INTRODUCTION
"Especially in a "flat world" where "size
matters not," small- and medium-size enterprises and even one-man
local businesses or projects can use these [Web 2.0] business models to
advantage" (Shuen, 2008)
"The tools of Web 2.0 allow anyone willing to put in the time
and effort to harness the tools of the Internet and build the next great
startup. Inexpensive and collaborative technology is allowing
entrepreneurs to create unbelievable products and services even with
meager resources and this environment of innovation should inspire
entrepreneurs of any age to tap into the opportunities." (Small
Business News, 2010)
Perhaps due to its ambiguous meaning and debated usefulness Web
2.0, and the evolution of web technology in general, and its impact on
small business has not been adequately addressed by the academic
business community. A recent article search in an EBSCO hosted database
of business publications revealed that over the last decade scholarly
articles focusing on small business and the World Wide Web oriented
technologies constituted just 2.3% of all articles published on small
businesses. Considering the number of small businesses, the magnitude of
their impact on the economy, and the prominence of the role of
technology and the World Wide Web in discussions regarding business, the
dearth of scholarly work on this subject seems salient. While a modicum
of research has been conducted on small businesses and specific Web
technologies, such as e-commerce (Grandon & Pearson, 2004; Hashim,
2009; Kendall, Tung, Chua, Ng, & Tan, 2001; Mehta & Shah, 2001;
Poon & Swatman, 1999) and internet marketing (Poon & Jevons,
1997; Schmengler & Kraus, 2010), few scholars have considered Web
2.0 as a general technology platform for small businesses. The
widespread usage of the term "Web 2.0" in the business world
suggests that, at a minimum, an analysis of its definition and alleged
role in small business development and success is warranted. The growing
buzz around the ability of so-called Web 2.0 technologies to democratize
various aspects of society and culture, including politics, information,
publishing, and business (Anderson, 2006; Governor, Hinchcliffe, &
Nickull, 2009; Hippel, 2005; Kelly, 2005; Shuen, 2008), suggests more in
depth conceptual and empirical analyses of this issue are needed to
further understanding and offer guidance for small business owners and
managers.
Web 2.0, a name reflecting an improved or upgraded version of the
Web, is generally defined and distinguished by the presence of increased
interactivity in Web applications including social media (online
collaborative projects such as wikis, blogs, and social networking
sites), cloud-based computing (information and software stored and run
from a web server, not the user's computer), and the ability to
access the Web via multiple device platforms (i.e. laptops, mobile
devices, e-readers)(Governor et al., 2009; Kroski, 2006; O'Reilly,
2005; Peter, 2004; Shuen, 2008). The interactivity defining Web 2.0 is
in large part a result of its underlying architecture as a technology
platform, which includes an emphasis on participation-collaboration, a
service orientation, and open source structured information, within the
context of ubiquitous internet access. The major benefit Web 2.0 is
purported to offer small businesses is the elimination of size
advantages of larger corporations due to economies of scale (Anderson,
2006; Governor et al., 2009; Shuen, 2008). While evidence suggests that
Web 1.0 applications such as e-commerce and informational web sites have
not put small businesses on equal competitive footing with large
corporations or reduced scale advantages (Hashim, 2009; Jones, 2005;
Jones, Hecker, & Holland, 2003; Poon & Swatman, 1999), advocates
of Web 2.0 technologies recognize this (O'Reilly, 2005; Shuen,
2008) and assert that Web 2.0 applications and technologies offer
opportunities to small businesses that were imaginable but not feasible
on a Web 1.0 platform (Anderson, 2006; O'Reilly, 2005).
