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What Can Web 2.0 Do for Your Business?

You might have heard of Web 2.0, but do you know what this new version of the internet means for your business? Get in step with the more collaborative, more interactive web of the future.

Online Exclusive: For a closer look at the hottest Web 2.0 companies, see our exclusive slideshow.

I wrote this article using a word processor. That in itself is not unusual. But this particular word processor exists solely on the internet and comes with "download," "share" and "publish" buttons at the top of the screen. This is ThinkFree's internet office suite, and there's a whole lot of Web 2.0 going on here. It's an online application that would normally reside on a desktop. There's a built-in collaboration feature. And there are minor technical snafus to remind you that it's still in beta. It's a microcosm of where we're at with Web 2.0.

Web 2.0 is a nebulous term. It implies an upgrade, a better version of what has come before. It includes innovations in the ways we think about and use the inter-net. Just like the growth of Web 1.0 before it, this new incarnation of the net is set to change the way businesses function and how entrepreneurs interact with customers, employees and colleagues. Depending on who you ask, this second generation of the web is either an evolution or a revolution, but most likely it's somewhere in between. "It's a blurry term," says Jason Fried, 32-year-old founder of web-based software company 37Signals in Chicago, whose revenue increases by about 10 percent each month. "It puts the focus too much on technology, [which] isn't what's important now. What's important is building simple things that people can use."

Web 2.0 is a people-oriented technology movement. Ease of use, social features, collaboration, fast-loading applications, interactivity, quick development times and real-time updates are all major trends. Instead of a million features packed into one expensive software program, you get smaller, sleeker online applications that aim to do just a few things very well. It's good news for the pocketbooks of growing businesses, because these applications usually come in free versions or are available for an affordable subscription price that doesn't tie you into a long-term contract. Getting onboard with Web 2.0 isn't a matter of if, but when.

A Computing Platform
The applications you associate with your desktop are moving over to the internet. Web-based e-mail is probably the most widely known and used application. Big companies like Google, MSN and Yahoo! all offer sophisticated online alternatives to desktop applications. "A lot of the Web 2.0 services have richer user interfaces. They look more like desktop applications. There's more interaction," says Ed Anuff, 38, co-founder of widget directory startup Widgetbox in San Francisco (more on widgets later). Online programs have the advantage of being accessible from any web-connected device, giving them the power of portability and flexibility.

Even desktop workhorses like word processing and spreadsheet and presentation software are going Web 2.0. ThinkFree is one example. Google Docs & Spreadsheets stems from Google's acquisition of online word processor Writely. Documents can be imported, exported, shared with other users for collaboration and published to the internet or posted to a blog. "The internet is the new super-platform," says Dion Hinchcliffe, founder and CTO of Web 2.0 consultants Hinchcliffe & Co. in Alexandria, Virginia. "All our productivity software, communications software--everything is moving to the web in better versions."

There is still a ways to go in overcoming issues with slow networks and technical hiccups. But look for online offerings to grow more sophisticated and reliable as users are increasingly pulled onto the web to access everyday business applications.

Getting Interactive
The web has been getting very sociable lately. Web users are coming to expect a level of interactivity and customization in the sites they visit. Social networking is one way entrepreneurs can provide this.

Web widgets--small programs that can be embedded into a web page--can help businesses build online communities within their sites. Eric Alterman, 43, is founder and CEO of KickApps, a hosted platform launched in July that helps companies bring social networking and user-generated content onto their websites using widgets. "We combine Flickr, MySpace and YouTube," says Alterman. KickApps, which expects 2007 sales in the millions, handles video, audio and photos on hosted sites and lets users build personalized spaces while KickApps runs unnoticed behind the scenes. Individual widgets can be "stolen" by web visitors for use on their own sites or blogs, but they still link back to your business' site. It's a new twist on viral marketing that helps businesses take advantage of the human networking aspects of Web 2.0. "This is what the next generation of social networking means," says Alterman, who adds that his New York City company's white-label social network solutions are now deployed on more than 800 sites across the internet. "The minute you deploy us, you deploy over the entire web."

Advanced social networking aspects aren't the best fit for every business website, but many entrepreneurs will find creative ways to integrate interactive communities. Social networking can be used to communicate with customers, gather feedback, allow users to help each other and get input into new product developments. "The key in letting people interact socially on the site is using that activity and input constructively," says Hinchcliffe. Social networking can help you "lower your support costs [and] increase customer satisfaction," he says, "but you have to give it structure so [users] can support each other and you can gather information."

Widgetbox is a user-friendly, self-service clearinghouse for a variety of different web widgets. There is a widget that lets visitors send text messages to your phone, one that lets customers know your Skype status, one that integrates newsfeeds and one that brings search features to your website. "The bar has been raised in terms of what [people] need to do to add that extra credibility that comes with the site being more interactive and visually appealing," says Anuff. Widgets may well be the simplest way for entrepreneurs to gain credibility without having to build these website features from scratch. Using widgets also ties into the massive trend of user-generated content and media that YouTube epitomizes. That's part of the aim of Web 2.0: to bring these interactive tools to the masses to create a more customizable and user-friendly internet experience.

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This article was originally published in the February 2007 print edition of Entrepreneur with the headline: It Takes 2.0 to Tango.

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