Chapter 7 Social Media, Peer Production, 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 poorly defined 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 than the static Web sites and transaction-focused storefronts that characterized so many failures in the dot-com bubble. Techies often joust over the precise definition of Web 2.0, but 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 for individuals, businesses, and society. Consider the following:

• Six of the world’s top ten most heavily trafficked Internet sites are social: Facebook, YouTube, Blogger.com (considered separately from parent Google), Wikipedia, Twitter, and QQ.com (China).Via Alexa.com, June 1, 2011. Via Alexa.com, June 1, 2011. U.S. users now spend more time with social media than on any other category of Internet use.“What Americans Do Online: Social Media and Games Dominate Activity,” NielsenWire, August 2, 2010. 
• It took just three years for the number of social sites in the top ten to grow from one to six. However, the list is volatile, and half of the top social sites from three years ago (MySpace, Hi5, Orkut) are no longer ranked in the top ten.Morgan Stanley, Internet Trends Report, March 2008. 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 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. 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 eighteen million articles in over 260 different languages, all of them contributed, edited, and fact-checked by volunteers.
• 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 forty-eight hours of video are uploaded to YouTube each minute),J. Roettgers, “YouTube Users Upload 48 Hours of Video Every Minute,” GigaOM, May 25, 2011. J. Roettgers, “YouTube Users Upload 48 Hours of Video Every Minute,” GigaOM, May 25, 2011. the site has emerged as the Web’s leading destination for video, hosting everything from apologies from CEOs for service gaffes to questions submitted as part of 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.  and the site serves over three billion videos each day,B. Erlich, “YouTube: Two Days’ Worth of Video Uploaded Every Minute,” Mashable, May 25, 2011.  with an increasing number watching from non-PC devices, including mobile phones and televisions.
• The population of Facebook users 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. “Facebook Facts and Figures (History and Statistics),” Website Monitoring Blog, March 17, 2010. Facebook is solidly profitable and revenues have been growing with astonishing speed (estimated at over $4 billion in 2011, doubling from the prior year).P. Kafka, “Facebook Isn’t Eating Google’s Lunch Yet, but It’s Getting Hungry…,” AllThingsD, March 13, 2011.  By spring 2011 some suggested that the value of the privately held firm may have reached $100 billion.G. Fowler and A. Das, “Facebook Numbers Feed IPO Outlook,” Wall Street Journal, May 1, 2011. 
• Facebook and Twitter have become activist tools and have played vital roles in supporting protest movements worldwide. China and Iran are among the governments so threatened by the power of these services that each has, at times, blocked Facebook and Twitter access within their borders.
• Twitter has emerged as a major force that can break news and shape public opinion. By the time Twitter was a five-year-old, the service boasted a population of over two hundred million users that were collectively posting more than a billion tweets (Twitter messages) each week.P. Kafka, “Twitter CEO Dick Costolo Talks about His New Photo Service, but Not about Profits,” AllThingsD, June 1, 2011. P. Kafka, “Twitter CEO Dick Costolo Talks about His New Photo Service, but Not about Profits,” AllThingsD, June 1, 2011. 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; 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 gripes, praise, and ratings are 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, brings in over $500 million in revenue (at roughly 45 percent margins),B. Wash, “Double Duty,” Colby Magazine, Winter 2009; S. Morrison, “Expedia to Spin Off TripAdvisor,” Wall Street Journal, April 8, 2011. B. Wash, “Double Duty,” Colby Magazine, Winter 2009; S. Morrison, “Expedia to Spin Off TripAdvisor,” Wall Street Journal, April 8, 2011. 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. 

The Web 2.0 moniker is a murky one because like so many popular technology terms there’s not a precise definition. We’ll add some precision to our discussion by focusing on social media efforts—technologies that support the creation of user-generated content, as well as content editing, commenting, curation, and sharing. Social media efforts include blogs, wikis, social networks, Twitter, and photo and video sharing sites. The rise of social media has also coincided with the rise of mobile computing—meaning the worldwide Internet conversation is always in your pocket. Mobile and social also work together to create entirely new services, like the location-based game / discovery engine / deals platform, Foursquare.

The 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. leveraged by collaborating users isn’t only used to create social media; it can be used to create services, too, and these are also considered to be part of Web 2.0. 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.

Table 7.1 "Web 1.0 versus Web 2.0" lists several examples typically considered to fall under the Web 2.0 classification (a term coined by publisher and pundit Tim O’Reilly), and each is offered alongside its first-generation Internet counterpart.Adapted and modified from the original list presented in T. O’Reilly, “What Is Web 2.0?” O’Reilly, September 30, 2005.

Millions of users, billions of dollars, huge social impact, and most of these efforts grew to influence millions in less time than it takes the average freshman to complete college. When technology moves that quickly, even some of the world’s most preeminent thought leaders can be sideswiped.

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.

This chapter can be considered in two parts. The first explains many technologies behind the social media / peer production / Web 2.0 movement, and we provide several examples of their use and impact. The final part of this chapter describes how firms should organize to engage with and take advantage of social media—specifically detailing how to “Get SMART” (with a social media awareness and response team). After going through both sections you should have a solid overview of major social technologies, how businesses are leveraging them, and how firms can organize for effective use while avoiding pitfalls.

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 BlogPulse has surpassed 160 million.BlogPulse.com stats, June 1, 2011.  This 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 that is often shared via other types of social media like Facebook and Twitter. 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. (citation 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.

