Special Issue Papers

Efthymios Constantinides
studied Economics at the BA
level and Economics of European
Integration at the post-graduate
level; his PhD dissertation
focused on Marketing in Virtual
Environments. After a corporate
Web 2.0: Conceptual
career of ten years (among
others for Ericsson and KLM),
foundations and
he worked as Senior Lecturer
Marketing for the International
marketing issues
Agricultural College Larenstein,
the Netherlands. Currently, he is Efthymios Constantinides and Stefan J. Fountain
working as Assistant Professor Received: 24 October 2007
E-Commerce in the faculty of
Management and Governance
of the University of Twente, the
Netherlands, and is visiting Abstract
professor at the University of
This paper identifies the technological and commercial
Castilla-La Mancha, Spain. His
research interests are focused on foundations of the new category of online applications commonly
strategy in virtual marketplaces, described as Web 2.0 or Social Media. It examines the relevance
E-Marketing and online consumer of Web 2.0 for Marketing Strategy and for Direct Marketing in
behaviour. particular. The issue is not a clear-cut one: while several observers
Stefan J. Fountain saw in Web 2.0 a new stage in the evolution of the internet,
studied Business Information
others simply rejected it as a new High-Tech hype while there is
Technology in the Netherlands at
the Faculty of Computer Science, still no generally accepted definition and demarcation of the term.
University of Twente. He recently Paradoxically, even without an accepted definition and despite
completed his MSc thesis, which lack of extensive research, the corporate world seems to embrace
deals with the effects of Trust and the Web 2.0 concept: high-profile mergers and acquisitions have
Network effects on the success
of online organisations. He is
already taken place or are under way while corporations are
currently working as project rushing to integrate various forms of social media into their
leader for the Web 2.0 startup marketing planning. The experience so far, based to a large degree
Soocial (www.soocial.com) and is on anecdotal evidence, is that Web 2.0 has a substantial effect on
the co-founder of Eight Media web
development studio in Arnhem, the
consumer behaviour and has contributed to an unprecedented
Netherlands. customer empowerment. The consequences are far reaching,
affecting not only the area of technology development but also the
domains of business strategy and marketing. From the academic
but also the practical point of view, attention must be placed on
the demarcation and evaluation of the new technologies and
trends so that the real value of Web 2.0 as a component of the
modern marketing can be determined.
Keywords: Web 2.0, social Journal of Direct, Data and Digital Marketing Practice (2008) 9, 231–244.
media, internet marketing, online doi:10.1057/palgrave.dddmp.4350098
marketing, online consumer
behaviour, direct marketing,
marketing strategy

Efthymios Constantinides
Introduction
Faculty of Management and On the 2nd of April 2005, The Economist published an article titled
Governance ‘Crowned at last’ and TIME magazine, breaking a tradition of almost
University of Twente
P.O. Box 217
40 years, assigned the title of the 2006 Man of the Year not to any
Enschede 7500 AE, particular personality but to the modern virtual consumer. The
The Netherlands underlying theme of both publications — and many others that
Tel: + 31 53 4893799
Fax: + 31 53 4892159
followed — was the effect of the new kind of internet applications on
E-mail: e.constantinides@utwente.nl shaping a new class of consumers increasingly integrating the web into

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www.palgrave-journals.com/dddmp
 Constantinides and Fountain

their daily life. Both articles describe how the phenomenon commonly
referred to as Web 2.0 or Social Media is affecting the way people
communicate, make decisions, socialise, learn, entertain themselves,
interact with each other or even do their shopping. They also suggest
that the Web 2.0, next to transforming peoples’ individual and group
behaviour, has also affected the power structures in the marketplace,
causing a substantial migration of market power from producers or
vendors towards customers. The main reason for this is that today’s
online consumer has access to a previously unknown reservoir of
information and knowledge as well as unlimited choice, available at the
click of the computer mouse.
Web 2.0 The terms Social Media and Web 2.0 are often used as
interchangeable; however, some observers associate the term Web 2.0
mainly with online applications and the term Social Media with the
social aspects of Web 2.0 applications (participation, openness,
conversation, community, connectedness; SpannerWorks, 2007). In this
paper, we will use the term Web 2.0 as an umbrella term of web
applications fulfilling a number of criteria to be defined further on.
The growing importance of the Web 2.0 and the effects on
consumers and organisations are issues frequently making headlines
and increasingly attracting academic attention. The interest is often
focused on the ways in which these applications contribute to customer
behavioural change and on new challenges facing strategists and
marketers (Urban, 2003; McKinsey Quarterly, 2007). There is little
clarity as to the exact nature of Web 2.0; for all intents and purposes,
there is still no generally accepted definition of the term and no
systematic research on its importance and its effects on the marketing
practice. This paper will attempt to define this phenomenon and
identify its dimensions in an effort to help marketers understand the
potential of Web 2.0 as a (direct) marketing tool.

