Web 2.0 Expo Preview: Web 2.0 Isn't Just About The AppsWeb 2.0 Expo Preview: Web 2.0 Isn't Just About The Apps

What does it take for brick-and-mortar companies to become Web 2.0-enabled? Conventional wisdom says it's a matter of deploying Web 2.0 applications like blogs, wikis, and Ajax applications. But that's just a coat of paint -- to be really Web 2.0-enabled requires a complete change of business model, says Tim O'Reilly, CEO of O'Reilly Media.

Classic Web 2.0 successes like Google, eBay, and Amazon.com succeed because they have massive databases of customer information and they share that information with their customers and use it to improve the customer experience. Big brick-and-mortar companies like banks and telephone companies have customer databases that are just as good -- but they bury the information behind a firewall, O'Reilly said.

"All the data is locked up in the back office," he said. "It's not a user-facing application."

I interviewed O'Reilly as part of our advance coverage of Web 2.0 Expo San Francisco 2008, April 22-25, produced by O'Reilly Media and information's' parent company TechWeb.

I also wanted to talk to a big brick-and-mortar company that is using Web 2.0 to transform its business, so I poked around a bit on Facebook to see who was active there. I looked over the profiles of the folks in my network and found Bruce Eric Anderson, who I knew from a decade ago when I covered Dell regularly, which led me in turn to the Dell Spot Facebook page, which has 2,409 fans -- quite a respectable number for a corporate page on Facebook.

I learned that Dell is pioneering Web 2.0 and social networks to transform its business, trying to turn around a reputation for terrible customer service that the Dell has been struggling with for several years. The strategy is controversial -- while Dell touts its successes, a couple of Dell customers I've talked to say customer service is still rotten.

Leveraging Existing Databases

O'Reilly used telephone companies as one example of a kind of business that should be making better use of their internal databases to serve customers. "They remember everybody you ever called, everyone who has called you, but they don't give you access to the data," O'Reilly said.

Most phones have a redial list, but they stop at a few numbers. Phone companies should be giving customers a complete redial list, going back to every call they've ever made or received, ever, O'Reilly said.

Moreover, phone companies should be kings of social networking, competing with the likes of Facebook -- after all, the phone company knows who you call and who calls you, he said. Putting that kind of data to work is what made Google, Amazon, and eBay great, O'Reilly said. Google gets smarter by tracking user searches -- the more searches people run on Google, the better Google gets. Amazon gets more useful as more people post reviews, and eBay gets refined as its users rate each other and products.

These kinds of "network effects" are fundamental to Web 2.0 -- building services that get smarter and more useful the more people use them, and make it harder for late-coming businesses to steal first movers' leads, he said.

Likewise, banks face opportunities and challenges from Web 2.0. Wesabe, an online personal finance management tool that O'Reilly invests in, allows members to upload all credit card, checking, and savings account information. Google's genius was that they realize that when one site linked to another, they were voting for the quality of the target site. Likewise, Wesabe realizes that when people spend money at a merchant -- and especially when they're repeat customers -- they're voting for the quality of that merchant.

Wesabe plans on Wednesday to open Merchant Pages, which allows users to rate the companies they do business with, and track other people's ratings, average spending, and look for competitors that might offer better customer satisfaction at lower prices. It's a service that banks should be offering, because they already have the data Wesabe has, and more, O'Reilly said.

Scrambling To Get Back On Top

Dell was a pioneer in using the Internet for business -- a decade ago, they were generating more than half their sales from the Internet, which was, at the time, an astonishing number.

But three years ago, the Internet turned on Dell. Jeff Jarvis, at the blog BuzzMachine, chronicled his problems with Dell customer service, and launched a firestorm of protest against Dell.

Now, Dell is trying to use blogs and Web 2.0 to fix what Web 2.0 broke. One of the earliest efforts, still going strong, is the Dedicated Blog Resolution Team. Eight Dell employees do nothing all day but scour blogs -- big, mass-audience blogs like BuzzMachine, and little friends-and-family blogs with only a few readers -- and look for complaints about Dell. When they find one, they jump in and try to fix the problem. "We solve problems one at a time -- independent of the size of the customer relationship. We've been doing that every day since 06," said Bob Pearson, vice president, communities and conversations for Dell. "If you're anywhere in the blogosphere and say you have a problem, we'll find you and we'll talk to you and if you're willing to talk to us we'll fix your problem."

The early blogging efforts led to Dell creating Ideastorm last year, a site where users can submit ideas to Dell, and vote on ideas submitted by others. Since the launch, users have submitted 9,000 ideas, and Dell has implemented 45 of them -- including a controversial decision last year to resume offering Windows XP on new PCs, after discontinuing it in favor of Vista. Customers on Ideastorm demanded XP, Pearson said.

And Dell plans to give its employees full access to the Internet in two weeks, without any Web filtering, to enable everyone to interact with customers. "We want our employees to be participating in Facebook, we want them to be doing Twitter, we want them to be active participants in the online world," Pearson said. Dell is also using Web 2.0 to transform internal communications, Anderson said. The company has internal community sites and blogs in nine languages. It runs Employeestorm, which is like Ideastorm but is designed for employees to suggest changes.

Has Web 2.0 succeeded in turning Dell's customer satisfaction around? Depends on who you ask? Dell conducts its own measurement of online discussion of Dell. In 2006, 48% of comments about Dell on blogs were negative, now it's down to the low 20s, Pearson said.

And Jarvis seems convinced -- in an October, 2007 BusinessWeek article, he wrote: "In the age of customers empowered by blogs and social media, Dell has leapt from worst to first. "

I went to Web 2.0 and social networks to find out how people felt about Dell. I posted a question on my Twitter account: "How's Dell's customer satisfaction nowadays? Do any of you have any recent experience with Dell, positive or negative?"

I only got one response. It wasn't encouraging: "I last dealt with Dell customer service several months ago -- still based in India, got a runaround, yes was still frustrated."

At about the same time, I got a Facebook message notifying me about a new social network for journalists: HelpAReporterOut.com, designed to help reporters find sources to comment on articles. I was skeptical, but I thought I'd give it a try. I posted my query to the group, and quickly got back about a half- dozen responses, three of which were useful -- which made the service a success for me.

Randy Cassingham, author of a site called "Dell Hell" said Dell hasn't changed: "No, I don't think Dell has improved despite their 'escalation' team: because of that page on my site, I get mail all the time from people who have found it and are telling ME their problems with Dell -- and that would only happen if they can't get anyone else to listen."

He added, "Despite my huge platform which got my own problem solved quickly, the continuing problems have convinced me that I'd be a fool to buy from them again -- and my readers and the people who write to me agree."

Lena West, founder and CEO of xynoMedia Technology, social media and Internet consultant, said that Dell does a great job with social media and Web 2.0, but they need to pay more attention to more fundamental customer service problems. Apple, for example, has had great success with its Apple Store chain, where customers can talk to tech support staff face-to-face and get tutorials in how to use their products.

"I think that Dell is committed to customer service, certainly, but I just don't think they've struck their golden formula yet," she said. She cited a customer-satisfaction metric called Net Promoter, which gave Dell a customer satisfaction rating of 50% two years ago, in the same league as Apple's 66%. Now, Dell's Net Promoter rating is half that, while Apple's is even better, West said.

"Dell really needs to get back to basics, to roll up their sleeves and find out what customer satisfaction looks like," she said.