Most blogs offer a two-way dialogue, allowing users to comment (a sort of “letters to the editor” section for each post). The running dialogue can read like an electronic bulletin board and can be an effective way to gather opinion, brainstorm, and vet ideas. Comments also help keep a blogger honest—a vigorous community of commenters will quickly expose a blogger’s errors of fact or logic.

Blogging can have significant appeal for an organization looking to be heard. Corporations that blog can enjoy immediate and unfiltered distribution of their ideas, with no limits on page size, word count, or publication deadline. And they can gather immediate feedback from readers via comments. Corporate blogs can be published directly to the public, skipping what bloggers call the mainstream media (MSM) and presenting their words without a journalist filtering their comments or an editor cutting out key points they’d hoped to make. That appeal has attracted some of the most senior executives to blogging. Hotel chief Bill Marriott, Zappos’ Tony Hsieh, Timberland’s Jeff Swartz, and Forrester Research’s George Colony are among those CEOs who use their blogs for purposes that include a combination of marketing, sharing ideas, gathering feedback, press response, image shaping, and reaching consumers directly.

Given the advantages of blogs over traditional broadcast and “dead tree” print publication, it’s not surprising that most mainstream news outlets also supplement their content with blogs that offer greater depth, more detail, and deadline-free timeliness. But they’ve got competition, and many of the most popular blogs have transformed into robust media enterprises. The political/news blog The Huffington Post grew to be more popular than all but eight newspaper sites and was acquired in 2011 by AOL for $315 million, a valuation significantly 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; V. Kopytoff, “AOL’s Bet on Another Makeover,” New York Times, February 7, 2011. Keep in mind that this is a site that lacks much of the sports, local news, weather, and other content offered by the locals.

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.

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. Bloggers, beware—there are dozens of examples of workers who have been fired for what employers viewed as inappropriate posts. The voice of the blogosphere can also wield significant influence. While not all blogosphere commentary deserves a response, firms ignore social media at their own peril (see sidebar below)! Tips on how firms should organize for social media engagement, issues to consider when developing corporate social media policy, and examples of effective and poor social media use are covered in Section 7.9 "Get SMART: The Social Media Awareness and Response Team".

Like any Web page, blogs can be public, tucked behind a corporate firewall, or password protected. Third-party blogging services include Google Blogger, WordPress, Tumblr, and Posterous, with most offering a combination of free and premium features. The most popular platform for organizations choosing to host their own blog server is the open source WordPress system. Firms often choose this option to gain more control over security and formatting.

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 reach out for an ongoing conversation on some topic of shared interest. But the social side means that unless a reader base discovers a blog and is engaged, an effort will have little impact.

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 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, with examples ranging from Wine Wiki for oenophiles to Wookieepedia, the Star Wars wiki. Wikis can also 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. Many wikis also serve as knowledge management systems that act as a sort of collective corporate memory that’s vital for sharing skills, learning, and preserving expertise even when employees leave the firm.

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.

Wikis are available both as software (commercial as well as open source varieties) that firms can install on their own computers and as hosted online services (subscription or ad-supported) where software and content are housed by third parties that run the technology for wiki users. 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.

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.

The larger and more active a wiki community, the more likely it is that content will be up to date and that errors or vandalism will be quickly corrected (again, we see the influence of network effects, where products and services with larger user bases become more valuable). At Wikipedia, for example, griefersInternet vandal and mischief maker; also sometimes referred to as a troll. and partisans regularly alter pages (in one noteworthy stretch, the page of former U.S. President Jimmy Carter was regularly replaced with 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. But the Wikipedia community is so large and attentive that such changes are often recognized in seconds and rolled back, and mischief makers soon give up and move on. 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.

7.4 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. The two most dominant public social networks are Facebook and LinkedIn, sites often described as the personal and professional networks, respectively. But there are also a host of third-party networks where firms can “roll their own” private networks. Such services include Ning, Lithium, and SelectMinds.

Social networks allow you to set up a profile, share content, comment on what others have shared, and follow the updates of particular users, groups, firms, and brands that may also be part of those networks. Many also are platforms for the deployment of third-party applications (not surprisingly, social games dominate).

Hundreds of firms have established pages on Facebook and communities on LinkedIn, and these are now legitimate customer- and client-engagement platforms. If a customer has decided to press the “like” button of a firm’s Facebook page, corporate posts can appear in their news feed, gaining more user attention than the often-ignored ads that run on the sides of social networks. These posts, and much of the other activity that takes place on social networks, spread via feed (or news feed). Pioneered by Facebook but now adopted by most services, feeds provide a timely list of the activities of and public messages from people, groups, and organizations that an individual has an association with.

Feeds are inherently viralIn this context, information or applications that spread rapidly between users.. By seeing what others are doing on a social network, and by leveraging the power of others to act as word-of-mouth evangelists, feeds can rapidly mobilize populations, prompt activism, and offer low-cost promotion and awareness of a firm’s efforts. Many firms now see a Facebook presence and social engagement strategy as vital. Facebook’s massive size and the viral power of spreading the word through feeds, plus the opportunity to invite commentary and engage consumers in a dialogue, rather than a continual barrage of promotion, is changing the way that firms and customers interact (indeed, you’ll hear many successful social media professionals declare that social media is more about conversations with customers than about advertising-style promotion).

