Chapter 7: Peer Production, Social Media, and Web 2.0

7.1 Introduction

Over the past few years a fundamentally different class of Internet services has attracted users, made headlines, and increasingly garnered breathtaking market valuations. Often referred to under the umbrella term “Web 2.0A term broadly referring to Internet services that foster collaboration and information sharing; characteristics that distinctly set “Web 2.0” efforts apart from the static, transaction-oriented Web sites of “Web 1.0.” The term is often applied to Web sites and Internet services that foster social media or other sorts of peer production.,” these new services are targeted at harnessing the power of the Internet to empower users to collaborate, create resources, and share information in a distinctly different way from the static Web sites and transaction-focused storefronts that characterized so many failures in the dot-com bubble. Blogs, wikis, social networks, photo and video sharing sites, and tagging systems all fall under the Web 2.0 moniker, as do a host of supporting technologies and related efforts.

The term Web 2.0 is a tricky one because like so many popular technology terms there’s not a precise definition. Coined by publisher and pundit Tim O’Reilly in 2003, techies often joust over the breadth of the Web 2.0 umbrella and over whether Web 2.0 is something new or simply an extension of technologies that have existed since the creation of the Internet. These arguments aren’t really all that important. What is significant is how quickly the Web 2.0 revolution came about, how unexpected it was, and how deeply impactful these efforts have become. Some of the sites and services that have evolved and their Web 1.0 counterparts are listed in Table 7.1 “Web 1.0 versus Web 2.0”.Adapted from T. O’Reilly, “What Is Web 2.0?” O’Reilly, September 30, 2005.

To underscore the speed with which Web 2.0 arrived on the scene, and the impact of leading Web 2.0 services, consider the following efforts:

• According to a spring 2008 report by Morgan Stanley, Web 2.0 services ranked as seven of the world’s top ten most heavily trafficked Internet sites (YouTube, Live.com, MySpace, Facebook, Hi5, Wikipedia, and Orkut); only one of these sites (MySpace) was on the list in 2005.Morgan Stanley, Internet Trends Report, March 2008.
• With only seven full-time employees and an operating budget of less than $1 million, Wikipedia has become the Internet’s fifth most visited site on the Internet.G. Kane and R. Fichman, “The Shoemaker’s Children: Using Wikis for Information Systems Teaching, Research, and Publication,” MIS Quarterly, March 2009. The site boasts well over fifteen million articles in over two hundred sixty different languages, all of them contributed, edited, and fact-checked by volunteers.
• Just two years after it was founded, MySpace was bought for $580 million by Rupert Murdoch’s News Corporation (the media giant that owns the Wall Street Journal and the Fox networks, among other properties). By the end of 2007, the site accounted for some 12 percent of Internet minutes and had repeatedly ranked as the most-visited Web site in the United States.D. Chmielewski and J. Guynn, “MySpace Ready to Prove Itself in Faceoff,” Chicago Tribune, June 8, 2008. But rapid rise doesn’t always mean a sustained following, and by the start of 2010, some were beginning to write the service’s obituary as it failed to keep pace with Facebook.O. Malik, “MySpace, R.I.P.,” GigaOM, February 10, 2010.
• The population of rival Facebook is now so large that it could be considered the third largest “nation” in the world. Half the site’s users log in at least once a day, spending an average of fifty-five minutes a day on the site.“Facebook Facts and Figures (History and Statistics),” Website Monitoring Blog, March 17, 2010. A fall 2007 investment from Microsoft pegged the firm’s overall value at $15 billion, a number that would have made it the fifth most valuable Internet firm, despite annual revenues at the time of only $150 million.M. Arrington, “Perspective: Facebook Is Now Fifth Most Valuable U.S. Internet Company,” TechCrunch, October 25, 2007. Those revenues have been growing, with the privately held firm expected to bring in from $1.2 to $2 billion in 2010.J. Vascellaro, “Facebook CEO in No Rush to ‘Friend’ Wall Street,” Wall Street Journal, March 3, 2010.
• Just twenty months after its founding, YouTube was purchased by Google for $1.65 billion. While Google struggles to figure out how to make profitable what is currently a money-losing resource hog (over twenty hours of video are uploaded to YouTube each minute)E. Nakashima, “YouTube Ordered to Release User Data,” Washington Post, July 4, 2008. the site has emerged as the Web’s leading destination for video, hosting everything from apologies from JetBlue’s CEO for service gaffes to questions submitted as part of the 2008 U.S. presidential debates. Fifty percent of YouTube’s roughly three hundred million users visit the site at least once a week.Morgan Stanley, Internet Trends Report, March 2008.
• Twitter has emerged as a major force that can break news and shape public opinion. China and Iran are among the governments so threatened by the power of Twitter-fueled data sharing that each has, at times, blocked Twitter access within their borders. At the first Twitter-focused Chirp conference in April 2010, Twitter boasted a population of over one hundred million users who have collectively posted more than ten billion tweets (Twitter messages). By this time, the service had also spawned an ecosystem of over one hundred thousand registered Twitter-supporting apps. In another nod to the service’s significance, the U.S. Library of Congress announced plans to archive every tweet ever sent.N. Bolton, “Chirp, Twitter’s First Developer Conference, Opens Its Doors,” New York Times, April 14, 2010; and M. Shaer, “Google Launches Archive Search for Twitter,” Christian Science Monitor, April 15, 2010.
• Services such as Twitter, Yelp, and the highly profitable TripAdvisor have unleashed the voice of the customer so that it is now often captured and broadcast immediately at the point of service. Reviews are now incorporated into search results and maps, making them the first thing many customers see when encountering a brand online. TripAdvisor, with just five hundred employees, contributes over $150 million in profits to parent company Expedia (at roughly 50 percent margins),B. Wash, “Double Duty,” Colby Magazine, Winter 2009. while Yelp has reportedly turned down acquisition offers valuing it at $700 million.P. Burrows, “Hot Tech Companies Like Yelp Are Bypassing IPOs,” BusinessWeek, February 4, 2010.

Millions of users, billions of dollars, huge social impact, and these efforts weren’t even on the radar of most business professionals when today’s graduating college seniors first enrolled as freshmen. The trend demonstrates that even some of the world’s preeminent thought leaders and business publications can be sideswiped by the speed of the Internet.

