Putting Web 2.0 and Social Media in Context

Note: A presentation on this topic is available on SlideRocket — “Web 2.0 and Social Media in Context”

The selection of “You” in 2006 and Facebook co-founder Mark Zuckerberg in 2010 as TIME’s Person of the Year provides two time markers in the “Web 2.0” or “social media” era (my earlier post: “TIME’s Person of the Year, 2006 and 2010“). Earlier on, the topic of discussion was all about Web 2.0; more recently, it is mostly about social media. Do not ask for a definition of these terms – Web 2.0 or social media (an attempt to define the latter term can be found in an earlier post: “Social Media: More ‘Social’ than ‘Media’“. Neither term is easy to define. Few business professionals have time to spare on such a definition. Ask someone for examples of the tools (i.e., applications and services) closely associated with either Web 2.0 or social media and you would get very much the same answers: blogs, RSS, tweets, online social networks, and so forth. If the two terms refer to the same phenomenon, then why do we need both? But if they do not, then how do they differ?

The Forces Behind

The terms Web 2.0 and social media essentially refer to the same phenomenon: the technological, social and economic transformations associated with a new era in the evolution of the Web. Initially, these transformations caught the attention of software developers, system architects and other information technology (IT) professionals. The term Web 2.0, used widely earlier on, tried to capture the transformation of the Web and eventually the society. These transformations are quite fundamental and lie mostly underneath the surface or behind the scene. They, hence the term Web 2.0, attracted little attention beyond IT professionals and some business strategists.

Transformed by Apps

At the heart of Web 2.0 transformations is the new system architecture centering on the lightweight programming model. This model is intended on delivering interoperability for easy deployment of applications over the network, independent of operating systems and hardware devices. Lightweight applications, often taking the form of Web services, are built as reusable, self-contained, function-specific software components that can be easily selected, extended and combined into new applications known as mashups. An example is HousingMaps, which meshes Google Maps data with home listings from Craig’s List to offer users the convenience of searching for rental and for-sale properties and getting their map locations on the same website. Such applications are highly modular and hence allow complementary services and functionalities to be added easily.

Modular application architecture introduces new sets of design possibilities and thereby creates opportunities for entry by new developers, including individuals with limited technological and financial resources. It means products do not create much value on their own as stand-alone elements. Rather, they depend on complementary products and services from other producers or providers to be useful. Think of Apple and the tens of thousands of iPhone and iPad apps available on AppStore plus all the entertainment on iTunes. The value of the iPad and iPhone lie as much in these apps and content as in the hardware (“There’s an app for that”). These devices plus iTunes and AppStore function as a platform that brings together several groups from different sides of the market – app developers, content publishers and users – and facilitate their transactions. For competitors, they need not only match Apple hardware quality and features but also build a comparable ecosystem of app developers and content publishers. Look at Facebook. It was trailing behind MySpace until it decided in May 2007 to let independent software developers to build apps for Facebook (and earn a share of advertising revenues). As more such apps become available, users can do more things (e.g., sharing shopping info with friends) and hence spend more time on Facebook, making it an attractive platform for advertisers. Meanwhile, MySpace and other online social networks did not respond to Facebook in the timely fashion; when they did, they did so in a half-heartedly manner through Google’s app development platform OpenSocial. By then many app developers had joined the Facebook platform and would be reluctant to spare their limited resources on another platform. Like Apple, Facebook offers much more value as a platform, bringing together multiple sides of a market, than a standalone product or service.

Propelled by Network Effect

To any side of a market (group of market participants), the value of a platform depends of its ability to attract participants on the other side or sides. To users, the value of Apple iPhone and iPad or that of Facebook social network depends on their ability to attract more app developers and content publishers or advertisers, respectively; to developers and publishers/advertisers, that value depends on the number of users buying Apple devices or signing up for Facebook. This is known as the network effect, which creates a virtuous cycle that can drastically reshape market landscape (an earlier post: “What do Amazon, Apple, eBay,Facebook and Saleforce have in common?“).