Feeds are also controversial. Many users have reacted negatively to a public broadcast of their online activity, and feed mismanagement can create accusation of spamming, public relations snafus, and user discontent and can potentially open up a site to legal action. Facebook initially dealt with a massive user outcry at the launch of feeds, and the site also 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.)

While a Facebook presence has become a must-have for firms (see Chapter 8 "Facebook: Building a Business from the Social Graph"), LinkedIn has become a vital tool for many businesses and professionals. LinkedIn boasted a nearly $9 billion valuation after its spring 2011 IPO (some say that price is a sign of a tech bubble and is far too high for a firm with less than $16 million in profits the previous year).S. Woo, L. Cowan, and P. Tam, “LinkedIn IPO Soars, Feeding Web Boom,” Wall Street Journal, May 20, 2011. Regardless of the valuation, the site’s growth has been spectacular, and its influence is threatening recruiting sites like Monster.com and CareerBuilder.M. Boyle, “Recruiting: Enough to Make a Monster Tremble,” BusinessWeek, June 25, 2009.

LinkedIn was conceived from the start as a social network for business users. On LinkedIn, members post profiles and contact information, list their work history, and can be “endorsed” by others on the network. It’s sort of like having your résumé and letters of recommendation in a single location. Users can pose questions to members of their network, engage in group discussions, and ask for introductions through mutual contacts. The site has also introduced a variety of additional services, including messaging, information sharing, and news and content curation—yes, LinkedIn will help you find stuff you’re likely to be most interested in (wasn’t that Google’s job?). The firm makes money from online ads, premium subscriptions, and hiring tools for recruiters.

Active members find the site invaluable for maintaining professional contacts, seeking peer advice, networking, and even recruiting. Starbucks manager of enterprise staffing has stated that 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 and a private messaging channel.

Corporate Use of Social Networks

Social networks have also become organizational productivity tools. Employees have organized thousands of groups using publicly available social networking sites because similar tools are not offered by their firms.E. Frauenheim, “Social Revolution,” Workforce Management, October 2007. Assuming a large fraction of these groups are focused on internal projects, this demonstrates a clear pent-up demand for corporate-centric social networks (and creates issues as work dialogue moves outside firm-supported services).

Many firms are choosing to meet this demand by implementing internal social network platforms that are secure and tailored to firm needs. At the most basic level, these networks have supplanted the traditional employee directory. Social network listings are easy to update and expand, and employees are encouraged to add their own photos, interests, and expertise to create a living digital identity.

Firms such as Deloitte, Dow Chemical, and Goldman Sachs have created social networks for “alumni” who have left the firm or retired. These networks can be useful in maintaining contacts for future business leads, rehiring former employees (20 percent of Deloitte’s experienced hires are so-called boomerangs, or returning employees), or recruiting retired staff to serve as contractors when labor is tight.R. King, “Social Networks: Execs Use Them Too,” BusinessWeek, November 11, 2006. Maintaining such networks will be critical in industries like IT and health care that are likely to be plagued by worker shortages for years to come.

Social networking can also be important for organizations like IBM, where some 42 percent of employees regularly work from home or client locations. IBM’s social network makes it easier to locate employee expertise within the firm, organize virtual work groups, and communicate across large distances.W. Bulkley, “Playing Well with Others,” Wall Street Journal, June 18, 2007. As a dialogue catalyst, a social network transforms the public directory into a font of knowledge sharing that promotes organization flattening and value-adding expertise sharing.

While IBM has developed their own social network platforms, firms are increasingly turning to third-party vendors like SelectMinds (adopted by Deloitte, Dow Chemical, and Goldman Sachs) and LiveWorld (adopted by Intuit, eBay, the NBA, and Scientific American). Ning allows anyone to create a social network and currently hosts over 2.3 million separate online communities.K. Swisher, “Ning CEO Gina Bianchini to Step Down—Becomes an EIR at Andreessen Horowitz,” AllThingsD, March 15, 2010. However, with robust corporate tools now offered by LinkedIn, we might see proprietary, in-house efforts start to migrate there over time.

A Little Too Public?

As with any type of social media, content flows in social networks are difficult to control. Embarrassing disclosures can emerge from public systems or insecure internal networks. Employees embracing a culture of digital sharing may err and release confidential or proprietary information. Networks could serve as a focal point for the disgruntled (imagine the activity on a corporate social network after a painful layoff). Publicly declared affiliations, political or religious views, excessive contact, declined participation, and other factors might lead to awkward or strained employee relationships. Users may not want to add a coworker as a friend on a public network if it means they’ll expose their activities, lives, persona, photos, sense of humor, and friends as they exist outside of work. And many firms fear wasted time as employees surf the musings and photos of their peers.

All are advised to be cautious in their social media sharing. Employers are trawling the Internet, mining Facebook, and scouring YouTube for any tip-off that a would-be hire should be passed over. A word to the wise: those Facebook party pics, YouTube videos of open mic performances, or blog postings from a particularly militant period might not age well and may haunt you forever in a Google search. Think twice before clicking the upload button! As Socialnomics author Erik Qualman puts it, “What happens in Vegas stays on YouTube (and Flickr, Twitter, Facebook…).”