What is Web 2.0?

Web 2.0 is a The term Web 2.0 is around since 2005 but the subject is already
controversial subject controversial. Considerable controversy stems from the fact that Web
2.0 applications are by and large based on content generated by users
often being anonymous and lacking qualitative credentials. This is a
basic difference from previous internet applications: the user as an
essential contributor is a new marketing parameter instigating a
migration of market power from producers to consumers and from
traditional mass media to new personalised ones.
Controversy is also evident in the lack of general consensus as to
what exactly the Web 2.0 is; this paper will apply the following
definition when referring to Web 2.0:
Web 2.0 is a collection of open-source, interactive and user-
controlled online applications expanding the experiences, knowledge
and market power of the users as participants in business and social
processes. Web 2.0 applications support the creation of informal users’
networks facilitating the flow of ideas and knowledge by allowing the

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 Web 2.0: Conceptual foundations and marketing issues

efficient generation, dissemination, sharing and editing/refining of

informational content.
Web 2.0 presents businesses with new challenges but also new
opportunities for getting and staying in touch with their markets,
learning about the needs and opinions of their customers as well as
interacting with them in a direct and personalised way.
A number of technology principles that will be briefly explained in
the next chapters are common to Web 2.0 applications. As to the
categories of Web 2.0, we propose a basic classification based on
application types divided into five main categories:

Five main categories 1. Blogs: Short for Web logs: online journals, the most known and
fastest-growing category of Web 2.0 applications. Blogs are often
combined with Podcasts, that is, digital audio or video that can
be streamed or downloaded to portable devices. Examples:
http://gizmodo.com, http://www.boingboing.net, http://www.
huffingtonpost.com
2. Social networks: applications allowing users to build personal
websites accessible to other users for exchange of personal content
and communication. Examples: http://www.myspace.com, http://
www.facebook.com, www.hyves.nl, http://www.ning.com/
3. (Content) Communities: Websites organising and sharing particular
types of content. Examples are applications of Video sharing: http://
video.google.com, www.youtube.com, http://etsylove.ning.com,
Photos sharing: http://www.flickr.com, Social Bookmarking www.
digg.com, http://del.icio.us and publicly edited Encyclopedias www.
wikipedia.org, http://en.citizendium.org/wiki/Main_Page
4. Forums/bulleting boards: sites for exchanging ideas and information
usually around special interests Examples: www.epinions.com,
www.personaldemocracy.com, http://www.python.org.
5. Content aggregators: applications allowing users to fully customise
the web content they wish to access. These sites make use of a
technique known as Real Simple Syndication or Rich Site
Summary (RSS). Examples http://uk.my.yahoo.com/, http://www.
google.com/ig, http://www.netvibes.com/

The user is a vital factor for all categories of Web 2.0 applications,
not only as a consumer but mainly as a content contributor. The term
User-Generated Content (UGC) is often used to underline this special
attribute of all the above Web 2.0 application categories.

Evolution and trends of the internet: From Web 1. 0 to

Web 2.0
From Web 1.0 to The recent high-profile takeovers of the internet telephone service
Web 2.0 Skype and the online payment system PayPal by the successful online
auction Ebay, the takeover of the photo-sharing site Flickr by Yahoo
and the 1.6-bn-dollar takeover of the still-unprofitable — video
exchange site YouTube by Google have placed the subject of Web 2.0
in the spotlight. Some observers already draw parallels to the internet