The concept of Web 2.0 is not without controversy, as some argue it
presents revolutionary opportunities for small businesses (Anderson,
2006; Governor et al., 2009; Li & Bernoff, 2008; O'Reilly,
2005; Rudman, 2010; Shuen, 2008; Wallace, 2007) while others suggest it
is mere hype, representing nothing of substance (Carr, 2003; Dijck &
Nieborg, 2009; Hindman, 2008; Maguire, 2007; Scholz, 2008). However, the
term has grown in popularity among business practitioners and has
spawned numerous workshops and consultants offering small businesses
training on how to take advantage of Web 2.0 applications. Therefore, in
this paper I consider the concept and meaning of "Web 2.0" and
explore the potential opportunities and risks for small businesses, with
an eye toward identifying fruitful future research opportunities.
Context of small businesses
Although there is no uniform and consistent definition of what
constitutes a small business, definitions tend to be based on the number
of employees, annual revenues, or amount of assets. The Small Business
Administration (SBA) of the U.S. government considers companies with up
to 500 employees, small businesses, while the U.S. Internal Revenue
Service considers businesses earning less than $10 million in gross
revenue to be small. Web 2.0 advocates have suggested opportunities
offered by these technologies are available and exploitable by even a
one-person operation. As such, the label 'small business' in
this paper will primarily refer to a business that contributes over 50%
of the owner's income, and has less than 20 employees. Although
many researchers follow the SBA's definition of small businesses as
organizations with less than 500 employees, external elements such as
technology arguably have a different impact on a company with 5
employees versus a firm with 50 or 300 employees. In addition, firms
with less than 20 employees represent a relevant and sizeable number of
businesses in the U.S. (roughly 90% of all businesses (U.S. Census
Bureau, 2006)). Finally, very little research focusing on firms with
less than 20 employees has been conducted, particularly on analyzing
impact of Web-based technology.
Since the early 1980s scholars have recognized that small
businesses have certain unique characteristics that questioned the
extension of existing management and business ideas to the small
business domain (d'Amboise & Muldowney, 1988; Welsh &
White, 1981). In particular, Welsh and White (1981) argued that small
businesses experience a condition they labeled "resource
poverty" resulting primarily from their small size. This condition
includes the tendency for small businesses to exist in highly fragmented
industries and have limited access to capital funds for growth or
weathering tough economic times. Highly fragmented industries involve a
multitude of competitors resulting in a tendency to move toward an
industry-wide emphasis on low price competition, eroding profit margins
(Porter, 1985). Shrinking profit margins and limited access to capital
in the context of low price competition puts small businesses in a
situation similar to an individual living "paycheck to
paycheck," making it challenging to survive even short economic
downturns, and restricting funds available for investors, employee
training, and other operational and growth-oriented investments.
Recent data support Welsh and White's (1981) claims regarding
small business resource poverty. For example, analyzing data on U.S.
small businesses Shane (2008) found that most small businesses are
started in industries with myriad competitors and subsequently less
attractive profit margins. In addition, the IRS suggests that while the
smallest businesses represent about 58% of all the small businesses in
the U.S., they generate less than 15% of the profits (Quantra
Strategies, LLC, 2009). Restricted access to capital also magnifies the
impact that external environmental forces have on small businesses. For
example, reacting to a change in regulations, tax laws, or interest
rates, affects a greater percentage of total expenses for a small
business than a large corporation, and small businesses tend to be less
diversified and less able to achieve economies of scale or access
capital markets as a means to react to changes in the external
environment (Dixon, Gates, Kapur, Seabury, & Talley, 2006; Welsh
& White, 1981). Data from the National Federation of Independent
Business (NFIB) suggest that the most pressing problems for small
businesses are the costs involved in operating their firms (i.e. health
insurance, energy, and electricity), business income tax, and property
taxes (Phillips & Wade, 2008). This suggests that most small
companies are concerned with short term financial stability and may have
less time and capital for investing in growth. Ultimately, their
resource poverty the reduced possession of and access to financial,
human, and knowledge resources in comparison to larger businesses--means
that small businesses have less margin for error, more difficultly in
surviving environmental shocks and/or internal mistakes, and arguably
less ability to take advantage of opportunities (Welsh & White,
1981).
