More people than ever are using the internet as a social networking platform and this has had enormous implications for business in 2008. But how many firms are actually doing anything about it and how many even know what to do about it? James Paterson explores this burgeoning area and provides some predictions for 2009.
By James Paterson, Plebble.com
According to the latest figures from the Office of National Statistics (released in August 2008), nearly every single British adult (93%) aged under 70 who have a degree or equivalent qualification now have access to the Internet in their home. Two-thirds of the all households in the UK have Internet access, a rise of more than 1.2 million since 2007. According to the same figures, 23.5 million adults in the UK (69% of the adult population) use the internet “every day or almost every day”.
What are these 23.5 million people doing every day?
The answer is that, more than ever, people are not only looking for information and content online (as they did during the early stages of mass adoption of the internet in the late 90s and early 2000s), they are now providing it – in the form of reviews, Facebook updates, photos on Flickr, videos on YouTube and blog posts about any subject imaginable, providing an unending commentary on their lives and the things they care about. This is the phenomenon known as 'Web 2.0', 'social media' or 'the social Web', and 2008 proves it’s here to stay.
James Paterson, Plebble.com
The evidence for this is compelling: according to traffic-ranking website Alexa.com, Facebook is currently the second most visited site in the UK (after Google). An estimated 12.5% of the world’s internet users visited the site yesterday alone. It boasts 120 million active users worldwide – i.e. people who have actually logged into the site within the last 30 days. This is a huge increase from the 7.1 million registered users it had at the beginning of the year.
YouTube is currently the UK’s fifth most-visited site. Nearly 20% of the world’s internet users (264 million people) went on it yesterday.
Interestingly, Blogger.com, a leading blog provider, has become the 14th most visited site in the UK, showing how popular and mainstream blogging has become. An average of 146 million people in the world visit a blog hosted by either Blogger, Word Press or Live Journal each day. Current estimates put the number of blogs in the world at around 186 million, including around 73 million blogs in China. This is up from 70 million blogs at the beginning of the year.
Leading search engines such as Google and Yahoo and technology companies such as Microsoft are also getting in on the act, meaning that 9 of the top 10 most popular UK websites are now either exclusively or in part involved in their users providing content.
So, what does this mean?
Growth of the ‘i’ economy
These changes in the way consumers are using the internet, I would suggest, reflect (or perhaps indeed have caused) the beginnings of a fundamental shift in the dynamic between consumers and businesses. In being able to provide content and information to each other in free and easy-to-create and easy-to-understand formats, consumers are becoming increasingly less receptive to marketing messages being pushed onto them by businesses via 'vertical' communication media such as the press, TV, advertising and static Web 1.0 websites. Instead they are pulling information about companies, products and services, more often than not from the most trusted of all sources – each other.
This is the ‘i’ economy – ‘i’ not meaning information or internet, but ‘me’ – it’s all about me and those like me. An example might be helpful. Think of someone wanting to watch a film. The ‘i’ consumer probably no longer studies a film poster or even reads a review in the paper before doing so. He/she will visit a peer-review film site like RottenTomatoes.com, skim a relevant discussion forum and/or search for relevant blogs via Technorati to see what ‘real’ people think about it.
They might visit Wikipedia to find out more factual information and finally download it to their PC via a peer-to-peer file sharing system like BitTorrent or stream it from a site like Watch-movies.net rather than even going to the cinema. All this is a reality for many people in 2008 – and it’s all free, can be done within minutes and, importantly, is all peer-enabled.
What this means for your business
First, the ‘i’ economy is likely to represent an extremely serious assault on your business model, particularly if it in any way relies on providing paid-for content or information. If consumers can get content and information for free, why should they pay for it? But, if they are not paying for it, who will be able to afford to create quality content or host and disseminate reliable information? Google’s unaudited costs just for Q3 of 2008 were nearly US$4 billion. Much of this can be attributed to its vast data centres that index the web and seek to provide over 81% (1.2 billion) of the world’s internet users with reliable information.
