Web 2.0: Going, Going, Strong

Forrester Research defines Web 2.0 as, “A set of technologies and applications that enable efficient interaction among people, content, and data in support of collectively fostering new businesses, technology offerings, and social structures.” According to Forrester’s research and blogs, everything is rosy in the Web 2.0 world. Recession or not, the space should continue to heat up for at least the next five years.

Forrester’s Josh Bernoff, writing on the Groundswell blog, differentiates the current economic stage from that which was seen at the end of the ‘tech boom’: “This time, the precipitating event is a housing bubble, and technology spending is not irrational.” This distinction may not even be necessary though, advertising expenditures in the Web 2.0 environment would likely increase regardless of the economic situation. Bernoff and Forrester reported last month that 72 percent of interactive marketers interviewed stated that they expect to, “keep their interactive spend on plan or increase it in a recession.”

The increase in spending will be distributed through a number of channels; says Forrester: “Interactive marketers are most likely to increase investment in social networks, with 48 percent planning an increase and another 34 percent keeping investment steady. Marketers are also bullish on user-generated content and blogs. Podcasts, RSS, and widgets, while less popular, will still generate increased investment from at least 20 percent of interactive marketers.” That three quarters of interactive marketers have expressed these plans is a statement to the staying power of Web 2.0; it is all the more so that they are doing it despite pushback from within their organizations. In closing Forrester notes that, “60 percent of marketers say that they struggle to build the case for interactive marketing in their organization,” however, “it is finally clear that interactive is not an experiment that will go away in a few years.”

In a second report by Forrester on the global enterprise market for Web 2.0, also issued in April, the results are very much the same: enterprises face challenges when making the move to integrate Web 2.0 into the enterprise, but success is more than likely.

Standing in the way of enterprise Web 2.0 adoption are three primary factors. First of all, enterprises rely on IT departments for implementation, and since, “70 percent of the average IT budget goes to maintaining past investments,” the challenge is obvious. Second, the assumption, based on consumer-side products, is that cost will be minimal. (Though not necessarily at the high end of spending, enterprise Web 2.0 products cost substantially more than the free versions which generated interest in the first place.)  Finally, “Web 2.0 tools enter a crowded landscape of legacy software investment,” a, “space full of legacy software and processes that are difficult to displace and with which Web 2.0 software must integrate to be fully effective.” These factors will all be overcome.

Forrester predicts that spending on Web 2.0 in the enterprise will skyrocket: “the collected expenditure on social networking, RSS, wikis, blogs, mashups, podcasting, and widgets will grow at a compound annual rate of 43 percent over the next five years.” By 2013 annual spending on enterprise Web 2.0 will reach $4.6 billion. As with the increased spending in interactive marketing, spending within the enterprise “will not accrue evenly across all product categories, geographies, or implementation types.”

Social networking remains at the top of the list of technologies receiving an influx of capital. Forrester projects companies will spend $258 million in this space in the current year and that this growth will continue. Of Web 2.0 technologies in the enterprise, Social networking will experience the strongest annual growth rate over the next five years; by 2013 spending will reach almost $2 billion. Mashup technologies will make a strong second place showing; growing from only $39 million in 2007 to $682 million in 2013.

Enterprise spending on Web 2.0 is now focused on internal audiences and projects, over the next five years this will change. “Forrester forecasts external enterprise Web 2.0 expenditure to pass internal expenditure in 2009 and ultimately dwarf internal expenditure by nearly a billion dollars in 2013.” There will also be a shift in the geography of spending. Though North America currently accounts for 62 percent of enterprise Web 2.0 spending, it will, by 2009, account for only 40 percent.

Though enterprise Web 2.0 is not going away, it may become invisible. Forrester notes: “it will eventually disappear into the fabric of the enterprise, despite the major impacts the technology will have on how businesses market their products and optimize their workforces.” Perhaps it will then be time for the next generation.

Further Reading:

Social Network Spending to Increase
Jeremiah Owyang/Web Strategy by Jeremiah

Social Networks continue to show a strong future of growth. Two recent Forrester reports published by my colleagues, Josh Bernoff and Oliver Young, both showing the future of social computing for the interactive marketer and for enterprise 2.0 purchasing. A very obvious trend for both of these reports is the growth of budgets by marketers and companies for social networks.

Social Media’s Future Looks Bright, Apply Sunscreen
CNET, May 1, 2008

Social media is in the spotlight because from a consumer perspective, it’s causing a shift in how people spend their time online and how they relate to media. All those involved, from advertisers to entrepreneurs to major media companies, are trying to figure out what it means to their business and how they should take advantage of it. What’s more, many social-media companies are still figuring out how to turn a profit.

Web 2.0 Means Business
Signal, May 2008

Social networking and other Web 2.0 capabilities are creating new avenues for commerce by facilitating communication inside the corporate structure and extending collaboration beyond company walls. Key to making the most out of new technology, however, is determining corporate goals before throwing a new tool into the mix. When chosen and applied judiciously, nearly every Web 2.0 weapon—from del.icio.us to wikis—can play meaningful and profitable roles within any company.

The Way of the Widget in the Age of the Social Web
Java Developers Journal, May 1, 2008

As the Internet’s newest way to connect brands with consumers, widgets have officially arrived. These portable applets appear on blogs, websites, and social networking sites like MySpace and Facebook. Offered by third-party developers as embedded Flash (.swf) objects, the self-contained badges allow page owners to personalize their sites with photo slide shows, music playlists, games, and other content. Widgets also allow companies to engage their audience with compelling content while also branding a company and/or product.

Social Technology Marketers Bullish in Face of Recession
Josh Bernoff/Groundswell, April 30, 2008

In February we published research based on our expectation that interactive marketers should continue their investments in social applications with a recession potentially coming. Today we published the results of new research that shows that many interactive marketers actually plan increases in the face of recession.

Why Social Applications Will Thrive in a Recession
Josh Bernoff/Groundswell, February 6, 2008

Is a recession coming? Don’t ask me — I’m not an economist, and even the economists don’t really know. But if it’s anything like the last recession, advertising will plummet and experimental media will crater. (In the 2001 recession, US advertising dropped 9% and Internet advertising plummeted 27%, according to Veronis Suhler Stevenson.) But do not panic. Things are different this time.


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