Consider that when management guru Michael Porter wrote a piece titled “Strategy and the Internet” at the end of the dot-com bubble, he lamented the high cost of building brand online, questioned the power of network effects, and cast a skeptical eye on ad-supported revenue models. Well, it turns out Web 2.0 efforts challenged all of these concerns. Among the efforts above, all built brand on the cheap with little conventional advertising, and each owes their hypergrowth and high valuation to their ability to harness the network effect.

While the Web 2.0 moniker is a murky one, we’ll add some precision to our discussion of these efforts by focusing on peer productionWhen users collaboratively work to create content, products, and services. Includes social media sites, open source software, and peer-produced services, such as Skype and BitTorrent, where the participation of users provide the infrastructure and computational resources that enable the service., perhaps Web 2.0’s most powerful feature, where users work, often collaboratively, to create content and provide services online. Web-based efforts that foster peer production are often referred to as social mediaContent that is created, shared, and commented on by a broader community of users. Services that support the production and sharing of social media include blogs, wikis, video sites like YouTube, and social networks. or user-generated content sites. These sites include blogs; wikis; social networks like Facebook and MySpace; communal bookmarking and tagging sites like Del.icio.us; media sharing sites like YouTube and Flickr; and a host of supporting technologies. And it’s not just about media. Peer-produced services like Skype and BitTorrent leverage users’ computers instead of a central IT resource to forward phone calls and video. This ability saves their sponsors the substantial cost of servers, storage, and bandwidth. Peer production is also leveraged to create much of the open source software that supports many of the Web 2.0 efforts described above. Techniques such as crowdsourcing, where initially undefined groups of users band together to solve problems, create code, and develop services, are also a type of peer production. These efforts often seek to leverage the so-called wisdom of crowds, the idea that a large, diverse group often has more collective insight than a single or small group of trained professionals. These efforts will be expanded on below, along with several examples of their use and impact.

7.2 Blogs

BlogsOnline journal entries, usually made in a reverse chronological order. Blogs typically provide comment mechanisms where users can post feedback for authors and other readers. (short for Web logs) first emerged almost a decade ago as a medium for posting online diaries. (In a perhaps apocryphal story, Wired magazine claimed the term “Web log” was coined by Jorn Barger, a sometimes homeless, yet profoundly prolific, Internet poster). From humble beginnings, the blogging phenomenon has grown to a point where the number of public blogs tracked by Technorati (the popular blog index) has surpassed one hundred million.D. Takahashi, “Technorati Releases Data on State of the Blogosphere: Bloggers of the World Have United,” VentureBeat, September 28, 2008. This number is clearly a long tailIn this context, refers to an extremely large selection of content or products. The long tail is a phenomenon whereby firms can make money by offering a near-limitless selection. phenomenon, loaded with niche content that remains “discoverable” through search engines and blog indexes. TrackbacksLinks in a blog post that refer eaders back to cited sources. Trackbacks allow a blogger to see which and how many other bloggers are referring to their content. A “trackback” field is supported by most blog software and while it’s not required to enter a trackback when citing another post, it’s considered good “netiquette” to do so. (third-party links back to original blog post), and blog rollsA list of a blogger’s favorite blogs. While not all blogs include blog rolls, those that do are often displayed on the right or left column of a blog’s main page. (a list of a blogger’s favorite sites—a sort of shout-out to blogging peers) also help distinguish and reinforce the reputation of widely read blogs.

The most popular blogs offer cutting-edge news and commentary, with postings running the gamut from professional publications to personal diaries. While this cacophony of content was once dismissed, blogging is now a respected and influential medium. Some might say that many of the most popular blogs have grown beyond the term, transforming into robust media enterprises. Consider that the political blog The Huffington Post is now more popular than all but eight newspaper sites and has a valuation higher than many publicly traded papers.E. Alterman, “Out of Print, the Death and Life of the American Newspaper,” New Yorker, March 31, 2008; and M. Learmonth, “Huffington Post More Valuable Than Some Newspaper Cos.,” DigitalNext, December 1, 2008. Keep in mind that this is a site without the sports, local news, weather, and other content offered by most papers. Ratings like this are hard to achieve—most bloggers can’t make a living off their musings. But among the elite ranks, killer subscriber numbers are a magnet for advertisers. Top blogs operating on shoestring budgets can snare several hundred thousand dollars a month in ad revenue.S. Zuckerman, “Yes, Some Blogs Are Profitable—Very Profitable,” San Francisco Chronicle, October 21, 2007. Most start with ad networks like Google AdSense, but the most elite engage advertisers directly for high-value deals and extended sponsorships.

Top blogs have begun to attract well-known journalists away from print media. The Huffington Post hired a former Washington Post editor Lawrence Roberts to head the site’s investigative unit. The popular blog TechCrunch now features posts by Sarah Lacy (a BusinessWeek cover-story writer) and has hired Erick Schonfeld away from Time Warner’s business publishing empire. Schonfeld’s colleague, Om Malik, has gone on to found another highly ranked tech industry blog, GigaOM.

Senior executives from many industries have also begun to weigh in with online ruminations, going directly to the people without a journalist filtering their comments. Hotel chief Bill Marriott, Paul Levy (CEO of health care quality leader Beth Israel Deaconess Medical Center), Toyota’s Akio Toyoda, and Zappos’ CEO Tony Hsieh use their blogs for purposes that include a combination of marketing, sharing ideas, gathering feedback, press response, image shaping, and reaching consumers directly without press filtering. Blogs have the luxury of being more topically focused than traditional media, with no limits on page size, word count, or publication deadline. Some of the best examples engage new developments in topic domains much more quickly and deeply than traditional media. For example, it’s not uncommon for blogs focused on the law or politics to provide a detailed dissection of a Supreme Court opinion within hours of its release—offering analysis well ahead of, and with greater depth, than via what bloggers call the mainstream media (MSM)Refers to newspapers, magazines, television, and radio. The MSM is distinctly different from Internet media such as blogs.. As such, it’s not surprising that most mainstream news outlets have begun supplementing their content with blogs that can offer greater depth, more detail, and deadline-free timeliness.