Welsh and White's (1981) notion of resource poverty is still
very relevant for small businesses in today's economy. In addition,
the claims of Web 2.0 advocates stress improved equality for small
businesses and an elimination of the advantages of size in the business
world (Anderson, 2006; Governor et al., 2009; O'Reilly, 2005;
Shuen, 2008). Given that a small business' limited resources are
the primary reasons for their disadvantages when compared with larger
firms, opportunities in Web 2.0 should increase the value of, or access
to resources for small businesses, and/or eliminate risk brought on from
a lack of resources due to size. As such, Web 2.0 technologies will be
considered in light of their ability to mitigate resource poverty for
small businesses.
What is web 2.0?
The label "Web 2.0" mimics the naming process of software
versions, in which the version number of the software increases with its
development and improvement. Made popular by Tim O'Reilly in his
2005 white paper (O'Reilly, 2005), the term "Web 2.0,"
according to O'Reilly, describes a set of characteristics present
in Web applications that collectively harness user participation and
collective intelligence (O'Reilly, 2005). Leverage occurs as a
result of the vast network effects found in these applications.
O'Reilly argues that these network effects are not only utilized to
create dynamic applications and services, but generate constant
improvements in the applications as their user bases grow. Thus, this
second era of the Web is characterized by the ubiquity of interactive
Web applications that further reduce barriers to information and
geographic connectivity. These applications include social media (online
collaborative projects such as wikis, blogs, and social networking
sites), cloud-based computing (information and software stored and run
from a web server, not the user's computer), and the ability to
access the Web via multiple device platforms (i.e. laptops, mobile
devices, e-readers).
Over the course of the last decade access to the internet has
increased dramatically and has been extended to an array of personal
devices. People are no longer tied to a desk, or even a laptop, to
access the internet. Cell phones, tablet devices, even
refrigerators(Smith, 2000) have access to the Web today. Fundamentally,
Web 2.0 feeds off of the legions of users interacting with each other
and the subsequent network effects generated by applications gaining
critical masses of users. Therefore, this ubiquitous access is an
important context for Web 2.0 technologies and their ability to leverage
Web 1.0 benefits. Web 1.0 offered reduced barriers to entry for
business, inexpensive access to global markets and increased access to
information. While these characteristics were powerful they did not
necessarily lead to a more level playing field for small businesses
(Hashim, 2009; Jones, 2005; Jones et al., 2003; Poon & Swatman,
1999).
Web 2.0 is argued to be distinguished from earlier Web technologies
predominantly by its underlying architecture, made possible and
effective by the ubiquity of broadband internet access and characterized
by three major elements; participation-collaboration, service
orientation, and open source structured information. While the
technological architecture of Web 2.0 has been described in great detail
and as encompassing eight or nine major characteristics (Governor et
al., 2009; O'Reilly, 2005), these three conceptual dimensions and
their interaction with features of Web 1.0, illustrated in Figure 1,
more parsimoniously account for the majority of the alleged impact of
Web 2.0 technologies on small business.
The participation-collaboration element of Web 2.0 is perhaps its
central theme. In general, greater numbers of internet users combined
with improving capabilities of hardware and software has led to what
many argue is a fundamentally new way of communicating and relating
(Anderson, 2006; Governor et al., 2009; Li & Bernoff, 2008;
O'Reilly, 2005; Shuen, 2008). Web users are now also producers,
creating and publishing their own content, organizing vast amount of
data through "folksonomies" or classification systems derived
from users categorizing data based on their collective understanding and
use of it, collaborating on everything from documents to software
development across geographic boundaries, and connecting with each other
and disseminating information widely and rapidly through online social
networks (Governor et al., 2009; O'Reilly, 2005).