The presence of network effect is not uniquely Web 2.0, but its magnitude is. Modular application architecture has lowers the entry barriers for complementary service providers so drastically that a visionary platform operator like Apple or Facebook can mobilize enormous pools of developer resources and quickly scale up its offerings to offer so compelling value to users. Three years after its launch, Facebook development platform has attracted 2.5 million developers offering more than 75,000 apps; 20 millions apps are installed by Facebook users every day. As more apps become available, users can do more things (e.g., sharing shopping info with friends) on Facebook, they spend more time there instead of searching on Google or going somewhere else. As users spend more time on Facebook, advertisers become attracted. As more advertisers spend their ad dollars on Facebook, more app developers become interested; as more apps become available, users spend more time on Facebook… The virtuous circle spirals upward. Facebook user population has reached 500 millions, ten folds what it was in Oct 2007.

The Public Face

While some transformational effects of the new Web era (e.g., modular application architecture) lie beneath the surface, others (e.g., the proliferation of online social networks – OSNs) are much more visible. The term “social media” captures the essence of the latter transformations .

Empowered by UGC

One highly visible transformation of the Web is the meteoric rise of user-generated content (UGC). Behind that rise is the modular application architecture, which “shifts computing to the edge of network, and empowers individual users with relative low technological sophistication in using the web to manifest their creativity, engage in social interaction, contribute their expertise, share content, collectively build new tools, disseminate information and propaganda, and assimilate collective bargaining power” (Parameswaran and Whinston, 2007). That shift, in the form of UGC, has transformed the Web from a ‘publishing’ to a ‘participatory’ medium. In the publishing Web era, institutions (e.g., corporate establishments, website operators, marketers and publishers) provided virtually all the content on the web. Users were primarily passive consumers of such content. In the participatory web era, users can now be active creators, not just passive consumers, of content on a scale never seen before, e.g., creating Facebook profiles, building Second Life avatars, recording podcasts, and blogging about political candidates, social causes or consumption experience. They have wrested power from the few (e.g., newspaper editors, broadcasters, marketers and advertisers). In the process, they have not only changed the world but also the way the world changes. “For seizing the reins of the global media, for founding and framing the new digital democracy, for working for nothing and beating the pros at their own game”, Internet users (“You” included) were selected as TIME’s 2006 Person of the Year.

What drives the participatory Web is not simply user participation per se, but an implicit “architecture of participation”. More than just facilitating user participation, it enables user interactions and collaborations such that services improve and content get richer as more users participate (O’Reilly, 2005). As more users collaborate on a Wikipedia entry, for instance, errors and intentionally bias can be detected and corrected more rapidly. Passive participation can contribute as well. Most users, for instance, bookmark web pages and tag content on social bookmarking sites such as Delicious and Furl for personal use rather for the collective benefits. Social bookmarking still can benefit other users by functioning as a recommendation system even without explicitly providing recommendations; tagging data can be automatically aggregated into useful information, e.g., folksonomy in form of a tag cloud.

Propelled by Social Interactions

UGC is not just about content. It is also about connectivity and collaboration on a massive scale. It depends on some media (means of mass communication, e.g., blogs, wikis and tweets) to deliver, aggregate, collaborate and/or improve on the content (e.g., entertainment, viewpoints, information, ratings, bookmarks, etc.). The more users it reaches or brings in, the more powerful or useful it gets. Blog posts by themselves are “isolated” content pieces. Commenting and hyperlinking can turn these isolated posts into running conversations and passionate debates or even start a social movement. Wiki entries are not content pieces by individuals but a product of the collective intelligence and collaborative efforts of crowds. User profiles on online social networks help people find and connect with each other. Web 2.0-era media are therefore social media.

Connectivity and collaboration constitute the “social” part of social media. This social dimension distinguishes UGC (contributed by the mass) from the commercially developed content (controlled by the few) in the Web 1.0 era. It shifts the balance to power from the center (e.g., advertisers and website operators) to the edge (e.g., consumers and web users). Connectivity offers content a mechanism for wider reach, or in other words, the “multiplier” effect that makes UGC so powerful. Collaboration ensures content its richness. Content constitutes the “media” part of social media. It provides the “substance”; in its void, there is nothing to converse about, nothing to share with each other, and nothing to collaborate on. Content transforms (plain) connectivity into (rich) interactions.