The voice of the blogosphereA term referring to the collective community of bloggers, as well as those who read and comment on blogs. can wield significant influence. Examples include leading the charge for Dan Rather’s resignation and prompting the design of a new insulin pump. In an example of what can happen when a firm ignores social media, consider the flare-up Ingersoll Rand faced when the online community exposed a design flaw in its Kryptonite bike lock.

Online posts showed the thick metal lock could be broken with a simple ball-point pen. A video showing the hack was posted online. When Ingersoll Rand failed to react quickly, the blogosphere erupted with criticism. Just days after online reports appeared, the mainstream media picked up the story. The New York Times ran a piece titled “The Pen Is Mightier Than the Lock” that included a series of photos demonstrating the ballpoint Kryptonite lock pick. The event tarnished the once-strong brand and eventually resulted in a loss of over $10 million.

Like any Web page, blogs can be public, tucked behind a corporate firewall, or password protected. Most blogs offer a two-way dialogue, allowing users to comment on posts (sort of instant “letters to the editor,” posted online and delivered directly to the author). The running dialogue can read like an electronic bulletin board, and can be an effective way to gather opinion when vetting ideas. Comments help keep a blogger honest. Just as the “wisdom of crowds” keeps Wikipedia accurate, a vigorous community of commenters will quickly expose a blogger’s errors of fact or logic.

Despite this increased popularity, blogging has its downside. Blog comments can be a hothouse for spam and the disgruntled. Ham-handed corporate efforts (such as poor response to public criticism or bogus “praise posts”) have been ridiculed. Employee blogging can be difficult to control and public postings can “live” forever in the bowels of an Internet search engine or as content pasted on other Web sites. Many firms have employee blogging and broader Internet posting policies to guide online conduct that may be linked to the firm (see Section 7.9 “Get SMART: The Social Media Awareness and Response Team”). Bloggers, beware—there are dozens of examples of workers who have been fired for what employers viewed as inappropriate posts.

Blogs can be hosted via third-party services (Google Blogger, WordPress, Tumblr, TypePad, Windows Live Spaces), with most offering a combination of free and premium features. Blogging features have also been incorporated into social networks such as Facebook, MySpace, and Ning, as well as corporate social media platforms such as Socialtext. Blogging software can also be run on third-party servers, allowing the developer more control in areas such as security and formatting. The most popular platform for users choosing to host their own blog server is the open source WordPress system.

In the end, the value of any particular blog derives from a combination of technical and social features. The technical features make it easy for a blogger and his or her community to engage in an ongoing conversation on some topic of shared interest. But the social norms and patterns of use that emerge over time in each blog are what determine whether technology features will be harnessed for good or ill. Some blogs develop norms of fairness, accuracy, proper attribution, quality writing, and good faith argumentation, and attract readers that find these norms attractive. Others mix it up with hotly contested debate, one-sided partisanship, or deliberately provocative posts, attracting a decidedly different type of discourse.

7.3 Wikis

A wikiA Web site that can be modified by anyone, from directly within a Web browser (provided that user is granted edit access). is a Web site anyone can edit directly within a Web browser (provided the site grants the user edit access). Wikis derive their name from the Hawaiian word for “quick.” Ward Cunningham, the “wiki father” christened this new class of software with the moniker in honor of the wiki-wiki shuttle bus at the Honolulu airport. Wikis can indeed be one of the speediest ways to collaboratively create content online. Many popular online wikis serve as a shared knowledge repository in some domain.

The largest and most popular wiki is Wikipedia, but there are hundreds of publicly accessible wikis that anyone can participate in. Each attempts to chronicle a world of knowledge within a particular domain, with examples ranging from Wine Wiki for oenophiles to Wookieepedia, the Star Wars wiki. But wikis can be used for any collaborative effort—from meeting planning to project management. And in addition to the hundreds of public wikis, there are many thousand more that are hidden away behind firewalls, used as proprietary internal tools for organizational collaboration.

Like blogs, the value of a wiki derives from both technical and social features. The technology makes it easy to create, edit, and refine content; learn when content has been changed, how and by whom; and to change content back to a prior state. But it is the social motivations of individuals (to make a contribution, to share knowledge) that allow these features to be harnessed. The larger and more active a wiki community, the more likely it is that content will be up-to-date and that errors will be quickly corrected (again, we see the influence of network effects, where products and services with larger user bases become more valuable). Several studies have shown that large community wiki entries are as or more accurate than professional publication counterparts.S. Robert Lichter, Are Chemicals Killing Us? Statistical Assessment Service, May 21, 2009; J. Kane, R. Fichman, J. Gallaugher, and J. Glaser, “Community Relations 2.0,” Harvard Business Review, November 2009.

Want to add to or edit a wiki entry? On most sites you just click the “Edit” link. Wikis support what you see is what you get (WYSIWYG)A phrase used to describe graphical editing tools, such as those found in a wiki, page layout program, or other design tool. editing that, while not as robust as traditional word processors, is still easy enough for most users to grasp without training or knowledge of arcane code or markup language. Users can make changes to existing content and can easily create new pages or articles and link them to other pages in the wiki. Wikis also provide a version history. Click the “History” link on Wikipedia, for example, and you can see when edits were made and by whom. This feature allows the community to roll backThe ability to revert a wiki page to a prior version. This is useful for restoring earlier work in the event of a posting error, inaccuracy, or vandalism. a wiki to a prior page, in the event that someone accidentally deletes key info, or intentionally defaces a page.

Vandalism is a problem on Wikipedia, but it’s more of a nuisance than a crisis. A Wired article chronicled how Wikipedia’s entry for former U.S. President Jimmy Carter was regularly replaced by a photo of a “scruffy, random unshaven man with his left index finger shoved firmly up his nose.”D. Pink, “The Book Stops Here,” Wired, March 2005. Nasty and inappropriate, to be sure, but the Wikipedia editorial community is now so large and so vigilant that most vandalism is caught and corrected within seconds. Watch-lists for the most active targets (say the Web pages of political figures or controversial topics) tip off the community when changes are made. The accounts of vandals can be suspended, and while mischief-makers can log in under another name, most vandals simply become discouraged and move on. It’s as if an army of do-gooders follows a graffiti tagger and immediately repaints any defacement.