I don’t pretend to have a solution to this complex problem. Google seems convinced that the answer lies in advertising – and it certainly seems to be working for them. However, advertising cannot in my view be an applicable revenue stream in every scenario. Perhaps this is something that will be addressed more fully in 2009.
Second, whatever your business, the ‘i’ economy will also have a dramatic effect on how you do business. As above, with consumers now exchanging increasing quantities of information, businesses can less and less hide behind expensive advertising campaigns and brand-building stunts when dealing with consumers. Thanks to price comparison sites, commoditised businesses in particular such as ISPs, mobile phone network operators, utilities providers, banks and insurance companies more than ever before need to ensure they offer competitive prices.
Customer service (one of the few key ways that commoditised businesses can distinguish themselves from competitors) is also firmly under the spotlight with 'service-comparison' websites such as my own, Plebble.com. CSR and environmental credentials are also becoming easier for consumers to measure, compare and judge. Transparency is the new watch-word – in all aspects of your business.
But, as we reach the end of 2008, how many companies understand this?
Finding their feet
Many of you will probably have spent much of 2008 being told about the importance of transparency, flattening your organisational structures and engaging with consumers on a more peer-to-peer level. But, how many are actually doing anything about it? How many even know what to do about it? Which are the appropriate platforms? What is the appropriate etiquette? Where is the business case for it? As 2008 draws to a close, businesses’ adoption of Web 2.0 technologies and techniques is still piecemeal.
My evidence for this is part anecdotal and part-statistical. During the last month, I have had two separate conversations with high-level communications executives at a leading energy company and a leading telecoms company on this subject. Both acknowledged the clear change in consumer behaviour (outlined above) and their brand’s inevitable need to become more open and transparent as a result at some point in the future.
However, both said they are not ready to do so yet – they have as yet felt no business pressure to do so. In other words, they’ve felt no pain. When their P&L is directly hit by consumers who refuse to buy from a non-transparent, 'vertically-minded' company (which both acknowledged will happen soon), that is when their boards will insist on changing business practices – but will it be too late for them by then?
The issues surrounding businesses’ use of Web 2.0 technologies are also well illustrated in the second instalment of McKinsey’s Web 2.0 survey, released in the middle of 2008. This found that only about a third of surveyed companies used blogs, wikis, rss feeds, podcasts and social networking sites. This was an increase on 2007’s figures but only a modest one. The number of companies using peer-to-peer technologies has actually fallen from 37% in 2007 to 18% in 2008. 22% of surveyed companies expressed clear dissatisfaction with Web 2.0 technologies, many saying they have stopped using them as a result.
This may look bleak for proponents of Web 2.0 such as me, but it is important to remember that many Web 2.0 technologies are simply not intended for business use. Social networking, for example, is not a business application. It is, by its nature (and name) social. There is arguably no place for a brand in a social network. Who socialises with Coca Cola?
So, while it is gaining momentum (slowly), business adoption Web 2.0 is still in its infancy and businesses are finding their feet.
Some predictions for 2009...
What about predictions for 2009? I have three:
- 1. From the consumer side, we will see further moves towards the ‘i’ economy – peer-to-peer content and information sharing will become more important. The economic downturn may actually accelerate this as people look for cheaper alternatives and spend more time at home – online. Watch out too for discussions about VRM (vendor relationship management) – http://projectvrm.net/, arguably the ultimate embodiment of the ‘i’ economy.
2. Brands that take the initiative on transparency in early 2009 – listening to what people are saying about them and (importantly) engaging back – will find themselves ahead of the curve and will gain a competitive advantage in so being. Brands that do not do so will start to feel pain as a direct result of others that are taking the initiative.
3. A lot of 2009 will be about platform choice for businesses – businesses finding Web 2.0 platforms that they can use, that give them a clear seat at the table and that have a good business case for their use.
2009 is going to be an interesting year.
James Paterson is co-founder of Plebble.com.