Social interactions follow primarily a many-to-many pattern among interconnected users, in place of a one-to-many broadcasting pattern that was well orchestrated by institutions (e.g., companies) in the past. They entail various levels of user engagement, ranging from passive usage (e.g., tagging content or joining groups) and limited engagement (e.g., rating and voting on content or commenting on blog posts) to active contributions (e.g., writing blogs or uploading photos and videos) and deep involvement (e.g., networking with others or running online communities). Depending on the level of engagement, social interactions can support sharing, facilitate conversations, engage users and help build community. They deliver a level of “stickiness” that has been elusive to website operators, advertisers and content publishers with faith in the “content is king” mantra. Commercially developed content, lacking social interactions and hence user engagement, often fails to attract visitors and keep them coming back (an earlier post: “Is [Commercially Developed] Content King?“). Social interactions, on the other hand, engage users, nurture relationships and build brand loyalty. The resulting “customer lock-in” (or stickiness) helps the firm fortify its customer base or even expand it with “word of mouth” and viral messages, and thus allow the firm to successfully leverage the network effect.

Some Takeaways

The terms Web 2.0 and social media essentially refer to the same set of tools and transformational changes taking place in the new Web era. Web 2.0 focuses on the forces behind the scene (i.e., modular application architecture and network effect) that are of interest to system architect, application developers and IT professionals. Social media, on the other hand, represent the public face of the new Web (e.g., UGC and social interactions) that captivates marketers, advertisers and PR professionals.

Time’s Person of the Year, 2006 and 2010

It’s that time of the year when we are anxiously waiting for the announcement of Time’s Person of the Year – the individual (or organization, thing, etc.) judged by the magazine’s editors to have most influenced the world over the past 12 months.

The selection for 2010 was Mark Zuckerberg, the founder of the leading online social network Facebook. Only four years ago, “You” were selected Time’s 2006 Person of the Year. In both cases, the selection recognizes the transformational effects of what was known more widely then as Web 2.0 and more recently as social media.

“You” in 2006

At the turn of the last millennium, in the aftermath of the dotcom crash, many academic researchers were busy drawing lessons from the demise of the dotcoms, issuing calls for a return to business fundamentals, and even recasting the future of e-commerce. They apparently failed to notice that amidst the rubble of the dotcom crash, Internet-based e-commerce continues to rise at double-digit rates, as measured by online retail sales and advertising revenues (after a brief decline in the latter case). A few dotcoms (among them were Google, eBay and Amazon) had not only survived the crash but also prospered. Meanwhile, a new crop of dotcom ventures (among them were YouTube, MySpace, Orkut, Wikipedia, Hi5, and Facebook) was once again mushrooming. Many had become leading Web destinations and household names.

For some practitioners, these developments did not go unnoticed. In 2004, during a brain-storming session between O’Reilly Media and MediaLive International for a potential future conference about the Web, it was noted that the Web was still getting more important than ever despite the dotcom crash a few years earlier. The term Web 2.0 was coined to capture the essence of what seemed to be some kind of turning point for the Web. Its “2.0” designation does not imply a new version of some old software applications. Rather, it underlines a very different Web. The earlier Web (or Web 1.0, if you will) was structurally hierarchical, ruled by webmasters and offered static websites that were broadcasted and distributed mostly through hypertext links. By contrast, Web 2.0 is characterized by open communication, decentralization of authority and freedom to share and re-use content. It allows individuals to publish, collaborate and share experiences with other like-minded individuals and groups on a scale never seen before, thus bringing together the small contributions of millions of people and making them matter.


Who are those individuals making such contributions? The answer is “You”. By creating Facebook profiles, building Second Life avatars, recording podcasts, blogging about political candidates, social causes or simply cooking recipes, connecting with one another, and/or spreading the viral messages, “You” (or more precisely, tens of millions of people like you) have wrested power from the few (e.g., newspaper editors, broadcasters, marketers and advertisers). In the process, you have not only changed the world; you have also changed the way the world changes. It did not take very long for this transformation to become well recognized. In December 2006, Time selected “You” as its Person of the Year “for seizing the reins of the global media, for founding and framing the new digital democracy, for working for nothing and beating the pros at their own game”.