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 Constantinides and Fountain

gold rush of the 1990s. The issue is already a subject of public debate
while studies about of the phenomenon have begun to surface
(McKinsey, 2007; Forrester, 2007). In the academic literature, the
topics of Web 2.0 and social media are slowly attracting attention
(Karger and Quan, 2005; Biever, 2006; Deshpande and Jadad, 2006;
Boll, 2007) and yet there is no visible line on research interests and
no definition of Web 2.0 enjoying general academic acceptance.
The term Web 2.0 was proposed by O’Reilly (2005) and it has
quickly become the new buzzword of Silicon Valley circles and the
media. For the software industry, the phenomenon is not really
new but marketers becoming familiar with Web 2.0 are increasingly
engaging this concept as part of their marketing strategy (McKinsey,
2007; Hitwise,1 Forrester, 2007). Expectations are high, despite the
fact that generally speaking the adoption rate among traditional
businesses is still low and the instruments being used are selective
and limited.2
Ambiguity The term Web 2.0 is used extensively despite the ambiguity as to its
exact meaning. Yet, using a common term serves a useful purpose: it
helps establish a common vision and provides a platform for
development of online service-oriented and customer-controlled
applications.
The influence of the Web 2.0 concept is evident in the field. One of
the most noticeable trends in the internet-mediated online marketplace
is that applications are increasingly being built no more on proprietary
platforms but rather on frameworks usually based on open-source
software. These frameworks enable the rapid development of new
forms of functionality, allowing the ‘democratisation’ of technology and
in many cases even facilitating connectivity to competitive applications.
Interconnectivity has substantially increased cooperation and interaction
among web users.
The value and benefits underpinning this trend are not always clear
and their effects have not yet been studied in a systematic way. One of
the reasons for this is the newness but most importantly the complexity
of the issue: in the Web 2.0 domain various technical and business
aspects are heavily interrelated, often making the identification of the
underlying value models difficult.
With regard to the innovative nature of Web 2.0, it can be argued
that the movement has not contributed many radically new
technological components; it has merely created new families of online
applications sharing a number of common sets of objectives,
characteristics and design principles. The main innovative aspect of
these applications is the way they allow user participation in the form
of content contribution and content editing; as such, they are usually
built on a common set of development practices and present users with
a new value proposition based on network effects.

The Web 2.0 main principles

Main principles As mentioned earlier, Web 2.0 applications must be seen as a new stage
in the evolution of the networked world, namely as a new generation of

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 Web 2.0: Conceptual foundations and marketing issues

online applications sharing a number of common traits. Various authors

(Daconta et al., 2003; Shirkey, 2003; Anderson, 2004; O’Reilly, 2005)
have identified and analysed these issues as crucial elements of Web
2.0 applications.
The key innovative elements typifying this new family of web
applications can be summarised as three main principles. These
principles are:

1. Focus on service-based, simple and open-source solutions in the

form of online applications.
2. Continuous and incremental application development requiring the
participation and interaction of users in new ways: not only
‘consuming’ but also contributing, reviewing and editing content.
3. New service-based business models and new opportunities for
reaching small individual customers with low-volume products.

The Web 2.0. main principles in detail

Detailed principles 1. Focus on service-based, simple and open-source solutions in the

form of online applications. The three main elements are:
(a) Shift towards online services: from software as product to
software as service: Unlike the first generation of internet
applications developed around proprietary software products, the
new Web 2.0 applications are platform independent, very often
making use of open-source software. They are offered as a
service rather than as packaged software (O’Reilly, 2005),
without scheduled releases, usually free to everyone — no
licensing fees are charged — easy to download, share and
distribute.
(b) Simplicity: Web 2.0 applications are widely considered as simple
and unfussy, at least from the user’s perspective. User interfaces
are less bloated, applications offer a limited number of features
and the value proposition for the user is easily recognisable.
In the case of content aggregators like My Yahoo and similar
RSS3-based sites, the user is allowed to fully customise the
application.
(c) The network effects as the vendor lock-in: The obvious winner
in the Web 2.0 movement is the user since he/she is in control
of the process. These applications often lack a financial vendor
lock-in and since the user can easily exchange or substitute
any service for another, it seems that network effects and peer
usage are important motives for customer loyalty. For example
while switching to a competitor of Skype.com (the market
leader in internet-based telephone services) could mean a
cheaper option, most Skype users will not migrate to another
service if their contacts and peers are also Skype.com users;
participants of the social networking site MySpace.com or the
online community SecondLife (www.secondlife.com) or the