Firms have also created their own online communities to foster brainstorming and customer engagement. Dell’s IdeaStorm.com forum collects user feedback and is credited with prompting line offerings, such as the firm’s introduction of a Linux-based laptop.D. Greenfield, “How Companies Are Using I.T. to Spot Innovative Ideas,” InformationWeek, November 8, 2008. At MyStarbucksIdea.com, the coffee giant has leveraged user input to launch a series of innovations ranging from splash sticks that prevent spills in to-go cups, to new menu items. Both IdeaStorm and MyStarbucksIdea run on a platform offered by Salesforce.com that not only hosts these sites but also provides integration into Facebook and other services. Starbucks (the corporate brand with the most Facebook “fans”) has extensively leveraged the site, using Facebook as a linchpin in the “Free Pastry Day” promotion (credited with generating one million in-store visits in a single day) and promotion of the firm’s AIDS-related (Starbucks) RED campaign, which garnered an astonishing three hundred ninety million “viral impressions” through feeds, wall posts, and other messaging.J. Gallaugher and S. Ransbotham, “Social Media and Customer Dialog Management at Starbucks,” MIS Quarterly Executive 9, no. 4 (December 2010): 197—212.

Social Networks and Health Care

Dr. Daniel Palestrant often shows a gruesome slide that provides a powerful anecdote for Sermo, the social network for physicians that he cofounded and where he serves as CEO. The image is of an eight-inch saw blade poking through both sides of the bloodied thumb of a construction worker who’d recently arrived in a hospital emergency room. A photo of the incident was posted to Sermo, along with an inquiry on how to remove the blade without damaging tissue or risking a severed nerve. Within minutes replies started coming back. While many replies advised to get a hand surgeon, one novel approach suggested cutting a straw lengthwise, inserting it under the teeth of the blade, and sliding the protected blade out while minimizing further tissue tears.M. Schulder, “50on50: Saw Blade through Thumb. What Would You Do?” CNN, November 4, 2009. The example illustrates how doctors using tools like Sermo can tap into the wisdom of crowds to save thumbs and a whole lot more.

Sermo is a godsend to remote physicians looking to gain peer opinion on confounding cases or other medical questions. The American Medical Association endorsed the site early on (although they failed to renew during a raucous debate on health care reform),The AMA and Sermo have since broken ties; see B. Comer, “Sermo and AMA Break Ties,” Medical Marketing and Media, July 9, 2009. and the Nature scientific journals experimented with a “Discuss on Sermo” button alongside the online versions of their medical articles. Doctors are screened and verified to maintain the integrity of participants. Members leverage the site both to share information with each other and to engage in learning opportunities provided by pharmaceutical companies and other firms. Institutional investors also pay for special access to poll Sermo doctors on key questions, such as opinions on pending FDA drug approval. Sermo posts can send valuable warning signals on issues such as disease outbreaks or unseen drug side effects. And doctors have also used the service to rally against insurance company policy changes.

Figure 7.1

These are some of the rich health monitoring and sharing tools available on PatientsLikeMe. Note that treatments, symptoms, and quality-of-life measures can be tracked over time.

Source: PatientsLikeMe, 2011.

While Sermo focuses on the provider side of the health care equation, a short walk from the firm’s Cambridge, Massachusetts, headquarters will bring one to PatientsLikeMe (PLM), a social network empowering chronically ill patients across a wide variety of disease states. The firm’s “openness policy” is in contrast to privacy rules posted on many sites and encourages patients to publicly track and post conditions, treatments, and symptom variation over time, using the site’s sophisticated graphing and charting tools. The goal is to help others improve the quality of their own care by harnessing the wisdom of crowds.

Todd Small, a multiple sclerosis sufferer, used the member charts and data on PLM to discover that his physician had been undermedicating him. After sharing site data with his doctor, his physician verified the problem and upped the dose. Small reports that the finding changed his life, helping him walk better than he had in a decade and a half and eliminating a feeling that he described as being trapped in “quicksand.”T. Goetz, “Practicing Patients,” New York Times Magazine, March 23, 2008. In another example of PLM’s people power, the site ran its own clinical trial—like experiment to rapidly investigate promising claims that the drug Lithium could improve conditions for ALS (amyotrophic lateral sclerosis) patients. While community efforts did not support these initial claims, a decision was arrived at in months, whereas previous efforts to marshal researchers and resources to focus on the relatively rare disease would have taken many years, even if funding could be found.J. Kane, R. Fichman, J. Gallaugher, and J. Glaser, “Community Relations 2.0,” Harvard Business Review, November 2009.

Both Sermo and PatientsLikeMe are start-ups that are still exploring the best way to fund their efforts for growth and impact. Regardless of where these firms end up, it should be clear from these examples that social media will remain a powerful force on the health care landscape.

Key Takeaways

• Electronic social networks help individuals maintain contacts, discover and engage people with common interests, share updates, and organize as groups.
• Modern social networks are major messaging services, supporting private one-to-one notes, public postings, and broadcast updates or “feeds.”
• Social networks also raise some of the strongest privacy concerns, as status updates, past messages, photos, and other content linger, even as a user’s online behavior and network of contacts changes.
• Network effects and cultural differences result in one social network being favored over others in a particular culture or region.
• Information spreads virally via news feeds. Feeds can rapidly mobilize populations, and dramatically spread the adoption of applications. The flow of content in social networks is also difficult to control and sometimes results in embarrassing public disclosures.
• Feeds have a downside and there have been instances where feed mismanagement has caused user discontent, public relations problems, and the possibility of legal action.
• The use of public social networks within private organizations is growing, and many organizations are implementing their own, private, social networks.
• Firms are also setting up social networks for customer engagement and mining these sites for customer ideas, innovation, and feedback.