Him (Mark Zuckerberg) in 2010

The proliferation of content-centric Web 2.0 tools such as blogs, podcasts, and video and video sharing sites once again brings to the forefront the notion of “Content is King”. This notion went back at least as far as 1996 when Microsoft co-founder Bill Gates wrote in an online column that “content is where I expect much of the real money will be made on the Internet”. But things did not out quite well as often touted. Content in the Web1.0 era was for the most part commercially generated content (CDC), which was too expensive to create and update frequently, and being non-engaging with consumers, also ineffective in relationship building (read my other blog post “Is [Commercially Developed] Content King?“). Content in the Web 2.0 era, by contrast, has increasingly been user-generated content (UGC), from blog posts and comments on them, entries on Wikipedia, videos on YouTube, profiles on Facebook, to virtual worlds and avatars on SecondLife. More than just content pieces, these are vehicles for users to share ideas, contribute knowledge, collaborate on projects, support common causes, build communities, or simply connect with each other. Web 2.0 tools are therefore as much about connectivity and collaboration as about content generation. They are thus social media. As media, they offer the means or instruments for delivering content of one kind or another (e.g., news, information, ads or entertainment). Being social, they help improve our ability to connect, communicate, and collaborate (read my other blog post “Social Media: More ‘Social’ than ‘Media’“).

It is the ability to connect that makes content generation more powerful and collaboration feasible. Blogs can be powerful when they are commented and hyperlinked, potentially turning themselves into running conversations and passionate debates that can mobilize the mass. Tweets can be powerful despite their 140-character limits. They can reach out to a large number of followers and keep them updated in real-time. Wikis can be powerful, as Wikipedia has amply demonstrated, thanks to their ability to harness the collective efforts and intelligence of the mass on a scale not possible until recent years. Still no social media tools to date can match the power to connect offered by online social networks (OSNs) such as Facebook. Its user population had crossed the 500 million mark in July 2010, placing it third in size behind only China and India. Half of its users log in on a daily basis. Each user has an average of 130 friends and creates 90 pieces of content a month. For “connecting more than half a billion people and mapping the social relations among them; for creating a new system of exchanging information; and for changing how we all live our lives”, Time selected Facebook founder as its 2010 Person of the Year.

Lessons from Mr. Splashy Pants

While writing by blog post “Markets are Conversations” , I found a very interesting presentation on TED. It is a story about an anti-whaling campaign which Green Peace tried to personify by having the public to name the humpback whales being tracked. Surprise!!! The most popular name was “Mr. Splashy Pants”, not exactly what Green Peace was hoping for. Still it worked in the end; the campaign successfully stopped the targeted whaling expedition. You can find out the rest of the story from the embedded video clip below.

What can we learn from Mr. Splashy Pants?

From the bottom up, not the top down. Social media is of the people, by the people and for the people. No company or institution owns it or can control it. “Mr. Splashy Pants” was not the kind of name Green Peace expected. Delay tactics to wait for more “thoughtful” cultural names to emerge did not work. “Mr. Splashy Pants” still won the naming contest by a wide margin; there was no close second place.

Level playing field. Done right, it costs little or nothing to mobilize people via the Internet. Social media empower users, making them collectively as powerful as, if not more so than, institutions.

OK to loosen up control. It is the end result, not the ability to command and control the media, that matters. Galvanizing people’s passion for the humpback whales so as to halt the targeted whaling expedition, not finding some thoughtful names (simply a means to some other end),  was the result that Green Peace was looking for. delivered that sought-after result.

Be genuine, honest and upfront. The name “Mr. Splashy Pants” won handily even if it was, from the standpoint of Green Peace, not culturally “meaningful”. Being genuine, it touched the people’s feeling at some personal level and stirred up the people’s passion for the humpback whales.

What do Amazon, Apple, eBay, Facebook and SalesForce have in common?

View this presentation — Increasing Returns — a Key Principle of the Information Economy — on Prezi.com

The most obvious answer to the above question — “What do Amazon, Apple, eBay, Facebook and SaleForce have in common?” — is that these companies all conduct their business exclusively, or extensively, over the Internet. That answer is technically correct but it misses a key element for understanding the information economy. The true success of these companies lies in their ability to leverage increasing returns to their competitive advantage.