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 Constantinides and Fountain

online photo-exchange service Flickr (www.flickr.com) will

keep using the service if more and more of their contacts and
peers do the same even if there are many other (and even better)
options available.
2. Continuous and incremental application development requiring the
participation and interaction of users in new ways: not only
‘consuming’ but also contributing, reviewing and refining content.
The fact that the user can actively participate in the development of
Web 2.0 applications offers important benefits to the application owner
like immediate access to the voice of the customer and to a very
extensive knowledge reservoir. The advantages of customer involvement
in application development are:
Advantages of (a) Continuous, real-time improvement: This is a common practice in
customer involvement many web applications: the photo-exchange service Flickr deploys
in application new builds every half an hour and the internet telephone service
development Skype frequently asks users for feedback on connection quality after
terminating a call, taking action and solving service bottlenecks
while customers actually use the service. Proactively using feedback
from users is the main differentiating factor between Web 2.0 and
older approaches; there is no question of upgrading cycles or
software releases but rather a continuous, real-time development,
based on actual user feedback and usability controls.
(b) Perpetual beta: The Web 2.0 variant of the Beta version concept is a
‘perpetual’ beta concept: (O’Reilly, 2005): there is never a definitive
version and software remains under development and improvement as
long as it exists. Following this concept, the software is
commercialised before it is ‘feature complete’ or free of programming
bugs, ‘developed in the open, with new features slipstreamed in on a
monthly, weekly, or even daily basis’ (O’Reilly, 2005).
(c) More users: more value though the aggregation of collective
intelligence: Every new user adds value by increasing the size of
the collective intelligence pool: the more users participate, the
more advanced and valuable the service becomes. Examples of
this are applications like the user-generated content tourism site
Wikitravel (http://wikitravel.org/en/Main_Page), the online
encyclopedias Wikipedia (www.wikipedia.org) and Citizendium
(http://en.citizendium.org) and Amazon.com who bases its book
recommendations on behavioural profiling and information about
the buying preferences of customers with similar profiles.
3. New service-based business models and new opportunities for
reaching small individual customers with low-volume products.

(a) Changes in revenue and usage models: A number of Web 2.0

applications secure part of their revenue stream on an online
version of the traditional newspaper-like subscription but most
offer their services for free, subsidising their operations by
advertising revenue or sponsoring (with Google, the most
successful search engine service today, as the best-known

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 Web 2.0: Conceptual foundations and marketing issues

example). A commonly applied form of subscription — the

online telephone service Skype being a good example — is to
offer a basic service for free and to charge a fee for the
premium, more advanced services.
(b) From mass markets to the individual customers: A substantial
number of service providers in the Web 2.0 domain seem to
understand that next to the high-volume hit products and
services, there is a high — previously untapped — market
potential of individual, ‘unsegmented’ consumers with very
specific interests and demand for low-volume, customised
products and services. Owing to low volumes, such products
have so far remained below the radar of the average high-street
marketer. Web 2.0 applications like specialised blogs, forums,
bulletin boards, podcasts and communities allow consumers to
easily learn about the existence of these products and also find
them often by simply getting in touch with other consumers
sharing the same interests. There is evidence that such niche
consumers can create substantial aggregated demand for
products and services not belonging to the mainstream or ‘hit’
categories but to the so-called Long-Tail (Anderson, 2006);
Anderson argues that firms able to tap the total sales potential of
low-volume products can substantially increase their business;
however, concrete scientific evidence of this does not exist yet.4
The evidence so far is anecdotal: Some of the most successful
Internet businesses seem to already leverage the Long Tail of
their markets. Examples include eBay (www.ebay.com) (online
auctions), Yahoo! (www.yahoo.com,) .com and Google (www.
google.com) (web search), Amazon (www.amazon.com) (retail)
and iTunes http://www.apple.com/itunes (music and podcasts),
Audible http://www.audible.com (audio books) and Netflix
(http://www.netflix.com) (video rental).

The Web 2.0 and marketing: What is changing?

Web 2.0 and The Web 2.0 is a new step in the evolution process of the internet as
marketing marketing environment. While some observers reject the Web 2.0
notion as nothing more than another technology fad, its success and
wide public acceptance point to the fact that Web 2.0 is here to stay.
Several studies suggest that young consumers have already adopted the
online social media as an integral part of their life: according to a
recent survey by Alloy Media & Marketing, 96 per cent of US teens go
online to participate in a social network at least once a week (Biz
Report.com, 27 June 2007).
Next to the young consumers, there is evidence that practitioners are
becoming increasingly attracted by the Web 2.0 realm: more than 50
per cent of professionals participate already in social networks
according to the Social Network Practitioner Consensus Survey of May
2007 (BizReport.com, 5 June 2007). On the other hand, the mainstream
online consumer has noticed that Web 2.0 applications offer new and