Wikis are available both as software (commercial as well as open source varieties) that firms can install on their own computers or as online services (both subscription or ad-supported) where content is hosted off-site by third parties. Since wikis can be started without the oversight or involvement of a firm’s IT department, their appearance in organizations often comes from grassroots user initiative. Many wiki services offer additional tools such as blogs, message boards, or spreadsheets as part of their feature set, making most wikis really more full-featured platforms for social computing.

Jump-starting a wiki can be a challenge, and an underused wiki can be a ghost town of orphan, out-of-date, and inaccurate content. Fortunately, once users see the value of wikis, use and effectiveness often snowballs. The unstructured nature of wikis are also both a strength and weakness. Some organizations employ wikimastersIndividuals often employed by organizations to review community content in order to delete excessive posts, move commentary to the best location, and edit as necessary. to “garden” community content; “prune” excessive posts, “transplant” commentary to the best location, and “weed” as necessary. Wikipatterns.com offers a guide to the stages of wiki adoption and a collection of community-building and content-building strategies.

7.4 Electronic Social Networks

Social networksAn online community that allows users to establish a personal profile and communicate with others. Large public social networks include MySpace, Facebook, LinkedIn, and Google’s Orkut. have garnered increasing attention as established networks grow and innovate, new networks emerge, and value is demonstrated. MySpace signed a billion-dollar deal to carry ads from Google’s AdSense network. Meanwhile, privately held Facebook has blown past the flagging MySpace. Its leadership in privacy management, offering new features, allowing third-party applications on its platform, and providing sophisticated analytics tools to corporations and other on-site sponsors have helped the firm move beyond its college roots. LinkedIn, which rounds out the big three U.S. public social networks, has grown to the point where its influence is threatening recruiting sites like Monster.com and CareerBuilder.M. Boyle, “Recruiting: Enough to Make a Monster Tremble,” BusinessWeek, June 25, 2009. It now offers services for messaging, information sharing, and even integration with the BusinessWeek Web site.

Media reports often mention MySpace, Facebook, and LinkedIn in the same sentence. However, while these networks share some common features, they serve very different purposes. MySpace pages are largely for public consumption. Started by musicians, MySpace casts itself as a media discovery tool bringing together users with similar tastes.B. Johnson, “MySpace Bosses Battle to Oust Facebook from Social Networking Top Spot,” The Guardian, March 15, 2010.

Facebook, by contrast, is more oriented towards reinforcing existing social ties between people who already know each other. This difference leads to varying usage patterns. Since Facebook is perceived by users as relatively secure, with only invited “friends” seeing your profile, over a third of Facebook users post their mobile phone numbers on their profile pages.

LinkedIn was conceived from the start as a social network for business users. The site’s profiles act as a sort of digital Rolodex that users update as they move or change jobs. Users can pose questions to members of their network, engage in group discussions, ask for introductions through mutual contacts, and comment on others’ profiles (e.g., recommending a member). Active members find the site invaluable for maintaining professional contacts, seeking peer advice, networking, and even recruiting. Carmen Hudson, Starbucks manager of enterprise staffing, states LinkedIn is “one of the best things for finding midlevel executives.”R. King, “No Rest for the Wiki,” BusinessWeek, March 12, 2007. Such networks are also putting increasing pressure on firms to work particularly hard to retain top talent. While once HR managers fiercely guarded employee directories for fear that a list of talent may fall into the hands of rivals, today’s social networks make it easy for anyone to gain a list of a firm’s staff, complete with contact information.

While these networks dominate in the United States, the network effect and cultural differences work to create islands where other social networks are favored by a particular culture or region. The first site to gain traction in a given market is usually the winner. Google’s Orkut, Mixi, and Cyworld have small U.S. followings, but are among the largest sites in Brazil, Japan, and South Korea. Research by Ipsos Insight also suggests that users in many global markets, including Brazil, South Korea, and China, are more active social networkers than their U.S. counterparts.Ipsos Insights, Online Video and Social Networking Web Sites Set to Drive the Evolution of Tomorrow’s Digital Lifestyle Globally, July 5, 2007.

Perhaps the most powerful (and controversial) feature of most social networks is the feedAn update on an individual’s activities that are broadcast to a member’s contacts or “friends.” Feeds may include activities such as posting messages, photos, or video, joining groups, or installing applications. (or newsfeed). Pioneered by Facebook but now adopted by most services, feeds provide a timely update on the activities of people or topics that an individual has an association with. Feeds can give you a heads-up when someone makes a friend, joins a group, posts a photo, or installs an application.

Feeds are inherently viralIn this context, information or applications that spread rapidly between users.. By seeing what others are doing on a social network, feeds can rapidly mobilize populations and dramatically spread the adoption of applications. Leveraging feeds, it took just ten days for the Facebook group Support the Monks’ Protest in Burma to amass over one hundred and sixty thousand Facebook members. Feeds also helped music app iLike garner three million Facebook users just two weeks after its launch.S. Lacy, Once You’re Lucky, Twice You’re Good: The Rebirth of Silicon Valley and the Rise of Web 2.0 (New York: Gotham Books, 2008); and K. Nicole, “iLike Sees Exponential Growth with Facebook App,” Mashable, June 11, 2007. Its previous Web-based effort took eight months to reach those numbers.

But feeds are also controversial. Many users react negatively to this sort of public broadcast of their online activity, and feed mismanagement can create public relations snafus, user discontent, and potentially open up a site to legal action. Facebook initially dealt with a massive user outcry at the launch of feeds, and faced a subsequent backlash when its Beacon service broadcast user purchases without first explicitly asking their permission, and during attempts to rework its privacy policy and make Facebook data more public and accessible. (See Chapter 8 “Facebook: Building a Business from the Social Graph” for more details.)

