International Study Urges Organizations to Adapt to Web 2.0 "Phenomenon"

First-of-its-kind Booz Allen survey shows that online interaction is changing consumer behavior worldwide.

by / June 25, 2007
Internet usage that involves online collaboration, networking between individual users, and user-created content - known as Web 2.0 -- is growing rapidly and is changing the way companies and organizations around the world should operate, a new Booz Allen Hamilton study has found. Consumers no longer visit the Internet to passively take in content; rather, they are actively creating content themselves.

"In this new era of interactivity, corporations must be aware of what is taking place on the Internet and in social media spaces like MySpace, Wikipedia, and Second Life. They also must decide how to participate in this new world. They must develop a strategy to address the threats posed by Web 2.0 and seize the opportunities it offers. This is equally true for corporations operating in the Middle East, where Web 2.0 sites have a dedicated following," said Jad Hajj, an associate with Booz Allen Hamilton, a global management consulting firm with offices throughout the MENA region.

He added that companies also may need to change their business models to better fit the new online environment. "Those that ignore the growing trend of Web 2.0 usage do so at their own peril," he warned.

To understand the full scale of Web 2.0 activity and learn how it might affect consumer behavior, Booz Allen conducted a first-of-its-kind study to investigate trends in Web 2.0 usage, including social behavior and networking, usage of communication and Internet services, and customer expenditure.

As part of the study, 4,570 individuals in the Middle East, Germany, the United Kingdom, Brazil, and the United States were surveyed between August 2006 and January 2007. The Middle Eastern countries surveyed included Egypt, the United Arab Emirates (UAE), Bahrain, Kuwait, Qatar, and Saudi Arabia.

What is Web 2.0?
The term "Web 2.0" describes online activities, sites, and applications that allow individuals to interact in online communities, directly exchange information with one another, and create their own content online. It involves technologies such as blogging, Wikis (i.e., websites such as Wikipedia that allow visitors to add, remove, edit, and change content, typically without the need for registration), social networking sites such as MySpace, LinkedIn, and, virtual meeting places such as Second Life or FunkySexyCool, media sharing sites such as YouTube and Flickr, podcasting and vidcasting.

Web 2.0 also describes the new ways in which people use the Web, such as writing a blog rather than creating a static personal site; participating in social networking sites rather than sending emails to isolated colleagues; or accessing voice-over-Internet protocol (VoIP) rather than using landline phone services. In general, Web 2.0 sites are distinguished by the wide-scale harnessing of collective intelligence - such as that which goes into creating Wikipedia, the ubiquitous online encyclopedia - and the enlisting of virtual users as content co-developers.

The scale of Web 2.0 activity is astonishing. For example, MySpace, a social networking site boasts 120 million users and a half-million new users added per week. YouTube, a site that hosts user-generated videos, has 100 million video clips downloaded per day and 65,000 video clips uploaded. Flickr, an online photo management and sharing application, has 7 million page views per day.

"The survey enabled Booz Allen to identify some major social and behavioral trends related to Web 2.0 usage - and it showed unequivocally that Web 2.0 usage is a growing phenomenon that has important effects on consumer behavior," said Karim Sabbagh, partner and vice president with Booz Allen Hamilton.

Key Findings
Some of the key findings from this study, particularly as they relate to consumers in the Middle East, are below.

Web 2.0 Is a Worldwide Phenomenon
In terms of sheer numbers, Web 2.0 usage is indeed revealing itself to be a mass phenomenon. Worldwide, 50 percent of individuals who use the Internet report that they use social media sites such as MySpace, Friendster, and Hi5-resulting in more

than 420 million Web 2.0 users globally.

In the United States, 71 percent of users report visiting social media sites at least once a week. This is number is 73 percent in Germany and 41 percent in the United Kingdom. Penetration of Web 2.0 sites in the Middle East is not yet as prevalent; only 15 percent of users in Arab countries report that they frequently visit Web 2.0 sites. Of the sites that Middle East users did report visiting frequently, Amazon, Wikipedia, Hi5, and YouTube topped the list, followed sequentially by, MySpace, Blogger, and iTunes.

Web 2.0 Usage is Prevalent Across Both Genders and All Age Groups
Contrary to popular belief, the phenomenon of Web 2.0 usage is not just a "young male" trend, the Booz Allen study found. Worldwide, people of all ages, both male and female, are using these sites.

"This, however, is not the case in the Middle East, where usage fell along more traditional lines. Usage continues to be dominated by younger males - even at very established sites such as Amazon. However, this too is expected to evolve as sites become more established and their audience grows," said Ghassan Hasbani, a principal with Booz Allen Hamilton.