[FIGURE 1 OMITTED]
The service-orientation of Web 2.0 refers to an overarching
framework for integrating services that are created, owned and managed
independently. The integration is like an overlay that creates new,
eminently more useful services while leaving the original services
intact and managed as separate entities. For example, Housingmaps.com
integrates information about available housing from Craigslist.com (a
popular classified ads website) and GoogleMaps (a free web mapping
service application that offers street maps, route planners, and place
locators for numerous countries around the world) to offer users a more
expedient way to find houses for sale or rent in their specified
locations. These integrations, called "mashups" (sites that
aggregate or combine content from multiple sources to create something
new), and software as a service (providing users with software
functionality without the need to install anything on their computers,
known as Software as a Service (SaaS)) represent some of the outcomes of
the service-orientation aspect of Web 2.0.
If the participation-collaboration is Web 2.0's central theme,
the open-source structured information element is arguably its core
enabling platform. Open source generally refers to software that is
developed around a production and distribution model that incorporates
access to the source code of the software and gives users the ability to
modify that code. These modifications can result in new features or
functionality of the software. Argued benefits of open source models
include higher quality software products with increased levels of
reliability and flexibility at a lower cost (Open Source Initiative,
2010). The open-source model ensures that all users have access to
information and services on the Web, while the structured information
component basically makes that access useful. Structured information has
to do with the way information is "marked up," and markup
technologies such as XML (Extensible Markup Language) which differs from
its Web 1.0 predecessor, HTML (hyper-text markup language), in its
ability to transport and store data, allow for connectivity and data
sharing across multiple sites. Metadata, as its name implies, is
"data about data" (NISO, 2004) and refers to structured
information that describes, explains, and locates other information,
making it easier to retrieve, use, or manage. Detailed technical aspects
of the structured information component are beyond the scope of this
article, but they comprise the platform that makes useful interactivity
among the Web's users possible and productive.
While each of these components is useful and important on its own,
it is the combination of these elements that create the overall concept
and alleged power of Web 2.0. A widely cited example of a Web 2.0
business is the photo sharing website, Flickr.com. Users upload their
pictures to Flickr and can immediately share them with others by sending
links to their Flickr pages. Basic functionality and uploading images is
free, which drives traffic to the site with little or no marketing
expenses. Users can "tag" or label photos to help other users
when searching for images, increasing the value of the site to users.
The more users Flickr attracts the more useful the site becomes to those
users and the more users want to utilize Flickr. Flickr monetizes its
web traffic in three ways: Offering contextual advertisements to outside
companies, sponsorship and revenue-sharing with companies that offer
complementary services (i.e. digital printing, camera sales), and
selling premium accounts that allow users greater functionality or the
elimination of advertisements on their page. This three-fold revenue
model takes advantage of the participation-collaboration structure of
Web 2.0, the ubiquity of internet access, and capitalizes on the network
effects created by its users.
WEB 2.0 AND SMALL BUSINESS
The idea that the Internet would be the great equalizer in
business, "leveling the playing field" for the "the
little guy" has been part of the conventional wisdom surrounding
Web technologies since e-commerce became part of the lexicon. Early
alleged benefits of the Web for small businesses included increased
access to information with little to no additional resources required,
low cost access to global markets, and overall lower barriers to entry
(Forster, 2000; Lituchy & Rail, 2000; Mehta & Shah, 2001).
However, advocates of Web 2.0 technologies and scholars alike recognize
that these benefits did not translate into real advantages for small
businesses (Hashim, 2009; Jones, 2005; Jones et al., 2003;
O'Reilly, 2005; Poon & Swatman, 1999; Shuen, 2008). One
rationale given for this is that while Web 1.0 technologies did make
information more accessible and cheaper, lower barriers to entry (for
establishing a Web-based business), and offer access to a global market,
they did not reduce the necessity for economies of scale as a key to
competition. For example, Behan (1998) noted that in 1998 the best
ecommerce web sites needed to generate 200 visitors to their site to
produce one purchasing customer. Even if the infrastructure for
establishing an e-commerce site was equally accessible to both small and
large companies, the resources to generate large numbers of users to the
company website were not equally accessible. Traditional promotion and
marketing channels were still the primary means for generating traffic
to a website in Web 1.0, and large companies could leverage those
resources and their already larger customer bases to create an advantage
over small companies with respect to generating website traffic. Small
businesses lacked the resources needed to produce large amounts of
visitors to their websites in a timely enough fashion to generate
positive cash flow early on.
