Ben Worthen writes an interesting article for the WSJ called, "Why Most Online Communities Fail." It’s basically a retelling of the results of a Deloitte study by consultant Ed Moran. Moran studied more than 100 businesses with online communities. 35% of the communities studied had less than 100 members. Fewer than 25% had more than 1,000 members. At the same time, 60% of these businesses had spent over $1 million on their community projects. Moran calls it a disturbingly high failure rate, and I agree.

Moran lists 3 reasons the sites fail: too much focus on technology, too little focus on the people (30% of online communities are run by part-time employees or just a single PR person), and measurement of the wrong metrics for success. On the measurement front, sites are chasing eyeballs instead of building interaction and creating a level of comfort that incents your most loyal users to evangelize products for you.

ReadWriteWeb’s Marshall Kirkpatrick picks up the thread with, "Corporate Social Networks are a Waste of Money." They reference the original study, done in conjunction with Beeline Labs, and some of the results don’t look so bad. For example, communities can increase revenue per customer by 50%, they can increase the likelihood of a successful product introduction, and they can reduce costs for a lot of other activities.

Looking at all this, the answer seems pretty obvious: many of the companies in the study did not provide a compelling incentive for customers to get involved with their communities. Many of these communities are set up with the idea that people want to come hang out in a community just to chat about a brand. As RWWeb puts it:

Let's face it, though. Social networks where a brand name product is what everyone rallies around are a dumb idea. They are stupid. No one should submit themselves to the indignity of creating a user profile and friend connections based on cola or cat litter. We have written before about the never ending market for niche social networks and we're down with that. Hell, we like to read about countless niche social networks on the Ning Blog just for fun. If brand-centered social networks are failing, though, it's probably because they are brand heavy and stupid.

It’s a bit hard hitting, but essentially true.

The problem here is not unlike the one retailers face when siting their storefronts. Are you a "destination" retailer, or do you rely on other destination retailers to bring traffic past your store? As it turns out, a lot of the value and benefits around community for marketing are not "destinations." It isn’t that people don’t want to talk to you about your brand, it’s just that they don’t get out of bed to do that, especially if they don’t have any kind of relationship with your company to start.

So how do you jump start the demand? How do you get your customers to attend the party? Much like a shopping mall involves anchor tenants to drive destination traffic that a lot of other interests can benefit from; the same analog exists for communities.

The destination need for corporate communities is not marketing or sales, it’s customer service. Build your community around customer services. That’s the reason for customers to get signed up and start interacting. Show them a great service experience and that gets them coming back to the community. Once you’ve got a destination community, you have the opportunity to expand the experience. Marketing and Sales can then begin to add value and receive benefits.

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Seth Godin writes a great piece about how the Internet doesn’t care what businesses want to use it for.  If business wants to use the Internet, it has to provide a value that customers want to receive.  That’s exactly my point in using Customer Service as the destination for your community.  It’s a value customers want to receive.

R. Todd Stephens over at the Collaborage writes:

Online communities seem to struggle when there is no real business reason to get involved. Focusing on the business environment, people need a reason to come to the community. This reason may include customer support, tips, techniques, best practices, news, or simple sharing of information. Communities that try the open end or "anything goes" approach will struggle to stay afloat.

Last week, Forrester published a report entitled, "Global Enterprise Web 2.0 Market Forecast: 2007 To 2013”. The money quote is…

Enterprise spending on Web 2.0 technologies will grow strongly over the next five years, reaching $4.6 billion globally by 2013, with social networking, mashups, and RSS capturing the greatest share.

There has been a lot of discussion in the blogosphere about this report (here and here, for a couple examples) but there is one point that I haven’t seen anybody touch on yet. In the report, “Enterprise 2.0” is defined as standalone offerings in areas like social networking, mashups, and RSS. At Helpstream, we feel that the real impact of Enterprise 2.0 is going to be the incorporation of Web 2.0 capabilities within business process applications like CRM, customer service, etc.

For example, in the area of customer service, we feel there is a huge opportunity for vendors to leverage the knowledge of their customer community in order to increase customer satisfaction and reduce their support costs. As a result, we have incorporated what we call “community collaboration” capabilities within our offering. These capabilities enable customers to interact among themselves to address certain problems.