Web 2.0 Users Share and Participate
One of the hallmarks of Web 2.0 is that users play the role not just of observers, but also of active content creators. The survey confirmed that significant numbers of users are sharing content - as well as private information - online. For example, of the MySpace users surveyed in this study, 78 percent in the United States, 70 percent in the United Kingdom, 51 percent in Germany - and 52 percent in the Middle East - report having created their own online content in recent weeks. "Creating content," for Middle East users, means a variety of things: creating Web pages; writing personal blogs; uploading photos, music, or videos; and even participating in online gaming.

Web 2.0 Users Rely on Recommendations from Anonymous Peers
The Internet is increasingly seen as a reliable source of information, with users viewing the Internet as providing faster - and often more honest and unbiased - news and product information than do traditional media channels. Individuals not only use the Internet to gather third-party product recommendations and opinions, but also to seek recommendations on buying decisions from their social networks. And importantly, many seem just as prepared to take recommendations from unknown contacts as they are from friends or acquaintances.

The Booz Allen survey found that approximately 50 percent of Web 2.0 users worldwide are happy to use purchasing recommendations received from friends or acquaintances on the Internet. In the Middle East, the figure was remarkably higher - 84 percent reported gathering purchasing recommendations online. Even more tellingly, many Web 2.0 users are also willing to use recommendations on purchases from unknown members of consumer platforms - around 40 percent of users worldwide, and 34 percent of users in the Middle East.

In looking at these new trends in consumer behavior, an important question arises - what do they mean for corporations?

Adapting to the Web 2.0 Model of Customer Interaction
"The results from the survey tell us that Web 2.0 usage has already reached a critical mass, both in the Middle East and in other regions around the world. The good news is that although Web 2.0 usage creates distinct challenges for companies, it also offers new opportunities," Hasbani noted.

Some of the challenges include:
-- Diminished customer loyalty, as consumers defect to companies that participate actively in Web 2.0 venues and use social communities to drive buying decisions and form positive product opinions.

-- Reduced online customer throughput, as customer traffic is channeled through social networking sites rather than through a company's website.

-- Lower customer acquisition and retention, as competitors do a better job of using

online channels to win customers, including cross-selling their products on both Web 2.0 platforms and traditional media channels.

The advent of Web 2.0 does offer significant opportunities for companies to increase customer loyalty, increase operational efficiencies, and increase product success and time-to-market. Companies that actively participate in Web 2.0 platforms and develop an understanding of evolving consumer behavior in the Web 2.0 environment can find opportunities in the following areas:

Product development. Using Web 2.0 platforms, companies can perform easier, less expensive product research than ever before - partly because customers are already using online forums to describe exactly what they think about various companies' products and services. Companies that make an effort to obtain and analyze this data can gain an enhanced understanding of their customers' needs, preferences, and "pet peeves." This knowledge can lead to improved product development and shorter innovation cycles.

Sales and marketing. Web 2.0 sites provide new sales and marketing venues for companies - ones that are often already geared demographically to certain populations. For example, companies that want to target professionals may choose to advertise on LinkedIn, a business-oriented social networking site, whereas companies targeting the youth market may advertise on FunkySexyCool, a mobile-oriented social network run in cooperation with MTV.

Customer service. Web 2.0 platforms offer companies the ability to create very interactive high-quality customer service sites that network together customers, staff, and suppliers. In addition, companies can create customer service sites moderated by full-time employees that encourage end-user created content and wide participation among users - enhancing consumers' customer service experience and building loyalty.

Branding. There are increasing opportunities to brand companies on Web 2.0 sites, also at a much more favorable cost than through other media channels.

Key Questions
In light of the Booz Allen study, Sabbagh identified some key questions that organizations should be asking themselves regarding Web 2.0:

-- Do we know what our customers are saying about us on the Web? Are we analyzing that data and feeding it back into product development?

-- Do we have a proactive method in place for responding to negative dialogue about our company on the Web?

-- Do we offer our customers an opportunity to interact directly with our company online? For example, do we have a blog on our website where customers can share thoughts, concerns, and feedback?

-- Do we have an online forum where our "power users" or "biggest fans" can offer advice and how-to information to other consumers?

-- Do we have a presence, such as a virtual storefront, in online communities like Second Life? Should we? Web 2.0 use is increasing and will continue to increase worldwide, across both genders and all age groups. Unless businesses and other organizations recognize and respond to the shifts in consumer behavior driven by Web 2.0, their customer acquisition and retention will likely suffer.

Image Web2.0 by Markus Angermeier. Creative Commons license Attribution-ShareAlike 2.0