Web 2.0 advocates not only recognize the challenges for small
businesses in Web 1.0 and the factors leading up to the dotcom bubble
burst, but suggest that Web 2.0 applications and technologies represent
the actualization of opportunities inherent in the World Wide Web, which
were only imaginable during the Web 1.0 era (Anderson, 2006;
O'Reilly, 2005). In particular, Web 2.0 is argued to offer
opportunities that are impervious to company size and scale, and are
accessible to the single individual as well as the large corporation.
These opportunities generally fall in two distinct categories: new
opportunities in digital product and service industries and drastic cost
reductions for small businesses across all industries.
Digital products and services
Small businesses in industries where products and services have
become digitized (i.e. music, books, Web-based services) should be able
to compete more effectively with large corporations based on new
business models and cost structures made possible by Web 2.0. These
business models offer quick monetization of website traffic, large scale
reductions in major cost centers of production (digital) and
distribution, and the ability to connect niche demand with niche supply
profitably (Anderson, 2006; O'Reilly, 2005; Shuen, 2008).
Web 2.0's participation-collaboration pattern of usage and
service oriented architecture magnify the lower barriers to entry and
access to information and global markets offered by Web 1.0. The
ultimate effect of this is argued to be an ability for companies to
quickly acquire customers that immediately contribute to positive cash
flows (Anderson, 2006; Shuen, 2008). Shuen (2008) suggests that Web 2.0
allows businesses to generate positive cash flows more quickly than
brick and mortar businesses, and eliminates the investment payoff time
present for Web 1.0 business. One example of a business model alleged to
accomplish this is commonly referred to as the "freemium"
model (Anderson, 2009; Shuen, 2008; Wilson, 2006). The freemium business
model offers a service (i.e. storing and sharing photographs) for free
and then charges users for more sophisticated features (i.e. licensing
photos to other users), or incorporates contextual advertising into the
site. As technology has continued to develop, Web 2.0 advocates argue
that the costs of developing and maintaining the free digital service
have declined to the point that resource requirements to do this are
minimal. The free service attracts users at a rapid rate through a
viral, word of mouth process generated through the social network and
user participation architecture of Web 2.0. Thus, large scale web
traffic is generated quickly and inexpensively and the small percentage
of users that click on an advertisement or convert to paid users
generate revenues sufficient to support the development cost of the free
service and create profit for the business (Anderson, 2006, 2009; Shuen,
2008; Wilson, 2006). This not only reduces customer acquisition costs,
but eliminates a major cost element in ongoing marketing and customer
relations management (Anderson, 2006; Shuen, 2008). Due to the low
development and marketing costs involved, Web 2.0 advocates suggest this
model can be carried out effectively by a one person operation or a
large corporation.
While detailed industry data on small businesses is not readily
available, national data from the US Small Business Association suggests
that for the period 2003 -2006 small businesses in the Internet related
industries (including e-Commerce retail sales, Internet publishing,
Software publishing, Data processing and Web hosting, and Other
information services) account for less that 1% of all small business
(with less than 20 employees), and this percentage has remained
relatively static over the three year period. While this figure is
similar for businesses with more than 500 employees (less than 2% of all
businesses), based on the argument that size advantages no longer matter
in these industries, one might expect to see an upward trend developing
in terms of numbers of small businesses in these industries. More recent
data may offer a better look given the growth of Web 2.0 applications
since 2005.