Questions and Exercises

1. Visit the major social networks (MySpace, Facebook, LinkedIn). What distinguishes one from the other? Are you a member of any of these services? Why or why not?
2. How are organizations like Deloitte, Goldman Sachs, and IBM using social networks? What advantages do they gain from these systems?
3. What factors might cause an individual, employee, or firm to be cautious in their use of social networks?
4. How do you feel about the feed feature common in social networks like Facebook? What risks does a firm expose itself to if it leverages feeds? How might a firm mitigate these kinds of risks?
5. What sorts of restrictions or guidelines should firms place on the use of social networks or the other Web 2.0 tools discussed in this chapter? Are these tools a threat to security? Can they tarnish a firm’s reputation? Can they enhance a firm’s reputation? How so?
6. Why do information and applications spread so quickly within networks like Facebook? What feature enables this? What key promotional concept (described in Chapter 2 "Strategy and Technology: Concepts and Frameworks for Understanding What Separates Winners from Losers") does this feature foster?
7. Why are some social networks more popular in some nations than others?
8. Investigate social networks on your own. Look for examples of their use for fostering political and social movements; for their use in health care, among doctors, patients, and physicians; and for their use among other professional groups or enthusiasts. Identify how these networks might be used effectively, and also look for any potential risks or downside. How are these efforts supported? Is there a clear revenue model, and do you find these methods appropriate or potentially controversial? Be prepared to share your findings with your class.

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 the New York Times and LinkedIn, 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 its fifth birthday the firm’s 500 employees were supporting a global phenomenon embraced by over two hundred million users worldwide,P. Kafka, “Twitter CEO Dick Costolo Talks about His New Photo Service, but Not about Profits,” AllThingsD, June 1, 2011. including some 13 percent of U.S. adults.B. Womack and B. Pulley, “Twitter Use Climbs to 13% of U.S. Adults Online Boosted by Older Americans,” Bloomberg, June 1, 2011. In fact, by 2011 Twitter’s reach was so broad that the stealth raid that led to the killing of Osama Bin Laden was inadvertently live-tweeted by an IT-savvy neighbor, commenting on the ruckus in the neighborhood.

Figure 7.2 Bin Laden’s Neighbor Accidentally Tweets the U.S. Raid

Tweets (topmost is most recent) by Abbottabad, Pakistan—based IT consultant Sohaib Athar (Twitter handle @ReallyVirtal), who had no idea (1) that Osama Bin Laden was his neighbor and (2) that his tweets about the neighborhood disturbance were actually a live account of a U.S. raid.J. O’Dell, “One Twitter User Reports Live from Osama Bin Laden Raid,” Mashable, May 2, 2011.

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 one of its portable computers. 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 next version of the product was launched just three months later. Dell also claims to have netted millions 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; 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 as part of global disaster relief.
• 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 eighty-five 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, https://twitter.com/#!/BESTBUY.

Figure 7.3 A Sampling of Tweets Filtered through Best Buy’s @Twelpforce Twitter Account

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 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 people 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 its initially high valuation (by 2009 the firm was said to have been worth $1 billion; by 2011 shares trading on private secondary markets suggested a $10 billion valuation).D. Rushe, “Twitter Valued at $10bn as Google and Facebook Reportedly Vie to Buy It,” Guardian, February 10, 2011. Others wonder 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, but the firm has thus far struggled to find the right model. 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—as the service grew, many Twitter users rarely visited the firm’s Web site. Instead, most active users would post and read tweets using one of many—often free—applications provided by third parties, such as Seesmic, TweetDeck, and Twhirl. This happened 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). But there are potential downsides to such openness. If users don’t visit Twitter.com, that makes it difficult to count users, serve profiling technologies such as tracking cookies (see Chapter 14 "Google in Three Parts: Search, Online Advertising, and Beyond"), collect additional data on service use, and make money by serving ads or offering promotions on the Web site. All 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 others 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), its acquisition of TweetDeck, and the launch of its own URL-shortening service (limiting opportunities for 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.

Twitter also got a boost when Apple deeply embedded Twitter into iOS 5. Users of the more than two hundred million Apple mobile devices gain a new one-button option to tweet photos, Web links, videos, map locations, and more. And the iOS will make Twitter easy to embed in other apps, too. Users can link a Twitter account used on their iOS devices to other apps, which means no need to log in or manually add an account each time you add an app that you’ll want to tweet from. While not directly tied to Twitter revenue, these features have the potential to encourage Twitter adoption and decrease friction for embedding a tweet button into even more applications, offering a key alliance that broadens Twitter’s distribution and utility and making it even harder for rivals to displace.

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

RSS

RSSA method for sending/broadcasting data to users who subscribe to a service’s “RSS feed.” Many Web sites and blogs forward headlines to users who subscribe to their “feed,” making it easy to scan headlines and click to access relevant news and information. (an acronym that stands for both “really simple syndication” and “rich site summary”) enables busy users to scan the headlines of newly available content and click on an item’s title to view items of interest, thus sparing them from having to continually visit sites to find out what’s new. Users begin by subscribing to an RSS feed for a Web site, blog, podcast, or other data source. The title or headline of any new content will then show up in an RSS readerA tool for subscribing to and accessing RSS feeds. Most e-mail programs and Web browsers can also act as RSS readers. There are also many Web sites (including Google Reader) that allow users to subscribe to and read RSS feeds.. Subscribe to the New York Times Technology news feed, for example, and you will regularly receive headlines of tech news from the Times. Viewing an article of interest is as easy as clicking the title you like. Subscribing is often as easy as clicking on the RSS icon appearing on the home page of a Web site of interest.