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 Constantinides and Fountain

previously unknown possibilities and empowerment not only in the

form of information sourcing but also as forums of dialogue and
confrontation of producers and vendors with their social, ethical and
commercial responsibilities. The power of these media can be very
substantial and there are already several cases of ‘citizen journalism’
exposing product failures or corporate misconduct and forcing
companies to respond. Some highly publicised cases include the
recall of a Dell laptop model and the Kryptonite bicycle lock after
blogs exposed serious shortcomings of these products, and American
On Line (AOL), which was forced to abolish its high-pressure
tactics to prevent customers from giving up their subscriptions. All
these cases started with a blog posting that reached millions of
users and ultimately reached the wider public through the traditional
media.
Scepticism Despite the positive perspectives there is still scepticism surrounding
surrounding Web 2.0 Web 2.0: Keen (2007), Keegan (2007) and Wilson (2007) argue that the
Web 2.0 and specifically applications based on user-generated content
present a real and present danger to the established culture. Some of
the arguments: anonymous amateur videos and music remixes posted to
sites like YouTube, Google Video and other such sites contribute to
public frustration (the viewer is not able to distinguish between reality,
fiction and advertising) and abuse of intellectual rights (from using
copyrighted material like music, video, logos, etc), leading to the
demise of professional artists and the entertainment industry in general.
Next to this, the complete lack of control and accountability allows
everyone to become a self-proclaimed expert and influence those who
are not able to distinguish between quality and nonsense. Gillin (2007)
and others, on the other hand, argue that in fact the social media
represents a healthy phenomenon, becoming the new source of
consumer creativity, influence and empowerment. An interesting
consequence of customer empowerment is that traditional media and
old-style marketing are constantly losing ground as influencers of
consumer behaviour. According to the 2004 Yankelovick Monitor,5 60
per cent of US consumers have a much more negative picture
about Marketing and 70 per cent of consumers tune out advertising
much more often than a few years ago. Consumers do not trust
traditional marketers as they used to: a recent study of Deloitte Touche
USA reveals that 62 per cent of the US consumers read consumer-
generated online reviews and 98 per cent of them find these reviews
reliable enough; 80 per cent of these consumers say that reading these
reviews has affected their buying intentions (emarketer.com, 12 October
2007).
Despite these negative signals, it is essential for marketers to look to
Web 2.0 as a challenge rather than as a threat and consider it as a new
domain of commercial strategy. As such, the subject poses some
interesting questions: what are the dimensions and the possible
consequences of the Web 2.0 phenomenon on the marketing practice?
What are the possible responses of business to the phenomenon and
which of these responses are likely to be successful?

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 Web 2.0: Conceptual foundations and marketing issues

Main consequences: Shift in market power, value

offering and customer needs
An important effect of the Web 2.0-mediated customer empowerment is
a visible shift in consumer attitudes. Some of the symptoms are the
surfacing of new customer needs, the emerging new value perceptions
and the change of consumer search tactics and buying behaviour.
Growing demand The shift in customer needs is reflected in the growing demand for
online services, particularly in the Web 2.0 domain, where consumers
can not only interact with marketers but also access peer communities.
The fast expansion of the ‘blogsphere’ and other online platforms where
people can post and exchange personal ideas, videos, pictures and tags
but also participate in virtual worlds or games has by now created its
own dynamics: it occurs without any form of marketing effort from
the part of the application providers. The value attributed to these
applications is not based on the classic customer value approach but
rather on some feeling of achievement through personal gratification.
As to the consumer behaviour this is increasingly influenced by peer
opinions and the collective intelligence (Surowiecki, 2005).

