Creating real business value with Web 2.0

I run into a fair number of people who are skeptical about the actual business value of Web 2.0.  Sure, they usually agree it's a terrific new movement There's a whole aspect of Web 2.0 that can drive genuine business value and significant competitive advantage.in online software that encourages social collaboration, two-way use of the Web, services that are open and repurposable, Web-based applications, and more.  But can you build and grow a real business with these ideas?

Sometimes the trend towards startups in miniature, mashups the size of a feature, open source data sources, and the relentless democratization of content makes it look like everything is becoming free or very inexpensive.  Or so distributed and decontrolled that there's no place to create value.  That makes the value proposition in this brave new world seem pretty shaky indeed. 

Yet the truth could not be more different.

To these concerns I point out that this is only one end of a spectrum.  There's a whole aspect of Web 2.0 that can drive genuine business value and significant competitive advantage.  To illustrate this argument, I've recently started collecting real-world Web 2.0 business success stories that demonstrate this point. 

Now, most people following this space are aware that eBay, Amazon, and Google are held up as exemplars and the successes of the Web 1.0 era because they were Web 2.0 before it was fashionable.  The argument is they did this by leveraging user contributions, offering open Web services for others to integrate with, building hard to recreate data sources, etc.

But there are many other interesting new success stories.  And by studying them some common threads can be teased out and we can get a general sense of what's happening and what works.  Let's take a look at the ones I'm tracking and what they're doing, in rough order of commercial success. I am also including two that aren't a commercial success but demonstrate some techniques with serious potential:

Companies using Web 2.0-style techniques for business advantage

• NHN's Naver Search Engine.  Never heard of Naver?  You're not alone unless you live in Korea.  But the big secret is that Naver is annihilating Google there.  Korea also happens to have the highest rate Internet use of any country in the world.  More importantly, not only is NHN using Web 2.0 techniques like gathering collective intelligence and social collaboration to achieve market domination, but they sold over $228 million in online ads on their service last year, making their stock go through the roof in recent months.  These are impressive results and note that much of this is revenue they've directly outcompeted Google for, one of the most successful Internet businesses in history who has also had a significant presence in Korea since 2001.
  
• Amazon's Web Services Division:  Currently taking in more than $211 million a year, Amazon's Web services turns most of its online storefront into a full blown open platform that supports a large and thriving community of companies that re-use Amazon's best-of-breed On Demand commerce services.  This gives Amazon's partners ready access to vast IT resources in the form of a product that would otherwise be only getting a single use.  By making this strategic move, Amazon takes advantage of the economies of software and resells its services over and over again, recouping their cost many times over and taking advantage of unintended uses dreamed up by the aftermarket.
• IBM, Salesforce, and Microsoft Provide Self-Servicing to SMBs: The potential of the Web to offer true customer self-service, particularly to small audiences en masse, still has largely untapped commercial potential.  This has led to the coining of the term, The Long Tail, a key concept in the Web 2.0 toolkit.  Because automated systems can efficiently provide high-quality unattended customer service online, it enables businesses to profitably serve customer groups they could never think of serving before.  The New York Times recently covered how both Salesforce and IBM are generating significant new revenue and business results from these smaller markets.  This is not just because the Web allows it, but also because of recent progress like pervasive Web connectivity, faster bandwidth, more people online, and growing trust of online software.  As for Microsoft, one of the last bastion's of market penetration for them is small and medium businesses.  This is the one market that their new online Office Live products is squarely aimed at self-servicing with Web-based business software.
• Craigslist and Google Base:  Both of these services, like eBay, can only exist in symbiotic conjunction with their users.  While gaining control of a hard to recreate data source is an important Web 2.0 strategy, you need to have a revenue model associated with it to be a business success.  This is something that Wikipedia, the classic example of a Web 2.0 data source built by its users, can't boast.  However, this is something both Craigslist and Google Base aspire to be, successful commercial services created from their user's data.  While Craigslist and Google both have done things occasionally to create walled gardens of their data, the point is that the more they do this, the more likely they will hurt themselves.  I don't have revenue numbers for craigslist
  
• Katrinalist.net and Antbase.org.  Both of these are completely non-commercial sites that demonstrate the raw power of harnessing collective intelligence and scalable marshalling of underutilized data resources, respectively.  The Katrina List story is amazing in itself and the Antbase.org story comes from a new article in Discover magazine, while partially online describes how a scientific community turned massive taxonomy resources otherwise mouldering away in basements as lost specimens into a thriving online database of information that can be shared by all.  Understanding the success and importance of both of these points to intriguing and largely unexploited possibilities that I predict will become more common and widespread in the near future.

The whole point of Enterprise Web 2.0 is to put best practices for creating Web experiences into the hands of business people, Web designers, and users so that we make the most of the systems, users, and information that we have.  For example, the vast, aging inventories of otherwise userful information is one of the bigger wastes in IT today.  Web 2.0 encourages us to put it all online, make it user organizable, findable, and to build a community around it. 

So too is leveraging the activities of users as they interact with our online systems.  Both first class participation mechansims like tagging, ranking, commenting are important but so are second order mechanisms that track what users are looking at, saving particularly popular data sets and making them easily shareable and reusable.
That's not to say that adding del.icio.us bookmark buttons to your content will save a failing business model from the eventual extinction, but it's the first step down a promising new path. These are just some of the possibilities and we can now begin to see how early adopters are using it to considerable effect.  What will you do?
Do you know of other Enterprise Web 2.0 success stories?  Please share!