Web 2.0 dropbox describes websites that uses technology beyond the original pages of the earlier websites. In fact web 2.0 suggests a new version of the World Wide Web and never refers to an update of any technical specification, but often cumulate changes in ways the web is used by the software developers and end users. It therefore allow users to interact and work together in one another in other social media dialogues to create content that are user friendly different from other sites where people are limited to the content viewing. This paper with therefore focus on how to build collective user value and activate network effects and its implementation to a business. This is useful tool in the application of Web 2.0 techniques in tactical thinking of the business. With that said, the paper will focus in examining the why of Web 2.0 and focus on the strategic side of online business and why we should incorporate these strategies into our business.
However, in order for the web 2.0 to be successful, the ability to collect information from the users and share it in a form that, others are willing to pay for it forms an integral part of many Web 2.0 projects. This means that it relies on users to contribute value to the larger environment, creation of such environment often remain the challenge as it requires different kinds of analysis than that of pure consumer environments. This demand for the need to understand basic value and cost to the users. Value goes beyond the infrastructure or brand for a growing company but also customers. In case of the online business, ad based revenue make up a larger part of their lifetime value of a customer.
For instance Flicker found innovative ways to avoid the four major cost drivers of the retail photo printing business and positive network effects generator. Through collective user value strategies, Flicker converted its significant costs savings into competitive advantage and positive network effects generator through user supplied photo inventory, little maintenance, partnerships with third party developers and positive network effects.
Flicker made it possible by creating user value through opened up digital content to global interaction that created better search through user generated information. They also enabled easier exploration through online groups that catalyzed and amplified group social networks that encouraged others to become part of digital ecosystem. The user value was also enhanced through evaluation of own projects to find areas of collective user value by finding ways of maximizing the creation by changing the relationships or interactions between online and offline users.
Through user value assessment, we learn that Flicker’s digital photo sharing is their customer acquisition costs. These costs were tied directly to how much it cost to build up and keep the media lending library up to date. It was evident that collective value has an immediate and recognizable impact of cost structure and cash flow requirements is growing a customer focused business.
Web 2.0 is dependent on network effects. Positive network effects contribute to hyper growth of such as Skype, yahoo and Google as well as Flickers and Craigslist. Network effects have strategically combined different kinds of network effects including direct, indirect, cross network and social network to multiply the overall positive impact of network value creation. With increased value of good, the number of people using it increases. More usage if the products spawn the production of increasingly valuable complementary goods resulting to added value to the original product or service. Network effects figure out what online and offline network effects are and how they can be measured as well as the unlikely groups and places that could generate positive effects. Therefore, once inventoried, network effects should help multiply and compound online network effects using powerful dynamic pricing demand side effects. The more systematically you examine the influence of network effects on your business the more opportunities you will find for creating and capturing both online and offline network effects.
Therefore, combining more than one type leads to multiplicative outcomes, not just simple incremental value. From this simple case, we can learn that Google may seem unique and although it has seized search market, there is still plenty of room to follow similar path in other markets. Likewise, if you product is unheard of, it will be hard to succeed in the market therefore early adoption is very critical. In case to ensure maximum profit margin, product cost is a classic barrier, reputation is critical therefore make it easy to stay with your service as too many products reach a certain market share then stop. Always take advantage of the long tail since as more join, it becomes easier to justify serving specific audiences as people are more likely to stay when rare features are provided that cannot be found elsewhere.
Social networking penetrate and enrich Web 2.0 projects even when they are not the central focus thereby acting as the natural conduit for network effects as such, social network forms the key community building for strengthening a projects appeal. While social networking can be businesses of its own, they are useful in reaching a much larger audience and building stronger ties with the business community. It is useful to map the online social network structure of a target market.
Online social networking experience therefore teaches three critical lessons. This includes importance of social network and effects for building business scale. Also, the value to users can generate by sharing even basic information with longer and larger group. It is incredible acceleration provided by bringing this kind of task to the web. Therefore, companies build their businesses on competencies as success in business depends in doing better than your competition to produce something unique, faster, better and cheaper.
The Web has created new opportunities for business to sell software and services including features and content used to be kept tightly proprietary. Businesses should therefore look for what they do well and find ways to sell it over the Web as well as look at what they need and find ways to source it from the Web as Web 2.0 promises greatness and not necessarily that of creative destruction voiced by the original dot com doomsayers. However, it is worth noting that the rules of business have changed, but it I not simply a case of replacing earlier business models with web based businesses.
The major principals indicate that formation of click and mortar online network partnerships can be valuable. Some of the principals indicate that focused bridging and building new networks rather than replacing or disrupting the infrastructures of the offline companies. This provides plenty opportunities for connecting innovations in both the offline and online business worlds as this makes potential competitors the potential partners. New business models provide companies with revenue stream built on an approach that would let them compete with competitors.
In terms of the Web 2.0 social impact, the web has also been subject to critics with other philosophy claiming that the web has created a cult which undermines the notion of the expertise by allowing anybody, anywhere to share and place undue value upon their own opinions about any subject and post any kind of content regardless of their particular talents, knowledge, credentials, biases or possible hidden agendas.
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