portfolios, by which they will secure customer commitment. Large, established Internet companies—e.g., Google, Yahoo, ebay, Microsoft—with market, brand, and financial strength are in the best position to profit from Web 2.0.
In the short term, however, momentum towards Web 2.0 use will continue to increase, with the consumer assuming a unique and powerful role. “We’re now starting to see a tangible power shift to the consumer that has never been experienced before,” Peterson says. “As customers help each other, companies need to establish a dialogue with customers and use information from them in their service improvement and product development policies.
“Companies can attract customers over websites or other exchange platforms. They can create a network and incorporate what they learn from customers into their services and products.”
Businesses can also shift product support and decision-making to online communities, which will help drive buying decisions and positive opinions. The use of existing or self-created online forums can deliver accurate feedback on market acceptance. Those businesses concerned about maintaining control of their content can protect it by licensing it for resale.
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For more information, please contact Susanne Mathony.
story posted March 2, 2007
Additional Information:
>> See Urgent Need for Companies To Adapt to the Web 2.0 Model of Consumer Interaction and Participation