Take Amazon as an example. Amazon’s decision to let other retailers, from large retail chains (e.g., Macy and Target) to mom-and-pop resellers to sell their merchandise on its Website, often in direct competition with its own retail offerings, had many skeptics at first; but no more. By transforming itself from simply a retailer into a retail platform (more on the platform concept in a later post), it is able to expand its lead as “Earth’s Largest Selection” (not just Earth’s Largest Retailer originally). With so many resellers offering a vast range of merchandise on its Website, Amazon has fortified its position as a one-stop retail destination for millions of online shoppers; if shoppers can find everything at Amazon, why would they waste time going to many other places. Thus, the more retailers Amazon can attract to its Website, the more attractive it becomes to online shoppers; as more people shop at Amazon, the more attractive its Website becomes to other retailers. The network effect is at work.

Consider Apple. Its iPhone and iPod Touch are marvelously designed. By themselves, they offer little value to their users. But the thousands and thousands of applications, available via Apple AppStore, let users add a wide range of selected functionality to these products. The more apps are available, the more attractive the iPhone and iTouch become; the more people owning them, the stronger is the incentive for developers to build applications for the iPhone and iTouch. Billions of downloads from the AppStore tell the story. Once again, the network effect is at work.

How about eBay? There are other consumer auction sites out there; but none comes close to eBay. Why goes anywhere else. As more sellers list their merchandise on eBay, more buyers find eBay an attractive place to buy; and as more buyers look for merchandise on eBay, more sellers become interested. Should I keep on saying the network effect is at work?

Look at Facebook. It was trailing far behind MySpace until it decided in May 2007 to let independent software developers to build applications for Facebook (and earn a share of advertising revenues). As more such applications become available, users can do more things (e.g., sharing shopping info with friends) on Facebook, they spend more time there instead of searching on Google or going somewhere else. As users spend more time on Facebook, advertisers become attracted. As more advertisers spend their ad dollars on Facebook, more app developers become interested; as more apps become available, users spend more time on Facebook… The virtuous circle spirals upward. Look at where Facebook is now, relatively to MySpace.

Also look at SalesForce.com. It is a pioneer of Web-based CRM software applications. Competing with software giants such as Oracle and SAP, which can spend massive amounts of money on software development, is certainly not easy. So, SalesForce creates AppExchange that lets independent developers, and users as well, to develop and market complementary applications…. [You can fill in the rest of the story].

There are more than just the network effect being at work. Amazon could have expanded its offering from books into other lines of merchandise on its own; but that would be very costly, slow and perhaps ineffective (after all, each line of merchandise requires unique “domain” expertise that takes years to build). By mobilizing other retailers to sell through its website, Amazon can accomplish the “Earths’ Largest Selection” mission very expeditiously. Furthermore, a major hurdle for online retailers is “order fulfillment” — once a customer places an online order, the merchandise has to be picked, packed, shipped and, if needed, traced. Amazon has spent around a billion dollar to build such a system. That system cannot be economically justified without the massive volume of sales to utilize it; yet, the massive volume cannot be generated without having such a system in place. Here is a chicken-and-egg problem — which one, sales volume or fulfillment system, should Amazon have first? By mobilizing resellers to Amazon site, the company can quickly build up the sales volume to justify the investments in building its fulfillment system. Scalability has been at work thanks to this. Likewise, it would be cost prohibitive and take foreever for Apple, Facebook and Salesforce to develop the massive volume of applications on their own. By mobilizing independent application developers, they can scale up very economically and expeditiously.

In the video clip above, the presenter suggests that the future lies with companies like Apple and Facebook (but not Google). That means these companies will be able to maintain their market leadership (while Google cannot, at least not so effectively). My question for you is: can they? That depends on their ability to lock-in their customers/users. In the case of Amazon, it would be very costly and time-consuming for someone else to develop an order fulfillment system of that scale and even more to replicate Amazon’s website operation capabilities (search, merchandise rating and recommendation functionality, payment processing, etc.). So, it should be difficult for resellers on Amazon to migrate elsewhere. But how about Apple, Facebook and Salesforce? As for Google, where can it finds and exploits the network effects?