Many firms use RSS feeds as a way to mange information overload, opting to distribute content via feed rather than e-mail. Some even distribute corporate reports via RSS. RSS readers are offered by third-party Web sites such as Google and Yahoo! and they have been incorporated into all popular browsers and most e-mail programs. Most blogging platforms provide a mechanism for bloggers to automatically publish a feed when each new post becomes available. Google’s FeedBurner is the largest publisher of RSS blog feeds, and offers features to distribute content via e-mail as well.

Figure 7.4

RSS readers like Google Reader can be an easy way to scan blog headlines and click through to follow interesting stories.

Figure 7.5

Web sites that support RSS feeds will have an icon in the address bar. Click it to subscribe.

Location-Based Services

Computing devices increasingly know where you are—and this is creating all sorts of new opportunities for social media. Twitter, Facebook, and Google Buzz are among the many social services that have added location-based options, allowing you to tweet or post a status update attached with a physical location as determined by your phone’s global positioning system (GPS)A network of satellites and supporting technologies used to identify a device’s physical location., triangulation from nearby cell phone towers, or proximity to neighboring Wi-Fi hotspots. This introduces a whole new way to gather and share information. In a new part of town and curious what folks are saying about the spot? Search for tweets tagged as being posted around that location.

Augmented-realityComputer applications that overlay real-world images with computer-generated imagery and data. apps can overlay real data on top of images from a GPS and compass-equipped smartphone. Swivel your iPhone around with Stella Artois’s Bar Finder app open, and it’ll point you to the nearest Stella-equipped watering hole (it’ll also let you text your friends to join you for a drink and call a cab for a safe ride home). Wikitude overlays images appearing through your phone’s camera lens with geotagged data from Wikipedia. Point your Yelp app down the street and activate the monocle feature to see starred reviews hover over the top of establishments that appear on screen.

Boston-based SCVNGR (pronounced “scavenger”), a gaming app, has allowed over one thousand clients, including Princeton, MetLife, and Boston’s Museum of Fine Arts, to create their own mobile phone–based scavenger hunts. The profitable firm has an 80 percent client return rate and had attracted funding from Google Ventures and Highland Capital Partners all before founder Seth Priebatsch turned twenty-one.J. Kincaid, “SCVNGR Raises $4 Million from Google Ventures,” TechCrunch, December 24, 2009; R. Kim, “What Makes SCVNGR So Sticky (Hot Sauce Not Included), GigaOM, February 17, 2011.  SCVNGR has also run promotions that encourage repeat purchases and return visits with a diverse client base that has included American Express, Coca-Cola, and Buffalo Wild Wings. The firm also offers the mobile app LevelUp, which rewards users with Groupon-style deals and includes some rewards if you bring friends (making buying social).

Perhaps the best known among the location-based pure plays is Foursquare. The service allows players to “check in” at different locations, allowing players to earn “badges” displayed in the app for completing specific achievements (“gym rat” for exercise buffs, “school night” for weeknight bar hoppers). Check into a location more than anyone else and you become that spot’s “mayor.” Foursquare users can follow public location postings from their friends, discovering when a buddy is close by. Users submit tips, and a recommendations button offers suggestions on nearby places to explore. Foursquare grew to over one million users roughly one year after the service debuted at the 2009 South by Southwest conference, and now, roughly two years later, those numbers have grown to ten million.R. Kim, “Foursquare Found as Featured Location Service for INQ Facebook Phone,” GigaOM, May 23, 2011.  Firms are now using Foursquare for promotions and to support loyalty programs—offering “mayor specials” or other incentives when users are nearby. Starbucks, the Bravo television channel, frozen yogurt chain Tasti D-Lite, and the Milwaukee-based burger chain AJ Bombers are among the diverse clients leveraging the service.

Figure 7.6 A Sampling of Location-Aware Apps

Wikitude shows Wikipedia overlays on top of images appearing through the viewfinder. Stella Artois’s Le Bar will point you to establishments offering the brew, and Foursquare offers nearby vendor promotions and discounts.

Of course, all this public location sharing raises privacy concerns. The Web site PleaseRobMe.com was created to draw attention to the potentially dangerous issues around real-time location sharing. After a brief demonstration period, the site stopped its real-time aggregation of publicly accessible user-location data and now serves as an awareness site warning of the “stalkerish” side of location-based apps. In most cases, though, users remain firmly in control—determining if they want to keep a visit private or release their locale to verified “app friends” or to the broader online space.

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 like 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 $100 million firm grew into a $9 billion 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 120,000 “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. TopCoder contests have attracted roughly 300,000 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, 2011, 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.

Responsibilities and Policy Setting

In an age where a generation has grown up posting shoot-from-the-hip status updates and YouTube is seen as a fame vehicle for those willing to perform sensational acts, establishing corporate policies and setting employee expectations are imperative for all organizations. The employees who don’t understand the impact of social media on the firm can do serious damage to their employers and their careers (look to Domino’s for an example of what can go wrong).

Many experts suggest that a good social media policy needs to be three things: “short, simple, and clear.”J. Soat, “7 Questions Key to Social Networking Success,” InformationWeek, January 16, 2010. Fortunately, most firms don’t have to reinvent the wheel. Several firms, including Best Buy, IBM, Intel, The American Red Cross, and Australian telecom giant Telstra, have made their social media policies public.