Web 2.0 as a direct marketing tool

Web 2.0 and What could Web 2.0 mean to marketers and how can they integrate it
marketing into the corporate commercial strategy? Recognising the effects of Web
2.0 on the consumer’s decision-making process, understanding the
sources of customer value and the motives of consumers to use these
applications are the first steps to this direction. Web 2.0 applications
are becoming increasingly popular due to the advantages they offer to
users (transparency, referrals, contacts with other users, etc) and their
effect on customer power (Urban, 2003). Interaction with peers triggers
new customer needs (often for niche and highly personalised products)
and alter buying attitudes. The new buying attitudes are not limited to
the online buying behaviour but extend to the traditional one: according
to a recent survey of the Sterling Committee ‘consumers want a
seamless buying experience across all channels’ (BizReport, 30 August
2007). Moreover, the customer preferences and experiences about the
products and services offered either in traditional or electronic outlets
are not based any more exclusively on information made available
through traditional mass media or corporate websites. In the Web 2.0,
era customer preferences and decisions are increasingly based on
inputs provided by parties beyond the control of online marketers:
peer reviews, referrals, blogs, tagging, social networks, online
forums and other forms of — uncontrollable by the marketer —
user-generated content.
As a result, the internet, and particularly the Web 2.0 as a new
marketplace component, further complicates the time-honoured
‘textbook’ buying behaviour process described in the Inputs —
Processing — Response model (Figure 1) where the elements A and B
represent the traditional influencers of the consumer behaviour: these
are the conventional marketing influences (A) and the uncontrollable
personal influencers (B) (Kotler, 2003).

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 Constantinides and Fountain

Figure 1: Factors influencing the decision-making process in an information-based marketplace adapted

from Kotler (2003) and Constantinides (2004)
Notes: A and B: Factors affecting the buying decision-making process in traditional shopping
environments. A, B and C: Factors affecting the buying decision-making process in an internet (Web
1.0)-mediated environment. A, B, C and D: Factors affecting the buying decision-making process in an
internet (Web 2.0)-mediated environment

In today’s digital-focused marketing environment, the internet as a

communication and transaction channel adds two more inputs and
influencers of buying behaviour to the model: the online marketing
mix (C), which basically represents the controllable online experiences
provided by the corporate website (Constantinides, 2004), and the Web
2.0 influences (D), which are by and large beyond the marketer’s control.
Increasing complexity Figure 1 underlines the increasing complexity of the customer
of the customer decision-making process in the Web 2.0 environment: as the web user
decision-making and the technology mature, marketers discover that influencing the
process consumer behaviour by means of traditional marketing media and
practices becomes less effective. Next to the new parameters entering
the decision process equation, an additional problem is the increasing
mistrust of consumers for traditional, mass marketing tactics as
explained earlier; these consumer attitudes are reflected on the
diminishing effect of mass media.6
Identifying ways to enhance user experience, meeting the customer’s
information needs and helping customers become successful — an
approach known as customer advocacy — will be the future keys to
success. Even in the case of product categories previously considered as
generic (like travel and vacation services), vendors discover that they can
gain and retain customers by offering something more than only low
prices (Gilden, 2006). There is evidence that customer reviews posted in
different forums or online communities, Web blogs and podcasts are
much more powerful as marketing tools than expert product reviews
(Gillin, 2007); the influence of blogs and podcasts is increasing because
of the fast expansion of the audience and contributors.7

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 Web 2.0: Conceptual foundations and marketing issues

Corporate options
Firms can capitalise on these developments in three different ways:

— The first way is to understand how social media function and

include them in their PR arsenal as a means of reaching and
informing the new online opinion leaders (bloggers, podcasters, etc)
about their products, services and new market offers; this in an
effective means of passing the message through to their target
markets or even to very specific market segments at a fraction of
the costs required by traditional media. Advertising in well-selected
blogs and popular search engines can also be a very interesting and
relatively low-cost communication option.
— The second way in which marketers can engage the Web 2.0 is by
actively and consequently ‘listen-in’ to the customer’s voice: what
people say about the firm and its products in blogs, podcasts,
forums and online communities. This is by no means an easy task
but there are already tools available to marketers: specialised parties
and search engines making possible the detection and collection of
this type of online content. The value and quality of this
information are obvious. People like to exchange online experiences
about products, services and firms, advising others or even
proposing how products can be improved; this is high-quality and
low-cost market information. A simple way to start is to search for
content related to the firm and posted in sites like YouTube. Coca
Cola discovered that a rage of amateur videos were building up in
YouTube showing the funny experiences of customers dropping
Mentos mints into Diet Coke bottles, something that is causing an
explosive soda fountain. After initially distancing itself from the
exploding Diet Coke videos and several unsuccessful efforts to stop
them, the company finally understood the value of this free
publicity, signing a formal deal with the initial creators of the
videos. Based on this idea, the firm introduced the ‘Coca-Cola
Challenge’ campaign asking consumers to submit videos
showcasing creative uses of everyday household items.
— The third way to utilise Web 2.0 media is to engage these as tools of
direct, personalised one-to-one marketing. Brick-and-mortar firms
like Nike, Disney, Coca Cola, TIME magazine, The Hearst Media,
etc are already experimenting with social media as part of their direct
marketing strategy seeking communication, interaction and customer
feed back. They do this by introducing Web 2.0 web sites based
on user-generated content and encouraging social networking and
community forming. These sites offer their customer the possibility
to reach their peers, exchange information and experiences.