7.5 Twitter and the Rise of Microblogging

Spawned in 2006 as a side project at the now-failed podcasting start-up Odeo (an effort backed by Blogger.com founder Evan Williams), Twitter has been on a rocket ride. The site’s user numbers have blasted past both mainstream and new media sites, dwarfing New York Times, LinkedIn, and Digg, among others. Reports surfaced of rebuffed buyout offers as high as $500 million.S. Ante, “Facebook’s Thiel Explains Failed Twitter Takeover,” BusinessWeek, March 1, 2009. By the firm’s first developer conference in April 2010, Twitter and its staff of 175 employees had created a global phenomenon embraced by over one hundred million users worldwide.

Twitter is a microbloggingA type of short-message blogging, often made via mobile device. Microblogs are designed to provide rapid notification to their readership (e.g., a news flash, an update on one’s activities), rather than detailed or in-depth comments. Twitter is the most popular microblogging service. service that allows users to post 140-character messages (tweetsA Twitter post, limited to 140 characters.) via the Web, SMSA text messaging standard used by many mobile phones., or a variety of third-party desktop and smartphone applications. The microblog moniker is a bit of a misnomer. The service actually has more in common with Facebook’s status updates and news feeds than it does with traditional blogs. But unlike Facebook, where most users must approve “friends” before they can see status updates, Twitter’s default setting allows for asymmetrical following (although it is possible to set up private Twitter accounts and to block followers).

Sure, there’s a lot of inane “tweeting” going on—lots of meaningless updates that read, “I’m having a sandwich” or “in line at the airport.” But while not every user may have something worthwhile to tweet, many find that Twitter makes for invaluable reading, offering a sense of what friends, customers, thought leaders, and newsmakers are thinking. Twitter leadership has described the service as communicating “The Pulse of the Planet.”E. Schonfeld, “Twitter’s Internal Strategy Laid Bare: To Be ‘The Pulse of The Planet,’” TechCrunch, July 19, 2009. For many, Twitter is a discovery engine, a taste-making machine, a critical source of market intelligence, a source of breaking news, and an instantaneous way to plug into the moment’s zeitgeist.

Many also find Twitter to be an effective tool for quickly blasting queries to friends, colleagues, or strangers who might offer potentially valuable input. Says futurist Paul Saffo, “Instead of creating the group you want, you send it and the group self-assembles.”C. Miller, “Putting Twitter’s World to Use,” New York Times, April 13, 2009. Users can classify comments on a given topic using hash tagsA method for organizing tweets where keywords are preceeded by the # character. (keywords preceded by the “#” or “hash” symbol), allowing others to quickly find related tweets (e.g., #iranelection, #mumbai, #swineflu, #sxsw). Any user can create a hash tag—just type it into your tweet (you may want to search Twitter first to make sure that the tag is not in use by an unrelated topic and that if it is in use, it appropriately describes how you want your tweet classified).

Twitter users have broken news during disasters, terror attacks, and other major events. Dictators fear the people power Twitter enables, and totalitarian governments worldwide have moved to block citizen access to the service (prompting Twitter to work on censor-evading technology). During the 2009 Iranian election protests, the U.S. State Department even asked Twitter to postpone maintenance to ensure the service would continue to be available to support the voice and activism of Iran’s democracy advocates.C. Ruffini, “State Dept. Asked Twitter to Delay Maintenance,” CBS News, June 16, 2009.

Twitter is also emerging as a legitimate business tool. Consider the following commercial examples:

• Starbucks uses Twitter in a variety of ways. It has run Twitter-based contests and used the service to spread free samples of new products, such as its VIA instant coffee line. Twitter has also been a way for the company to engage customers in its cause-based marketing efforts, such as (Starbucks) RED, which supports (Product) RED. Starbucks has even recruited staff via Twitter and was one of the first firms to participate in Twitter’s advertising model featuring “promoted tweets.”
• Dell used Twitter to uncover an early warning sign indicating poor design of the keyboard on its Mini 9 Netbook PC. After a series of tweets from early adopters indicated that the apostrophe and return keys were positioned too closely together, the firm dispatched design change orders quickly enough to correct the problem when the Mini 10 was launched just three months later. By December 2009, Dell also claimed to have netted $6.5 million in outlet store sales referred via the Twitter account @DellOutlet (more than 1.5 million followers)K. Eaton, “Twitter Really Works: Makes $6.5 Million in Sales for Dell,” Fast Company, December 8, 2009. and another $1 million from customers who have bounced from the outlet to the new products site.J. Abel, “Dude—Dell’s Making Money Off Twitter!” Wired News, June 12, 2009.
• Brooklyn Museum patrons can pay an additional $20 a year for access to the private, members-only “1stFans” Twitter feed that shares information on special events and exclusive access to artist content.
• Twitter is credited with having raised millions via Text-to-Donate and other fundraising efforts following the Haiti earthquake.
• Twitter can be a boon for sharing time-sensitive information. The True Massage and Wellness Spa in San Francisco tweets last-minute cancellations to tell customers of an unexpected schedule opening. With Twitter, appointments remain booked solid. Gourmet food trucks, popular in many American cities, are also using Twitter to share location and create hipster buzz. Los Angeles’s Kogi Korean Taco Truck now has over sixty thousand followers and uses Twitter to reveal where it’s parked, ensuring long lines of BBQ-craving foodies. Of the firm’s success, owner Roy Choi says, “I have to give all the credit to Twitter.”A. Romano, “Now 4 Restaurant 2.0,” Newsweek, February 28, 2009.
• Electronics retailer Best Buy has recruited over 2,300 Blue Shirt and Geek Squad staffers to crowdsource Twitter-driven inquiries via @Twelpforce, the firm’s customer service Twitter account. Best Buy staffers register their personal Twitter accounts on a separate Best Buy–run site. Then any registered employees tweeting using the #twelpforce, will automatically have those posts echoed through @Twelpforce, with the employee’s account credited at the end of the tweet. As of November 2009, Twelpforce had provided answers to over 19,500 customer inquiries.Twitter.com, “Case Study: Best Buy Twelpforce,” Twitter 101, http://business.twitter.com/twitter101/case_bestbuy.

Surgeons and residents at Henry Ford Hospital have even tweeted during brain surgery (the teaching hospital sees the service as an educational tool). Some tweets are from those so young they’ve got “negative age.” Twitter.com/kickbee is an experimental fetal monitor band that sends tweets when motion is detected: “I kicked Mommy at 08:52.” And savvy hackers are embedding “tweeting” sensors into all sorts of devices. Botanicalls, for example, offers an electronic flowerpot stick that detects when plants need care and sends Twitter status updates to owners (sample post: “URGENT! Water me!”).