Most guidelines emphasize the “three Rs”: representation, responsibility, and respect.

• Representation. Employees need clear and explicit guidelines on expectations for social media engagement. Are they empowered to speak on behalf of the firm? If they do, it is critical that employees transparently disclose this to avoid legal action. U.S. Federal Trade Commission rules require disclosure of relationships that may influence online testimonial or endorsement. On top of this, many industries have additional compliance requirements (e.g., governing privacy in the health and insurance fields, retention of correspondence and disclosure for financial services firms). Firms may also want to provide guidelines on initiating and conducting dialogue, when to respond online, and how to escalate issues within the organization.
• Responsibility. Employees need to take responsibility for their online actions. Firms must set explicit expectations for disclosure, confidentiality and security, and provide examples of engagement done right, as well as what is unacceptable. An effective social voice is based on trust, so accuracy, transparency, and accountability must be emphasized. Consequences for violations should be clear.
• Respect. Best Buy’s policy for its Twelpforce explicitly states participants must “honor our differences” and “act ethically and responsibly.” Many employees can use the reminder. Sure customer service is a tough task and every rep has a story about an unreasonable client. But there’s a difference between letting off steam around the water cooler and venting online. Virgin Atlantic fired thirteen of the airline’s staffers after they posted passenger insults and inappropriate inside jokes on Facebook.L. Conway, “Virgin Atlantic Sacks 13 Staff for Calling Its Flyers ‘Chavs,’” The Independent, November 1, 2008.

Policies also need to have teeth. Remember, a fourth “R” is at stake—reputation (both the firm’s and the employee’s). Violators should know the consequences of breaking firm rules and policies should be backed by action. Best Buy’s policy simply states, “Just in case you are forgetful or ignore the guidelines above, here’s what could happen. You could get fired (and it’s embarrassing to lose your job for something that’s so easily avoided).”

Despite these concerns, trying to micromanage employee social media use is probably not the answer. At IBM, rules for online behavior are surprisingly open. The firm’s code of conduct reminds employees to remember privacy, respect, and confidentiality in all electronic communications. Anonymity is not permitted on IBM’s systems, making everyone accountable for their actions. As for external postings, the firm insists that employees not disparage competitors or reveal customers’ names without permission and asks that any employee posts from IBM accounts or that mention the firm also include disclosures indicating that opinions and thoughts shared publicly are the individual’s and not Big Blue’s.

Some firms have more complex social media management challenges. Consider hotels and restaurants where outlets are owned and operated by franchisees rather than the firm. McDonald’s social media team provides additional guidance so that regional operations can create, for example, a Twitter handle (e.g., @mcdonalds_cincy) that handle a promotion in Cincinnati that might not run in other regions.E. York, “McDonald’s Names First Social-Media Chief,” Chicago Business, April 13, 2010. A social media team can provide coordination while giving up the necessary control. Without this kind of coordination, customer communication can quickly become a mess.

Training is also a critical part of the SMART mandate. GM offers an intranet-delivered video course introducing newbies to the basics of social media and to firm policies and expectations. GM also trains employees to become “social media proselytizers and teachers.” GM hopes this approach enables experts to interact directly with customers and partners, allowing the firm to offer authentic and knowledgeable voices online.

Tweets from the Untrained

Followers of fashion label Kenneth Cole know when the firm’s eponymous founder, chairman, and chief creative officer has tweeted via the corporate account—he signs these tweets with his initials KC. But it looks like KC could have used a bit of SMART training when he offered up a meant-to-be-light-hearted quip comparing Egypt’s historic Mubarak-ousting protests (where several citizens were killed and injured) to enthusiasm for his firm’s “new spring collection.” Although the tweet was quickly deleted, screenshots (see below) linger forever, and the media widely reported on the big brand’s insensitive gaffe.

Training should also cover information security and potential threats. Social media has become a magnet for phishing, virus distribution, and other nefarious online activity. Over one-third of social networking users claim to have been sent malware via social networking sites (see Chapter 13 "Information Security: Barbarians at the Gateway (and Just About Everywhere Else)"). The social media team will need to monitor threats and spread the word on how employees can surf safe and surf smart.

Since social media is so public, it’s easy to amass examples of what works and what doesn’t, adding these to the firm’s training materials. The social media team provides a catch point for institutional knowledge and industry best practice; and the team can update programs over time as new issues, guidelines, technologies, and legislation emerge.

The social media space introduces a tension between allowing expression (among employees and by the broader community) and protecting the brand. Firms will fall closer to one end or the other of this continuum depending on compliance requirements, comfort level, and goals. Expect the organization’s position to move. Firms will be cautious as negative issues erupt, others will jump in as new technologies become hot and early movers generate buzz and demonstrate results. But it’s the SMART responsibility to avoid knee-jerk reaction and to shepherd firm efforts with the professionalism and discipline of other management domains.

Astroturfing and Sock Puppets

Social media can be a cruel space. Sharp-tongued comments can shred a firm’s reputation and staff might be tempted to make anonymous posts defending or promoting the firm. Don’t do it! Not only is it a violation of FTC rules, IP addresses and other online breadcrumbs often leave a trail that exposes deceit.