However, there are conceptual arguments that suggest this trend may
not appear in more recent data. Recent research has shown that even
while access to the Internet and information may be growing, possession
of the knowledge and skills needed to use the Web varies widely and
appears to be based on an individual's status group (Dijk, 2005;
DiMaggio, Hargittai, Celeste, & Shafer, 2004; Hargittai, 2003;
Hargittai & Walejko, 2008) and that small businesses may not have
the skills to capitalize on the opportunities present in Web 2.0
technologies (Jones, 2005). Web 2.0 may have increased access to
information, however this access does not translate into knowledge,
which is a key resource for developing and maintaining a successful
business, in particular a business in a "knowledge-based"
industry. Information, argues Prusak (2006), comes in the form of a
finite message that can be distributed to anyone while knowledge is the
integration of information, primarily through experience, that leads to
the ability to do something. Web 2.0 may increase the ability for anyone
to be able to find and download information, however this does not
translate to knowledge or the ability to utilize the information
(Prusak, 2006; Rogers, 1995) to realize an opportunity.
In addition, research regarding small businesses' general lack
of adoption of e-commerce technologies (Jones et al., 2003; Mehta &
Shah, 2001; Zwass, 1996) and recent empirical data on issues of concern
for small businesses (Phillips & Wade, 2008) suggests that small
businesses primarily serve local markets. Moreover, existing data
indicate that very few new small businesses are innovative, and that
most are replications of existing businesses (Aldrich & Kenworthy,
1999; Reynolds, 2005). The replicative nature of most small businesses
implies that few owners possess the ability to capitalize on an untapped
or technically complex opportunity (Aldrich & Kenworthy, 1999).
Thus, for the typical small business, neither the business nor the
founder is likely to be positioned to take advantage of the
opportunities created by Web 2.0 in digital industries. The reduced cost
of technological development argument seems to depend on having a
technically skilled member of the business that can not only recognize
opportunities in digital industries but also build the technological
infrastructure necessary to carry out the opportunity. This is not to
say that such opportunities do not exist. What it does suggest is that
small firms need access to extensive technical and knowledge resources
in order to take advantage of opportunities in digital industries
created by Web 2.0 technologies. Arguably, in and of itself Web 2.0 does
little to mitigate challenges arising from the lack of such resources
for small businesses.
Dramatic cost reductions with concomitant improved returns
Another proffered advantage of Web 2.0 is argued to go beyond the
pure Web-based businesses in digital industries and extend to a wider
range of small companies including those that offer more traditional
goods and services. This advantage stems from alleged drastic cost
reductions in marketing, sales, and distribution made possible by Web
2.0. These cost advantages are primarily accomplished through the
network effects and the open and collective architecture of Web 2.0.
The combination of network effects and the open and collective
architecture allows for the harnessing of collective intelligence, a key
characteristic of the Web 2.0 era. One way small businesses can
supposedly benefit from this is through the use of crowdsourcing to
accomplish more complex business tasks less expensively--thereby
potentially mitigating some resource poverty. Crowdsourcing is a concept
built on Surowecki's (2005) ideas suggesting the masses are
generally smarter than the single expert, and is similar to outsourcing.
However instead of farming out a service of the business to a firm that
specializes in it as occurs with outsourcing, the service need is
broadcast out to an unknown mass of users that compete for the job,
through crowdsourcing websites. Crowd members are paid based on
submitting a winning design or project, or based on the frequency and
quality of their participation in a given project. Consider the
experience of the founder and only full-time staff member of Trek Light
Gear, a camping gear company that needed help in product development,
branding and market research. The founder turned to a crowdsourcing
company and was advised by the crowd to expand his business beyond his
signature light-weight camping hammock. In addition, the founder also
received specific information about the product areas customers were
most interested in, which served as market research to guide the
expansion (Rich, 2010).
In addition to so-called wisdom of the crowds, Web 2.0
applications, including social networks and peer-to-peer sharing, create
an "amplified word-of-mouth" effect (Anderson, 2006) that
replaces traditional marketing channels and can dramatically reduce
advertising costs (Shuen, 2008). Web 2.0 advocates argue these social
links, including crowdsourcing, user generated data, and mashups all
drastically lower barriers to production.