Organizations are well advised to monitor Twitter activity related to the firm, as it can act as a sort of canary-in-a-coal mine uncovering emerging events. Users are increasingly using the service as a way to form flash protest crowds. Amazon.com, for example, was caught off guard over a spring 2009 holiday weekend when thousands used Twitter to rapidly protest the firm’s reclassification of gay and lesbian books (hash tag #amazonfail). Others use the platform for shame and ridicule. BP has endured withering ridicule from the satire account @BPGlobalPR (followed by roughly 200,000 two months after the spill).

For all the excitement, many wonder if Twitter is overhyped. Some reports suggest that many Twitter users are curious experimenters who drop the service shortly after signing up.D. Martin, “Update: Return of the Twitter Quitters,” Nielsen Wire, April 30, 2009. This raises the question of whether Twitter is a durable phenomenon or just a fad.

Pundits also wonder if revenues will ever justify initially high valuations and if rivals could usurp Twitter’s efforts with similar features. Thus far, Twitter has been following a “grow-first-harvest-later” approach.J. Murrell, “Twitter Treads Gently into Advertising Minefield,” San Jose Mercury News, April 13, 2010. The site’s rapid rise has allowed it to attract enough start-up capital to enable it to approach revenue gradually and with caution, in the hopes that it won’t alienate users with too much advertising (an approach not unlike Google’s efforts to nurture YouTube). MIT’s Technology Review reports that data sharing deals with Google and Bing may have brought in enough money to make the service profitable in 2009, but that amount was modest (just $25 million).D. Talbot, “Can Twitter Make Money?” Technology Review, March/April 2010. Twitter’s advertising platform is expected to be far more lucrative. Reflecting Twitter’s “deliberately cautious” approach to revenue development, the ad model featuring sponsored ‘‘promoted tweets” rolled out first as part of the search, with distribution to individual Twitter feeds progressing as the firm experiments and learns what works best for users and advertisers.

Another issue—many Twitter users rarely visit the site. Most active users post and read tweets using one of many—often free—applications provided by third parties, such as Seesmic, TweetDeck, and Twhirl. This happens because Twitter made its data available for free to other developers via API (application programming interface)Programming hooks, or guidelines, published by firms that tell other programs how to get a service to perform a task such as send or receive data. For example, Amazon.com provides APIs to let developers write their own applications and Websites that can send the firm orders.. Exposing data can be a good move as it spawned an ecosystem of over one hundred thousand complementary third-party products and services that enhance Twitter’s reach and usefulness (generating network effects from complementary offerings similar to other “platforms” like Windows, iPhone, and Facebook). There are potential downsides to such openness. If users don’t visit Twitter.com, that lessens the impact of any ads running on the site. This creates what is known as the “free rider problemWhen others take advantage of a user or service without providing any sort of reciprocal benefit.,” where users benefit from a service while offering no value in exchange. Encouraging software and service partners to accept ads for a percentage of the cut could lessen the free rider problem.P. Kafka, “Twitter’s Ad Plan: Copy Google,” AllThingsD, February 25, 2010.

When users don’t visit a service, it makes it difficult to spread awareness of new products and features. It can also create branding challenges and customer frustration. Twitter execs lamented that customers were often confused when they searched for “Twitter” in the iPhone App Store and were presented with scores of offerings but none from Twitter itself.D. Goldman, “Twitter Grows Up: Take a Peek Inside,” CNN, April 16, 2010. Twitter’s purchase of the iPhone app Tweetie (subsequently turned into the free “Twitter for iPhone” app) and the launch of its own URL-shortening service (competing with bit.ly and others) signal that Twitter is willing to move into product and service niches and compete with third parties that are reliant on the Twitter ecosystem.

Microblogging does appear to be here to stay, and the impact of Twitter has been deep, broad, stunningly swift, and at times humbling in the power that it wields. But whether Twitter will be a durable, profit-gushing powerhouse remains to be seen. Speculation on Twitter’s future hasn’t prevented many firms from commercializing new microblogging services, and a host of companies have targeted these tools for internal corporate use. Salesforce.com’s Chatter, Socialtext Signals, and Yammer are all services that have been billed as “Twitter for the Enterprise.” Such efforts allow for Twitter-style microblogging that is restricted for participation and viewing by firm-approved accounts.

7.6 Other Key Web 2.0 Terms and Concepts

7.7 Prediction Markets and the Wisdom of Crowds

Many social software efforts leverage what has come to be known as the wisdom of crowdsThe idea that a group of individuals (the crowd), often consisting of untrained amateurs, will collectively have more insight than a single or small group of trained professionals.. In this concept, a group of individuals (the crowd often consists mostly of untrained amateurs), collectively has more insight than a single or small group of trained professionals. Made popular by author James Surowiecki (whose best-selling book was named after the phenomenon), the idea of crowd wisdom is at the heart of wikis, folksonomy tagging systems, and many other online efforts. An article in the journal Nature positively comparing Wikipedia to Encyclopedia Britannica lent credence to social software’s use in harnessing and distilling crowd wisdom.J. Giles, “Special Report: Internet Encyclopedias Go Head to Head,” Nature 438, no. 15 (December 14, 2005): 900–901.

The crowd isn’t always right, but in many cases where topics are complex, problems are large, and outcomes are uncertain, a large, diverse group may bring collective insight to problem solving that one smart guy or a professional committee lacks. One technique for leveraging the wisdom of crowds is a prediction marketPolling a diverse crowd and aggregating opinions in order to form a forecast of an eventual outcome., where a diverse crowd is polled and opinions aggregated to form a forecast of an eventual outcome. The concept is not new. The stock market is arguably a prediction market, with a stock price representing collective assessment of the discounted value of a firm’s future earnings. But Internet technologies are allowing companies to set up prediction markets for exploring all sorts of problems.