Whole Foods CEO John Mackey fell victim to this kind of temptation, but his actions were eventually, and quite embarrassingly, uncovered. For years, Mackey used a pseudonym to contribute to online message boards, talking up Whole Foods stock and disparaging competitors. When Mackey was unmasked, years of comments were publicly attributed to him. The New York Times cited one particularly cringe-worthy post where Mackey used the pseudonym to complement his own good looks, writing, “I like Mackey’s haircut. I think he looks cute!”A. Martin, “Whole Foods Executive Used Alias,” New York Times, July 12, 2007.

Fake personas set up to sing your own praises are known as sock puppetsA fake online persona created to promote a particular point of view, often in praise of a firm, product, or individual. Be aware that the use of undisclosed relationships in endorsements is a violation of U.S. Federal Trade Comission rules. among the digerati, and the practice of lining comment and feedback forums with positive feedback is known as astroturfingEngineering the posting of positive comments and reviews of a firm’s product and services (or negative ones of a firm’s competitors). Many ratings sites will penalize firms that offer incentives for positive feedback posts.. Do it and it could cost you. The firm behind the cosmetic procedure known as the Lifestyle Lift was fined $300,000 in civil penalties after the New York Attorney General’s office discovered that the firm’s employees had posed as plastic surgery patients and wrote glowing reviews of the procedure.C. Cain Miller, “Company Settles Case of Reviews It Faked,” July 14, 2009.

Review sites themselves will also take action. TripAdvisor penalizes firms if it’s discovered that customers are offered some sort of incentive for posting positive reviews. The firm also employs a series of sophisticated automated techniques as well as manual staff review to uncover suspicious activity. Violators risk penalties that include being banned from the service.

Your customers will also use social media keep you honest. Several ski resorts have been embarrassed when tweets and other social media posts exposed them as overstating snowfall results. There’s even an iPhone app skiers can use to expose inaccurate claims.L. Rathke, “Report: Ski Resorts Exaggerate Snowfall Totals,” USA Today, January 29, 2010.

So keep that ethical bar high—you never know when technology will get sophisticated enough to reveal wrongdoings.

Monitoring

Concern over managing a firm’s online image has led to the rise of an industry known as online reputation managementThe process of tracking and responding to online mentions of a product, organization, or individual. Services supporting online reputation management range from free Google Alerts to more sophisticated services that blend computer-based and human monitoring of multiple media channels.. Firms specializing in this field will track a client firm’s name, brand, executives’ names, or other keywords, reporting online activity and whether sentiment trends toward the positive or negative.

But social media monitoring is about more than about managing one’s reputation; it also provides critical competitive intelligence, it can surface customer support issues, and it can uncover opportunities for innovation and improvement. Firms that are quick to lament the very public conversations about their brands happening online need to embrace social media as an opportunity to learn more.

Resources for monitoring social media are improving all the time, and a number of tools are available for free. All firms can take advantage of Google Alerts, which flag blog posts, new Web pages, and other publicly accessible content, regularly delivering a summary of new links to your mailbox (for more on using Google for intelligence gathering, see Chapter 14 "Google in Three Parts: Search, Online Advertising, and Beyond"). Twitter search and Twitter clients like TweetDeck can display all mentions of a particular term. And more advanced commercial tools, such as Radian9, HubSpot, and CoTweet, monitor a wide variety of social media mentions, provide metrics for ongoing campaigns and practices, and gauge sentiment and spot opportunities for sales leads or customer service.

Figure 7.7

Tools, such as those provided by HubSpot (depicted here), track social media mentions by key word or phrase. Savvy organizations can mine comments for competitive intelligence, insight, and product ideas or to coordinate follow-up and thoughtful customer service.

Facebook provides a summary of page activity to administrators (including stats on visits, new fans, wall posts, etc.), while Facebook’s Insights tool measures user exposure, actions, and response behavior relating to a firm’s Facebook pages and ads.

Bit.ly and many other URL-shortening services allow firms to track Twitter references to a particular page. Since bit.ly applies the same shortened URL to all tweets pointing to a page, it allows firms to follow not only if a campaign has been spread through “retweeting” but also if new tweets were generated outside of a campaign. Graphs plot click-throughs over time, and a list of original tweets can be pulled up to examine what commentary accompanied a particular link.

Location-based services like Foursquare have also rolled out robust tools for monitoring how customers engage with firms in the brick-and-mortar world. Foursquare’s analytics and dashboard present firms with a variety of statistics, such as who has “checked in” and when, a venue’s male-to-female ratio, and which times of day are more active for certain customers. “Business owners will also be able to offer instant promotions to try to engage new customers and keep current ones.”N. Bolton, “Foursquare Introduces New Tools for Businesses,” March 9, 2010. Managers can use the tools to notice if a once-loyal patron has dropped off the map, potentially creating a special promotion to lure her back.

Monitoring should also not be limited to customers and competitors. Firms are leveraging social media both inside their firms and via external services (e.g., corporate groups on Facebook and LinkedIn), and these spaces should also be on the SMART radar. This kind of monitoring can help firms keep pace with employee sentiment and insights, flag discussions that may involve proprietary information or other inappropriate topics, and provide guidance for those who want to leverage social media for the firm’s staff—that is, anything from using online tools to help organize the firm’s softball league to creating a wiki for a project group. Social media are end-user services that are particularly easy to deploy but that can also be used disastrously and inappropriately, so it’s vital for IT experts and other staffers on the social media team to be visible and available, offering support and resources for those who want to take a dip into social media’s waters.