Web 2.0 tools like Twitter, Facebook can foster growth in hard times

But analysts warn that companies should be prepared for potential online user attacks.

Zappos.com Inc. credits its novel Web 2.0-based sales philosophy for much of its significant sales growth -- and continuing profitability -- during the current hard times.

The online shoe and clothing store doesn't spend massive sums creating and implementing online or offline marketing and advertising campaigns, yet it still generates significant buzz among its current and potential customers.

How? Mostly through its heavy use of Twitter Inc.'s eponymous social network and, to a lesser extent, its use of tools from Web 2.0 providers like Facebook Inc.

Of Zappos.com's 1,400 employees, 450 actively use Twitter to promote the company. In fact, CEO Tony Hsieh is the 20th most popular Twitterer, with more than 186,000 followers on the social network, according to Twitterholic.com.

Instead of sending online shoppers coupons or information about sales, executives and employees at Henderson, Nev.-based Zappos.com regularly tweet about what happens to them at the airport, the fact that they eat marshmallows in between phone calls and the state of the economy.

The goal is to respond to customer comments and form personal connections with their Twitter followers, as well as with friends on Facebook, where employees post blogs and videos.

The tweets and posts are a way to give customers and other curious social network members a way to get a glimpse at the inside workings of the company.

"Today, consumers have access to so much information," said Aaron Magness, director of business development at Zappos.com. "You can buy the same shirts at Zappos as at somewhere else. The product almost becomes less important; it becomes about the business."

The privately held retailer claimed more than $1 billion in sales last year, up from $840 million in 2007. In blog posts, Hsieh said the company did cut 8% of its workforce late last year because of the declining economy, but it continues to be profitable nonetheless.

Zappos.com isn't alone in its use of social networks. Companies large and small are increasingly investigating how to best use Web 2.0 tools from the likes of Twitter, Facebook, LinkedIn and YouTube. Analysts note that there's increasing pressure from customers and employees on companies to use social networks.

Potential Risks

Analysts say that, as in the case of Zappos.com, using Web 2.0 tools to boost visibility can be a good thing, but the strategy can also pose risks, especially in a time of layoffs, benefit cutbacks and salary reductions.

For example, an employee, whether she's a CEO or a researcher, could create an online maelstrom with an unintentional slip of the keyboard. And readers of a company's online posts, bolstered by anonymity, could respond to them in a particularly vicious manner.

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