Consider Best Buy, where employees are encouraged to leverage the firm’s TagTrade prediction market to make forecasts, and are offered small gifts as incentives for participation. The idea behind this incentive program is simple: the “blue shirts” (Best Buy employees) are closest to customers. They see traffic patterns and buying cycles, can witness customer reactions first hand, and often have a degree of field insight not available to senior managers at the company’s Minneapolis headquarters. Harness this collective input and you’ve got a group brain where, as wisdom of crowds proponents often put it, “the we is greater than the me.” When Best Buy asked its employees to predict gift card sales, the “crowd’s” collective average answer was 99.5 percent accurate; experts paid to make the prediction were off by 5 percent. Another experiment predicting holiday sales was off by only 1/10 of 1 percent. The experts? Off by 7 percent!P. Dvorak, “Best Buy Taps ‘Prediction Market,’” Wall Street Journal, September 16, 2008; and Renée Dye, “The Promise of Prediction Markets: A Roundtable,” McKinsey Quarterly (2008): 83–93.

In an article in the McKinsey Quarterly, Surowiecki outlined several criteria necessary for a crowd to be “smart.”R. Dye, “The Promise of Prediction Markets: A Roundtable,” McKinsey Quarterly (2008): 83–93. The crowd must

• be diverse, so that participants are bringing different pieces of information to the table,
• be decentralized, so that no one at the top is dictating the crowd’s answer,
• offer a collective verdict that summarizes participant opinions,
• be independent, so that each focuses on information rather than the opinions of others.

Google, which runs several predictive markets, underscored these principles when it found that predictions were less accurate when users were geographically proximate, meaning folks in the same work group who sat near one another typically thought too much alike.B. Cowgill, J. Wolfers, and E. Zitzewitz, “Using Prediction Markets to Track Information Flows: Evidence from Google,” working paper accessed November 30, 2009, via http://bocowgill.com/GooglePredictionMarketPaper.pdf. Poorer predictive outcomes likely resulted because these relatively homogeneous clusters of users brought the same information to the table (yet another reason why organizations should hire and cultivate diverse teams).

Many firms run predictive markets to aid in key forecasts, and with the potential for real financial payoff. But University of Chicago law professor Todd Henderson warns predictive markets may also hold legal and ethical challenges. The Securities and Exchange Commission may look askance at an employee who gets a heads-up in a predictive market that says a certain drug is going to be approved or fail clinical trials. If she trades on this information is she an insider, subject to prosecution for exploiting proprietary data? Disclosure issues are unclear. Gambling laws are also murky, with Henderson uncertain as to whether certain predictive markets will be viewed as an unregulated form of betting.R. Dye, “The Promise of Prediction Markets: A Roundtable,” McKinsey Quarterly 2 (2008): 83–93.

Publicly accessible prediction markets are diverse in their focus. The Iowa Electronic Market attempts to guess the outcome of political campaigns, with mixed results. Farecast (now part of Microsoft’s Bing knowledge engine) claims a 75 percent accuracy rate for forecasting the future price of airline tickets.“Audit Reveals Farecast Predictive Accuracy at 74.5 percent,” farecast.live.com, May 18, 2007, http://www.prnewswire.com/news-releases/farecast-launches-new-tools-to -help-savvy-travelers-catch-elusive-airfare-price-drops-this-summer-58165652.html. The Hollywood Stock Exchange allows participants to buy and sell prediction shares of movies, actors, directors, and film-related options. The exchange, now owned by investment firm Cantor Fitzgerald, has picked Oscar winners with 90 percent accuracy.J. Surowiecki, “Crowdsourcing the Crystal Ball,” Forbes, October 15, 2007. And at HedgeStreet.com, participants can make microbets, wagering as little as ten dollars on the outcome of economic events, including predictions on the prices of homes, gold, foreign currencies, oil, and even the economic impact of hurricanes and tropical storms. HedgeStreet is considered a market and is subject to oversight by the Commodity Futures Trading Commission.E. Lambert, “Hedging for Dummies,” Forbes, March 13, 2006, 70–72.

7.8 Crowdsourcing

The power of Web 2.0 also offers several examples of the democratization of production and innovation. Need a problem solved? Offer it up to the crowd and see if any of their wisdom offers a decent result. This phenomenon, known as crowdsourcingThe act of taking a job traditionally performed by a designated agent (usually an employee) and outsourcing it to an undefined generally large group of people in the form of an open call., has been defined by Jeff Howe, founder of the blog crowdsourcing.com and an associate editor at Wired, as “the act of taking a job traditionally performed by a designated agent (usually an employee) and outsourcing it to an undefined, generally large group of people in the form of an open call.”J. Howe, “The Rise of Crowdsourcing,” Wired, June 2006.

Can the crowd really do better than experts inside a firm? At least one company has literally struck gold using crowdsourcing. As told by Don Tapscott and Anthony Williams in their book Wikinomics, mining firm Goldcorp was struggling to gain a return from its 55,000-acre Canadian property holdings. Executives were convinced there was gold “in them thar hills,” but despite years of efforts, the firm struggled to strike any new pay dirt. CEO Rob McEwen, a former mutual fund manager without geology experience who unexpectedly ended up running Goldcorp after a takeover battle, then made what seemed a Hail Mary pass—he offered up all the firm’s data, on the company’s Web site. Along with the data, McEwen ponied up $575,000 from the firm as prize money for the Goldcorp Challenge to anyone who came up with the best methods and estimates for reaping golden riches. Releasing data was seen as sacrilege in the intensely secretive mining industry, but it brought in ideas the firm had never considered. Taking the challenge was a wildly diverse group of “graduate students, consultants, mathematicians, and military officers.” Eighty percent of the new targets identified by entrants yielded “substantial quantities of gold.” The financial payoff? In just a few years a one-hundred-million-dollar firm grew into a nine-billion-dollar titan. For Goldcorp, the crowd coughed up serious coin.

Netflix followed Goldcorp’s lead, offering anonymous data to any takers, along with a one-million-dollar prize to the first team that could improve the accuracy of movie recommendations by 10 percent. Top performers among the over thirty thousand entrants included research scientists from AT&T Labs, researchers from the University of Toronto, a team of Princeton undergrads, and the proverbial “guy in a garage” (and yes, that was his team name). Frustrated for nearly three years, it took a coalition of four teams from Austria, Canada, Israel, and the United States to finally cross the 10 percent threshold. The winning team represented an astonishing brain trust that Netflix would never have been able to harness on its own.S. Lohr, “And the Winner of the $1 Million Netflix Prize (Probably) Is…” New York Times, June 26, 2009.