Active participation in Another option is to actively participate in the Web 2.0 domain by
the Web 2.0 domain launching corporate blogs and podcasts. Several business executives
like the CEO of Sun Microsystems Jonathan Swartz, the CEO of Apple
Computers Steve Jobs and the McDonalds Vice President Bob Langert
post regularly on corporate blogs, encouraging customers to interact

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 Constantinides and Fountain

and freely express their feelings, suggestions or remarks about the

company and its products.
Some firms are going a step further: SONY, Frito-Lay’s, Sunkist are
some examples of a growing pool of corporations partnering with
talented amateurs, who create viral films or television commercials for
them. The idea behind such partnerships is that messages created by
real customers reflect the genuine feelings of product users and as such
they are more credible and more effective than messages created by
advertising agencies.
Personalised products An alternative approach is the increasingly popular corporate practice
taking advantage of the rising customer individualism namely providing
customers with personalised products. There are several examples of
firms offering customers online tools allowing modification,
customisation or even the design of company products. Pioneers in this
area are companies like Kleenex (myklenextissue.com), a service called
photostamps.com allowing consumers to create their own (US Postal
Service approved) stamps from their photos, Heinz (myheinz.com)
inviting customers to create their own personalised labels of their
ketchup bottle and M&M (nymms.com) allowing customers to select
their favourite candy colours and have a personalised message printed
on it. Pepsi invites fans to design their soft drink cans in the Design
Our Pepsi Can Contest (www.designourpepsican.com), with the best
idea adopted as the new look of the product in regular intervals, and
NIKE offers similar tools to its customers, allowing customising the
sport articles they order online (http://nikeid.nike.com).

Conclusions and issues for further research

New stage in the The growing family of Web 2.0 applications appears to be a new stage
internet’s evolution in the internet’s evolution. These applications are suitable for using new
forms of interactive, one-to-one marketing. A number of common
software development trends and commercial principles underpin the
Web 2.0 applications. Furthermore, these applications directly affect
the market power structures to the benefit of consumers rather than
corporations. These effects require new marketing strategies and
approaches.
The Web 2.0 movement emphasises the trend towards openness and
technology democratisation and introduces new forms of participation
based on decentralisation and user-generated content. They present
consumers with a whole array of options in searching for value
products and services and finding exactly what they need and want
with minimum effort, in line with the current customer desire for
personalisation, individual approach and empowerment. By introducing
a new uncontrollable element into the customer decision-making
process equation, the Web 2.0 domain presents a new challenge to
marketing strategists who witness the diminishing effect of traditional
marketing practices as customers’ influencers. The obvious course for
marketers is to engage the new media in passive and active ways as
part of the overall marketing strategy: as part of the PR and
communication mix, as new channels for listening to the customer’s

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 Web 2.0: Conceptual foundations and marketing issues

voice and as means for direct, one-to-one marketing. These areas are
already pioneered by corporations testing and adopting new tactics
based on openness, dialogue and individual (one-to-one) approach,
offering customers the possibility to express their needs, creativity
and experiences and in some cases even involving customers in
the production of communication messages and the design of
their products.
From the academic point of view, these developments present a
challenging research domain that should embrace three main topics:

Three main topics 1. The identification and classification of the different types of
applications and instruments belonging to the Web 2.0 category
from the technological but also from the commercial perspective.
This will provide the basis for a comprehensive definition as a
basis for the systematic analysis of the phenomenon.
2. The study of the effects of these instruments on consumer
perceptions, needs and behaviour and the study of the effects of
Web 2.0-based approaches on market niches.
3. The value of Web 2.0 applications as marketing tools and ways to
maximise the effectiveness of these tools. The important questions
here refer to how these tools can be efficiently incorporated into
the marketing strategy, how they can become sources of additional
business value and how to use these as effective instruments of
customer acquisition and retention.

The social media are Finally, all indications point to the fact that the social media are here to
here to stay stay. In the future, Marketers should learn to co-exist and communicate
with a powerful customer very little sensitive to old-fashioned push
marketing and by and large determined to participate as an equal in the
marketing process.

