Consumer Demand Should Prevent Web 2.0 Bubble, Say Users, Analysts

Computerworld - Vendors’ rush to build Web 2.0 technologies reminds some observers of the wild run-up to the Internet bubble during the late 1990s.

However, users and analysts say there is a significant difference this time: Customers are demanding that businesses use wikis, blogs, podcasts, widgets and social networks to communicate with them, and many businesses are already responding to that demand.

Vendors no longer need to create a corporate use for new technologies out of thin air, they noted.

Joseph Jang, director of marketing at mortgage banking company Liberty Financial Group Inc. in Bellevue, Wash., said his company plans to use Zoodango Inc.’s social network to boost brand recognition with a block of customers the company hasn’t reached using more traditional outlets.

The company and its 80-plus loan officers will post profiles on the Seattle-based vendor’s site to generate leads and better interact with users, Jang said. “[Social networking] promotes aspects of interaction you haven’t had before between consumers and the business,” he said. “I don’t think I fully grasp the potential of the interaction between the two entities. This is a living, breathing thing. It will evolve as it goes along.”

Also wading into the Web 2.0 waters is the Austin-based State Bar of Texas, which next month plans to launch a branded social network that will let its 80,000 members connect, collaborate and network, said John Sirman, the organization’s Web manager.

The bar association will use technology from Mountain View, Calif.-based Affinity Circles Inc. to create a members-only social network, Sirman said.

Attorneys can feed existing blogs into the community, and members can form special interest groups to collaborate on specific topics, he said.

“We know a lawyer’s business and career depend on networking and connections they have with other people,” Sirman said. “I see [the social network] as providing an online venue to do that and meet people outside their local circles.”

James Sun, CEO of Zoodango, said businesses must adapt to the Web 2.0 method of interacting with customers rather than continue to “blast them” with traditional advertising.

Zoodango this month launched a new program to help businesses and nonprofits use Web 2.0 principles to augment branding and marketing efforts. And during the next several months, Zoodango plans to launch a “virtual Starbucks” online community to allow business professionals to network online as they would in coffeehouses, he added.

Andrew McAfee, an associate professor at Harvard Business School who specializes in IT issues, said companies must embrace the technologies or risk losing out to competitors.

“What if [corporate users] decide to ignore this phenomenon, and their competitors don’t and are able to harness this energy we see on the Web with Web 2.0?” he said. “That is a key question for managers.”

McAfee said he doesn’t expect that a rush to create Web 2.0-based systems will lead to a new dot-com bubble that will burst under the stress of failing businesses. “The first go-around was so big and there was so large a collapse that I have trouble believing either the up or the down will be as big this time around,” he said.

David Kirsch, an assistant professor at the University of Maryland and founder of the Business Plan Archive, a historical archive of business plans and other documents from the dot-com era, noted that the “Web 1.0” companies helped ensure the survival of the new firms by creating a strong infrastructure.

“There were community sites in Web 1.0, but what is happening here is we now have the simplest infrastructure pieces, like broadband,” he said. “The people who are participating in Web 2.0 have what they need to do the things people were just talking about in Web 1.0.”