Other crowdsourcers include Threadless.com, which produces limited run t-shirts with designs users submit and vote on. Marketocracy runs stock market games and has created a mutual fund based on picks from the 100 top-performing portfolios. Just under seven years into the effort, the firm’s m100 Index reports a 75 percent return versus 35 percent for the S&P 500. The St. Louis Cardinals baseball team is even crowdsourcing. The club’s One for the Birds contest calls for the fans to submit scouting reports on promising players, as the team hopes to broaden its recruiting radar beyond its classic recruiting pool of Division I colleges.

There are several public markets for leveraging crowdsourcing for innovation, or as an alternative to standard means of production. Waltham, Massachusetts–based InnoCentive allows “seekers” to offer cash prizes ranging from ten to one hundred thousand dollars. Over one hundred twenty thousand “solvers” have registered to seek solutions for tasks put forward by seekers that include Dow Chemical, Eli Lilly, and Procter & Gamble. Among the findings offered by the InnoCentive crowd are a biomarker that measures progression of ALS. Amazon.com has even created an online marketplace for crowdsourcing called Mechanical Turk. Anyone with a task to be completed or problem to be solved can put it up for Amazon, setting their price for completion or solution. For its role, Amazon takes a small cut of the transaction. And alpha geeks looking to prove their code chops can turn to TopCoder, a firm that stages coding competitions that deliver real results for commercial clients such as ESPN. By 2009, TopCoder contests had attracted over 175,000 participants from 200 countries.M. Brandel, “Should Your Company ‘Crowdsource’ Its Next Project?” Computerworld, December 6, 2007; M. Brandel, “Crowdsourcing: Are You Ready to Ask the World for Answers?” Computerworld, March 3, 2008; and TopCoder, 2009, http://topcoder.com/home.

Not all crowdsourcers are financially motivated. Some benefit by helping to create a better service. Facebook leveraged crowd wisdom to develop versions of its site localized in various languages. Facebook engineers designated each of the site’s English words or phrases as a separate translatable object. Members were then invited to translate the English into other languages, and rated the translations to determine which was best. Using this form of crowdsourcing, fifteen hundred volunteers cranked out Spanish Facebook in a month. It took two weeks for two thousand German speakers to draft Deutsch Facebook. How does the Facebook concept of “poke” translate around the world? The Spaniards decided on “dar un toque,” Germans settled on “anklopfen,” and the French went with “envoyer un poke.”D. Kirkpatrick, “Help Wanted: Adults on Facebook,” Fortune, March 21, 2008. Vive le crowd!

7.9 Get SMART: The Social Media Awareness and Response Team

For an example of how outrage can go viral, consider Dave Carroll.The concepts in this section are based on work by J. Kane, R. Fichman, J. Gallaugher, and J. Glasser, many of which are covered in the article “Community Relations 2.0,” Harvard Business Review, November 2009. The Canadian singer-songwriter was traveling with his band Sons of Maxwell on a United Airlines flight from Nova Scotia to Nebraska when, during a layover at Chicago’s O’Hare International Airport, Carroll saw baggage handlers roughly tossing his guitar case. The musician’s $3,500 Taylor guitar was in pieces by the time it arrived in Omaha. In the midst of a busy tour schedule, Carroll didn’t have time to follow up on the incident until after United’s twenty-four-hour period for filing a complaint for restitution had expired. When United refused to compensate him for the damage, Carroll penned the four-minute country ditty “United Breaks Guitars,” performed it in a video, and uploaded the clip to YouTube (sample lyrics: “I should have gone with someone else or gone by car…’cuz United breaks guitars”). Carroll even called out the unyielding United rep by name. Take that, Ms. Irlwig! (Note to customer service reps everywhere: you’re always on.)

The clip went viral, receiving 150,000 views its first day and five million more by the next month. Well into the next year, “United Breaks Guitars” remained the top result on YouTube when searching the term “United.” No other topic mentioning that word—not “United States,” “United Nations,” or “Manchester United”—ranked ahead of this one customer’s outrage.

Scarring social media posts don’t just come from outside the firm. Earlier that same year employees of Domino’s Pizza outlet in Conover, North Carolina, created what they thought would be a funny gross-out video for their friends. Posted to YouTube, the resulting footage of the firm’s brand alongside vile acts of food prep was seen by over one million viewers before it was removed. Over 4.3 million references to the incident can be found on Google, and many of the leading print and broadcast outlets covered the story. The perpetrators were arrested, the Domino’s storefront where the incident occurred was closed, and the firm’s president made a painful apology (on YouTube, of course).

Not all firms choose to aggressively engage social media. As of this writing some major brands still lack a notable social media presence (Apple comes immediately to mind). But your customers are there and they’re talking about your organization, its products, and its competitors. Your employees are there, too, and without guidance, they can step on a social grenade with your firm left to pick out the shrapnel. Soon, nearly everyone will carry the Internet in their pocket. Phones and MP3 players are armed with video cameras capable of recording every customer outrage, corporate blunder, ethical lapse, and rogue employee. Social media posts can linger forever online, like a graffiti tag attached to your firm’s reputation. Get used to it—that genie isn’t going back in the bottle.

As the “United Breaks Guitars” and “Domino’s Gross Out” incidents show, social media will impact a firm whether it chooses to engage online or not. An awareness of the power of social media can shape customer support engagement and crisis response, and strong corporate policies on social media use might have given the clueless Domino’s pranksters a heads-up that their planned video would get them fired and arrested. Given the power of social media, it’s time for all firms to get SMARTThe social media awareness and response team. A group tasked with creating policies and providing support, training, guidance, and development expertise for and monitoring of a firm’s social media efforts., creating a social media awareness and response team. While one size doesn’t fit all, this section details key issues behind SMART capabilities, including creating the social media team, establishing firmwide policies, monitoring activity inside and outside the firm, establishing the social media presence, and managing social media engagement and response.