Notes
1. HitWise.com, in a study published in April 2007, calculates the participation of Web 2.0 to
the top participatory websites to be 12,28 per cent, a 668 per cent increase compared to two
years ago.
2. Marketingvox.com, 28 March 2007.
3. RSS stands for Rich Site Summary. This technology allows web users to easily customise and
access websites of interest.
4. Anderson focuses on the specific example of online music sales in comparison with music
products sold in music stores where only the most popular music is selling enough units
justifying shelf space. Less popular music numbers or albums do not sell enough and thus
are not taken in the assortment of traditional brick and mortar stores where physical shelf
space is limited.
5. 2004 Yankelovich Marketing Resistance Survey.
6. 2004 Yankelovich Monitor.
7. According to Technorati.com, a firm measuring the development of this phenomenon as of 30
September 2006 1.3 million blog posts are published daily, 54.000 + per hour.

Further reading
Anderson, C. (2006) ‘The long tail: Why the future of business is selling less of more’, Hyperion,
ISBN 1401302378.

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 Constantinides and Fountain

Biever, C. (2006) ‘Web 2.0 is all about the feel-good factor’, The New Scientist, Vol. 192, pp. 30.
Boll, S. (2007) ‘MultiTube — Where Web 2.0 and multimedia could meet’, IEEE Multimedia, Vol.
14, No. 1, pp. 9–13.
Constantinides, E. (2004) ‘Influencing the online consumer’s behaviour: The web experience’, Jour-
nal of Internet Research, Vol. 14, No. 2, pp. 111–126.
Daconta, M. (2003). The Semantic Web: A Guide to the Future of XML, Web Services, and Knowl-
edge Management, John Wiley & Sons Inc, New York.
Deshpande, A. and Jadad, A. (2006) ‘Web 2.0: Could it help move the health system into the 21st
century’, The Journal of Men’s Health & Gender, Vol. 3, No. 4, pp. 332–336.
Gilden, J. (2006) ‘Travel websites gain visitors by offering more than low prices’, Los Angeles
Times, 22 January 2006.
Gillin, P. (2007). The New Influencers, A Marketer’s Guide to the New Social Media, Quill Driver
Books\Word Dancer Press, Inc, CA, USA.
Karger, D. and Quan, D. (2005) ‘What would it mean to blog on the semantic web’, Web Semantics:
Science, Services and Agents, Vol. 3, No. 2–3, pp. 147–157.
Keegan, V. (2007) ‘Amateurs can be good and bad news’, The Guardian, 5 July 2007.
Keen, A. (2007). The Cult of the Amateur: How Today’s Internet is Killing our Culture, Doubleday/
Random House, New York.
Kotler, P. (2003). Marketing Management, 11th edn, Prentice-Hall International Editions, Englewood
Cliffs, NJ.
Li, C. and Stromberg, C. (2007). Calculating the ROI of Blogging: A Case Study, A Look At The ROI
Of General Motors’ FastLane Blog, Forrester Research, http://www.forrester.com/Research/
Document/Excerpt/0,7211,41066,00.html.
McKinsey. (2007) ‘How business are using Web 2.0: A McKinsey global survey’, The McKinsey
Quarterly, http://www.mckinseyquarterly.com/Marketing/How_businesses_are_using_Web_20_
A_McKinsey_Global_Survey_1913_abstract.
O’Reilly, T. (2005) ‘What is Web 2.0?’, http://www.oreillynet.com/pub/a/oreilly/tim/news/2005/09/
30/what-is-web-20.html.
Shirkey, C. (2003) ‘Power laws, weblogs, and inequality, networks, economics, and culture mailing
list’, Source: http://www.shirky.com/writings/powerlaw_weblog.html.
SpannerWorks. (2007) ‘What is social media’, www.spannerworks.com/ebooks.
Surowiecki, J. (2005). The Wisdom of Crowds, Anchor Books, New York.
Urban, G. (2003) ‘Customer advocacy: Is it for you? MIT Sloan School of Management’, Center for
E-Business, Paper 175.
Weill, P. and Vitale, M. (2001). Place to Space, Migrating to e-Business Models, Harvard Business
School Press, Boston, MA, USA.
Wilson, A. N. (2007) ‘The Internet is destroying the world as we know it’, Daily Mail Online,
8 June 2007.

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