While such significant cost reductions may exist, they exist
universally and are accessible to all businesses, leaving small
businesses in the same relative position of resource poverty compared to
large companies. The cost reductions occur because Web 2.0 is
essentially an "infrastructure technology," which according to
Carr (2003) means it is not a source of a competitive advantage for any
individual company, but is a basis for competition and thus, a source of
risk for businesses that do not utilize it. In this sense, Web 2.0 not
only fails to alleviate resource poverty for small businesses but may
actually increase risk for small businesses not participating in and
utilizing these technologies. Additionally, recent data suggesting that
the major cost problems faced by small businesses in 2008 were primarily
operational (Phillips & Wade, 2008). This combined with the limited
numbers of small businesses believed to be using Web 2.0 technologies
for marketing and sales (Citigroup, 2009; The State of Small Business,
2010), suggests that the costs savings suggested here are not likely to
be mitigating any resource poverty for small businesses. Moreover, even
if small businesses engage in Web 2.0 sales and marketing channels, it
is unclear that this will generate a stronger ROI than traditional
channels. This is due to two primary factors; the sophisticated but not
well understood "back-end" of Web 2.0 and to the difficulty of
identifying and measuring returns generated from Web 2.0 participation.
The back-end of Web 2.0 refers to the algorithms and site ranking
programs that are critical in determining what content users actually
see. Metadata and link structures drive visibility in Web 2.0, and
Hindman (2008) argues that the this infrastructure creates inequality
with respect to web site visibility in search results. He notes that
some sites rise consistently to the top of the results while some never
even get indexed by search engines. Carr (Maguire, 2007) argues further
that the control that Google has acquired over online search (Google
currently controls approximately 70% of the online search market
(McIntyre, 2010)) gives it great power in determining what users see on
the Web. He suggests Google's algorithms ultimately drive Web
traffic to a smaller and smaller range of sites, which include its own
content areas (news, video, etc.). Hindman (2008) adds that part of
Google's page rank algorithm is link structure, and the more links
to a site from other sites the more traffic it will receive. This, he
argues, is a social process that impacts visibility on the Web and
echoes Carr's suggestion that more and more traffic is being driven
to a smaller and smaller group of sites (Maguire, 2007). The risk here
for small businesses is two-fold. First, small businesses typically lack
the technologically savvy human resources to understand the
"back-end" aspects of Web 2.0, and as the critics above
suggest, success in Web 2.0 may be driven by organization size after
all.
The second major challenge to verifying the ROI of engaging in Web
2.0 technologies is the difficulty of identifying and measuring
appropriate indicators of success. With the hype surrounding Web 2.0
many small businesses may have begun to participate without
understanding the goals and expected benefits of such participation. As
small businesses realize the significant time commitment involved in
these applications, the concern over verifying the returns has grown. A
recent survey of small businesses indicates that most small business
owner/managers using Web 2.0 applications (primarily social media sites
such as Facebook and Twitter, and writing or contributing to blogs)
believe that it is paying for itself, although the numbers of those that
think it has lost money almost equal those that think it has made money
(The State of Small Business, 2010). Although it is unclear from the
data how the participation is paying for itself, owners and managers
express that they expect these efforts to identify and attract new
customers, build brand awareness, and keep them engaged with customers.
Given the challenges small businesses face due to their resource
poverty, it is crucial that clear measures of ROI for Web 2.0
applications are developed. Costs of participation are not well
understood but include a significant time commitment. In addition,
expected returns are ambiguous and difficult to accurately conceptualize
much less measure. Until such measures are identified it remains unclear
whether Web 2.0 offers significant cost advantages that help small
businesses overcome their size disadvantage in the marketplace.
