The diffusion of a Web 2.0 product or services is, unlike to traditional consumer or industrial goods, not only based on purchase. Full acceptance of Web 2.0 platforms occurs by recurring utilization. The chapter focuses on diffusion characteristics of this innovative category of ICT products and provides management concepts for competition. The concept of critical mass is applied to different growth scenarios. Additional success factors are discussed. Particularly the permanent supervision of a platform regarding its compliance with qualitative, as well as ethical and legal standards is of great importance. Adjustments to external market conditions, proactive management, and a bilateral marketing approach are a key to lasting success within the Net Economy. Markets are never settled, due to the ever changing and oscillating conditions. The chapter shows that there is always a chance to capture a market or at least to grow against competition in a Web 2.0 setting.
Critical Mass As A Success Factor
The extension of electronic networks and the use of information and telecommunication technologies for the digitalization of value creation lead to a new economic dimension (Lumpkin & Dess, 2004). This newly established level of value creation, the so-called Net Economy, provides room for innovative business models and successful start-up firms (Kollmann, 2006). An increasing number of companies participate in the economic potential of the internet which leads to a rising level of competition. Competing players either win a market and participate in a stable and sustainable business development or fail with their idea within a short period of time (Shapiro & Varian, 1999). The roots of this phenomenon are derived from an economies of scale effect that keeps aggravating itself instead of declining. Every new user of an offered platform (community or marketplace) helps to raise the value of a network and makes it even more attractive for further participants. A higher number of communication and transaction activities are the possible outcome. A rising quantity of community members also increases the perceived attractiveness (site stickiness) of a platform. This can be illustrated by the following two examples: A rising number of members subscribing to an E-Community (Kollmann, 2006) raises the chance to meet likeminded individuals or to receive answers to posted questions. Also a rising number of users to an E-Marketplace (Kollmann, 2006) rises the probability to find interested customers for offered products of a supplier.
According to the presented scenarios, a special focus has to be put on the critical mass phenomenon, because the subjectively perceived attractiveness of a system (e.g. community) is highly correlated with the already registered number of users. A certain number of users within a network are necessary to create value among the participants at a sophisticated level. Reaching this level is essential for a network, because the enrolled participants will be reinforced to use the system on an ongoing basis, and it will become easier to convince new users to join in (Kollmann, 1998). The minimum number of participants to maintain a sufficient utility on a long-term basis is referred to as the critical mass (Weiber, 1992).
Especially in a Net Economy setting young companies experience a very competitive environment to reach the critical mass (Kollmann, 1998). Oftentimes, the winners of this race drive smaller competitors or copycats off the market. This conception reinforces itself in a Web 2.0 setting (O’Reilly, 2005), where customers or members leave the status of pure information consumers. Their status changes to an active information provider and editor role (O’Reilly, 2005). Therefore, growth at a fast pace in regards to the number of users becomes the critical success factor to leave the zone of competition as a winner. Actually, the winner of this battle is able to establish a close too monopolistic market position (Shapiro & Varian, 1999). The attractiveness for new users to join a network is even higher, if everyone else already joined in.
Key Terms in this Chapter
Vapor Marketing: Is characterized by promising announcements to the market on products or services in advance and the management of expectations combined with additional online and offline marketing activities.
Critical Mass: Of users is an important success measure for Web 2.0 platforms, because the subjectively perceived attractiveness of a system (e.g. community) is highly correlated with the already registered number of users. A certain number of users within a network are necessary to create value among the participants at a sophisticated level. Reaching this level is essential for a network, because the enrolled participants will be reinforced to use the system on an ongoing basis, and it will become easier to convince new users to join in. The minimum number of participants to maintain a sufficient utility on a long-term basis is referred to as the critical mass.
Web 2.0: Is the next evolutionary step of the internet. In the past the internet used to be recognized as a technology to publish and distribute data, information and media content. This view was based on split-up roles: Private and commercial publishers of web contents with an active role on the one hand, and passive consumers on the other hand. This golden rule changed in 2005, when Web 2.0 concepts as a new category of websites were established. The traditional differentiation between active content providers and passive consumers diluted. On Web 2.0 platforms users are able to generate and affect contents. User generated content became the slogan of Web 2.0. The active role of users built the basis for innovative business ideas, which were unthinkable before. Many Web 2.0 business models like online communities or video platforms are centered around community structures.
E-Community: Stands for a virtual community. E-Communities are one sort of communication platform on the internet, and support or initiate business processes. They are used to build constant, self dynamic communication and interaction processes.
Net Economy: Refers to the commercial/business dimension of electronic data networks and is therefore a digital network economy. Different electronic platforms perform the execution of information, communication and transaction processes. The starting point for its expansion is the development of the information society. The basis of the Net Economy is formed by four technological innovations: telecommunication, information technology, media technology and entertainment (the so-called TIME markets). These innovations have, and continue to, significantly impact the possible ways in which information, communication and transactions are managed. The increased support of business processes using electronic systems takes centre stage here. There are a number of terms for this that can be identified (e.g. e-business, e-commerce, information economics, network economics), which can, to some degree, be used synonymously.
E-Marketplaces: Are virtual-based organizations to exchange services. An E-Marketplace has an institutional framework for transaction processes. They can be interpreted as virtual space where supply and demand is coordinated.
Netiquette: Is derived from the terms internet and etiquette. Despite the fact that every human being possesses the right to express an opinion on the internet, legal and ethical standards have to be obeyed. Sometimes those standards are violated, especially on anonymous web-based communication platforms. Comments with an extremist, offending, or sexually harassing content should not be tolerated by any individual or platform operator. Guidance for communication on the internet is given by the so-called netiquette. The recommended behavior of the netiquette is not legally binding, but helps to maintain and develop a positive net culture. The voluntary agreed upon rules are frequently incorporated in codes of conduct of platform operators.