We believe the incorporation of Web 2.0 capabilities within business process applications will have a significant impact on businesses. Although it is probably difficult to measure, this type of capability will make enterprise spending on Web 2.0 technologies by 2013 far greater than the $4.6 billion estimated by Forrester.

John Ragsdale of SSPA recently did an interesting post entitled, “Leveraging Web 2.0 to Improve Collaboration With and Among Customers”. In his post, John talks about the importance of getting input from customers and how it isn’t easy these days…

With many companies launching ‘voice of the customer’ initiatives, input from customers is becoming more sought after than ever before. As support organization push towards Value-Added Support, direct input from customers is critical to delivering service offerings and products that not only fit customer needs, but help deliver more business value and better enable customer success. But capturing customer feedback isn’t always easy, and relying on surveys as the only mechanism to gather input will soon exhaust the patience of some customers. Finding new ways to collaborate with customers, and encourage peer-to-peer customer collaboration, is a good strategy to collect the necessary input, as well as build stronger relationships with customers overall.

He has also talks about ways in which Web 2.0 capabilities can help…

The key, then, is to take your existing processes for customer collaboration and migrate them to the Web, incorporating community capabilities such as forums and Wikis to replace existing email distribution lists, conference calls, maybe even some local user group meetings. Once this online beachhead is established, you can begin to expand the community to incorporate additional processes and additional customers. When other customers see lively discussions going on around topics they are interested in, they will be much more likely to join in and participate.

As my previous post on SaaS 2.0 implies, we completely agree with John. We are currently working on innovative ways to take familiar collaborative capabilities and combine them with time-proven customer support practices to deliver benefits to both customers and vendors. Stay tuned.

In the business world, SaaS (Software as a Service) is all the rage these days. In the consumer world, Web 2.0 is “the thing.” Fortunately for us at Helpstream, when we started developing our service, both of these trends were well underway. As a result, we were able to design a service that takes the best of both elements. We are calling it “SaaS 2.0.”

The first generation of SaaS applications – what we call SaaS 1.0 – are basically legacy apps moved to the Web. These apps mirror the look and basic functionality of the old legacy apps while giving customers dollar savings on total cost of ownership (TCO) driven largely by the benefits of multi-tenancy. That’s certainly attractive, but SaaS 2.0 is a different animal, leveraging not only the inherent cost-savings associated with Web delivery, but actually leveraging technologies to provide users with a rich user experience and connectedness that didn’t exist until the emergence of consumer-oriented Web 2.0 offerings.

One of those Web 2.0 technologies is known as AJAX (Asynchronous JavaScript and XML). AJAX allows today’s developers to build rich Internet applications that feel extremely interactive and responsive to users. AJAX typically involves, among other things, the exchange of small amounts of data between a web page and a server, resulting in a level of performance and responsiveness not experienced with typical SaaS 1.0 applications.

Social networking and user-generated content are other by-products of the Web 2.0 movement. It’s hard to think of a consumer Internet service these days that doesn’t enable users to connect with other users and generate their own content, whether it’s a YouTube video or a restaurant review. The combination of social networking and user-generated content has resulted in a very powerful concept known as collective intelligence. By leveraging the collective intelligence of a community, users are getting smarter, faster.

SaaS 2.0 offerings incorporate these Web 2.0 capabilities to deliver a different type of application experience than available with legacy enterprise applications. Take, for example, our Helpstream service. By taking advantage of the flexibility and scalability of SaaS, and leveraging AJAX to deliver a rich user experience, we are able to deliver a modern support solution that can deliver a vastly superior experience to customers.

In addition, the Helpstream service will free customers from being completely dependent on agents and/or articles in a Knowledge Base. In an upcoming version, users will be able to contribute their own experiences and expertise into the Knowledge Base and interact with other users to create collective intelligence that benefits everyone—including agents. This will bring solutions to problems more quickly and will increase the number of problems that can be resolved by users themselves--reducing dependency on agents.

All in all, we feel that the combination of SaaS and Web 2.0 is a powerful one, and that SaaS 2.0 is the future of business applications.