CONCLUSIONS AND SUGGESTIONS FOR FUTURE RESEARCH
Given the ubiquity of Web access and the permeation of the Web
across numerous product and service categories, understanding and
participating in the Web will only grow in importance for small
businesses. Currently, only a small percentage of small businesses
appear to be utilizing Web 2.0 applications (Citigroup, 2009; Jones et
al., 2003; The State of Small Business, 2010), although it is still
unclear as to whether this results from a lack of knowledge resources
necessary to capitalize on the opportunities present, or is due to a
lack of usefulness perceived in Web 2.0 for the average replicative
small business and its typical local market. A recent consulting client
with a small custom gift card business expressed that she was aware
"she had to be involved in social media and other Web 2.0
things" to be successful. However, the existing data and evidence
do not yet make that argument convincing. Thus, small businesses need to
balance the potential risk of not participating in the infrastructure
technology offered by Web 2.0 with the lack of understanding regarding
the ROI in participating. The most direct way to address this challenge
is for small businesses to be clear about their own reasons and goals
for participating in Web 2.0 and develop their own measures for success
to evaluate the returns on that participation.
In addition, though opportunities in digital products and services
do arguably exist, they require human resources with significant
technological knowledge and expertise. Cost advantages present in Web
2.0 business models, such as the freemium model, appear to be based on
an assumption of having human resources capable of in-house
technological infrastructure development to realize the opportunity.
Given the typical condition of resource poverty, it is unlikely that the
average small business has access to this kind of technological
expertise on staff, and outsourcing the process arguably erodes the
alleged cost savings as well as risks losing a proprietary and
competitive advantage. Ultimately, in light of the lack of evidence
supporting the idea that small businesses can compete on equal footing
with large corporations via Web 2.0, small companies should develop
their own company-specific understanding about when, how, and why to
utilize these technologies.
The mere dearth of analytical research on Web 2.0 and small
businesses presents myriad opportunities and directions for future
research on this subject. The concepts and claims regarding Web 2.0
explored in this paper suggest a few specific avenues which may be
relevant and useful for guiding small businesses and developing our
understanding of how web-based technologies impact the small business
community.
First, conceptual arguments have been presented here that suggest
there are potential opportunities for small businesses but question the
claim that Web 2.0 eliminates advantages due to economies of scale.
Therefore, an empirical investigation of the validity of this latter
claim would not only help small businesses better understand the
challenges they face in the digital economy but also answer questions
regarding democratization of business raised by Web 2.0 advocates. In
addition, a best-practice analysis of small businesses that have been
able to capitalize on opportunities created by Web 2.0 could also help
develop basic resource and operational guidelines for small businesses
interested in pursuing such opportunities.
Perhaps the most obvious and practical avenue for future research
is the development of a core set of metrics to evaluate the ROI of
utilizing Web 2.0 applications and services. Costs of participation as
well as expected returns are ambiguous and difficult to accurately
conceptualize. An empirically based articulation of the costs and
benefits for small businesses would enhance both the academic
understanding of the usefulness of Web 2.0 as well, as offer a framework
for small businesses to evaluate their success in utilizing these
technologies without taxing their limited human resources.
In addition, the debated usefulness of Web 2.0 is arguably impacted
by the type of product, service, and business involved. Therefore,
studies analyzing the role of industry in the success of utilizing Web
2.0 for small businesses would offer some theoretical basis for the
variations with regard to the usefulness of Web technologies as well as
practical guidance for small businesses.
What appears to be increasingly certain is that the Web and its
rapidly evolving technologies and applications are only growing in their
importance to business, and may figure more prominently in the success
or failure of small businesses in the future. Moreover, since its
widespread adoption by the business world, the Internet has been seen as
a force for equality across many domains. Recent speculation that large
companies such as Google and Verizon are attempting to remove open
access and offer greater speed and access to those that can pay for it
(Miller & Helft, 2010), contribute to the need for small businesses
and small business researchers to better understand the lay of the
Internet land for small businesses. The numbers of small businesses
fully engaged in Internet and Web 2.0 applications may still be
relatively small, but appears to be growing (The State of Small
Business, 2010). Thus, the academic community could serve these
businesses well by addressing the questions surrounding small business
and evolving Web technologies.
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Trish Boyles, Muhlenberg College