Web 2.0 and Beyond: Implications for Electronic Commerce Rolf T.

Wigand Departments of Information Science and Management University of Arkansas at Little Rock Robert I. Benjamin and Johanna L. H. Birkland School of Information Studies Syracuse University

ABSTRACT A recent major shift has broadly impacted the evolution of elec- tronic commerce : Web 2.0. This paradigm shift represents the change of the Internet from a mark et for goods and services to a socially centered and user-driven marketplace. Th e authors argue that by applying the fundamental principles of basic psychologi - cal need theory, we can better understand how the Web 2.0 tech- nologies and applications have made possible these transformative changes in electro nic markets. We provide an un- derlying conceptual needs-focused model helping u s understand todays commerce and consumer behavior on the web. These observations are scrutinized within the Web 2.0 context and dem- onstrate how the world of c onducting business has changed and how this world must link and embrace the unfo lding new world of social relationships, developing communities and networks on the web. General Keywords 1. Terms Management, Economics, Human Factors, Theory.

electronic commerce; human needs; Web 2.0

OVERVIEW AND CONTEXT

The influential paper Electronic Markets and Electronic Hierar- chies. by Tom Malo ne, JoAnne Yates, and Bob Benjamin was published in the Communications of the AC M in June 1987. This paper is the most cited article in the field of Informatio n Systems (with 424 citations in the ISI Web of Science index and 1,472 citation s according to Google Scholar). In numerous ways this paper and the underlying u nderstanding and functioning of elec- tronic markets and information technology use in firms have fun- damentally shaped todays field of electronic commerce. Thi s hypothesis has spawned many papers by academicians and practi- tioners alike a nd not even counting the vast number of sessions, workshops, tracks at conferenc es influenced by this original pa- per. Based on the institutional economics literature as well as transaction cost econ omics, Malone, Yates, and Benjamin [10] developed justifications for the organiz ational and economic exis- tence and size of business firms. Institutional econ omics theory made possible testable predictions of changes in firms that would a rise from technology advances. Along this line of thinking, Coase [5] p osited that Changes like the telephone and the telePermission to make digital or hard copies of all or part of this work for person al or classroom use is granted without fee provided that copies are not made or distributed for profit or commercial advantage and that copies bear this notice and the full citation on the first page. To copy otherwise, or republish, to pos t on servers or to redistribute to lists, requires prior specific permission and /or a fee. 10th Int. Conf. on Electronic Commerce (ICEC) 08 Innsbruck, Austria Copyright 2008 ACM 978-1-60558-075-3/08/08 ...$5.00. graph, which tend to reduce the cost of organizing spatially, will tend to incre

ase the size of the firm. All changes which improve managerial technique will t end to increase the size of the firm. Malone et al.s reasoning and electronic mark et hypothesis fol- lowed the notions of transaction cost economics (TCE) [26] an d others. TCE explained and justified the firms size and adoption of vertical hi erarchies in responses to asset specificity and the risk of opportunism in trans acting with external suppliers. Along this line of reasoning, Malone, Yates, and Benjamin propose that informa tion technology, by reducing the costs of coordination, will lead to greater u se of markets and outsourcing, and a shift away from vertical hierarchies in bus iness organiza- tions. Specifically, the authors assert that, By reducing the co sts of coordination, information technology will lead to an overall shift toward proportionally more use of markets, rather than hie- rarchies, to coordinate ec onomic activity. Actually, firms smaller in size were predicted. Accordingly, the electronic market hypothesis posits that more economic activity would be coordinated across firm boundaries, and less within firms. The authors predicted far-reaching changes in the ways in which firms identify, choose, and maintain rela- tionships with vendors and trading partners. In the evolution o f electronic commerce (see also Picot, Reichwald & Wigand [18], Wigand, Picot & Reichwald [25], Benjamin & Wigand, [3], Wi- gand & Benjamin [24]) many of these changes predicted by Ma- lone et al. can be observed, although the jury on the u niversality of the electronic market hypothesis is still out. Nevertheless along this evolutionary path, we need to recognize that recently Web 2.0 as a movement has triggered a similar impact reflected in the research, writ ings and applications of the concept of electronic markets and underlying inform ation technology by both academi- cians and practitioners and has provided users with the ability to express human needs. This fundamental movement or shift wit hin this evolution of electronic commerce, i.e. a major shift in the use and app lication of electronic markets and underlying information technology, can be obs erved in the form of Web 2.0. Web 2.0 may be viewed as a paradigm shift and be examined by borrowing from the framework of Thomas Kuhn [9]. Kuhn is credited with addressing the notion of par adigm shift in the con- text of scientific revolution. Although we are certainly not observ- ing a scientific revolution in the context of Web 2.0, but the p aradigm, in Kuhn s view, is not simply the currently prevailing theory, but the larger picture, even the entire worldview, in which it exists as well as all of the implications coming with it. It is of- ten this final comprehension, the res ult of the long process of change, that is understood when the expression paradi gm shift is used colloquially, i.e. the change of worldview, without reference t o the specificities of Kuhn s historical argument. Web 2.0 is a somewhat misleading term, as it may suggest ideas about a new techn ology, but what has abruptly changed is something very different: What has drast ically changed is everyday as well as business life, simply by being online in some fa- shion, has beco me interwoven, linked and in part enabled by the Internet. More than ever we rea lize that the media shape and re- configure society not only through their conte nt, but through their form. Although it is difficult at this stage, maybe even i mpossible, to provide a precise picture of what this shift looks like and to det ermine where these development are precisely headed. In this paper we will addre ss some manifestations of this paradigm shift and demonstrate through examples h ow these changes are unfold- ing. With such reshaping and reconfiguration, however, we can ob- serve how the media and tools used in peoples interaction and communication that a restructuring and regrouping of their real relations to each other is occurring. Such a shift nev er is possible without consequences, such as when parents are concerned with the ir childrens missing the real life. But then such concerns had arisen with the in troduction of any new medium. Even Socrates envisioned the sad possibility that the sheer practice of writing and scripting may push aside or by-pass the lively exchange of ideas, an early form of disintermediation. Gutenbergs printing press es disseminated not only the idea of freedom of choice, but they enabled the tec hnical free choice of ideas. Similar concerns

were also raised when silence permeated in 17th century English coffee houses a s the visitor mostly heard the rustling of newspa- pers instead of the twitter o f patrons. Here too concerns about real and actual life were expressed. This cyc le repeated itself with the introduction of the telephone as well. It seems that that what is happening on the Internet and with Web 2.0 is not any less real. Today over 1.4 billion people utilize the Internet [8]. Many tens of millions of these users have embraced Web 2.0 and its applications and, in doing so, have c hanged electronic commerce in that it now allows human needs to be taken into ac count much like in traditional commerce and other social interactions. Thus embracing Web 2.0 capabilities has become a mass phe- nomenon. Some skeptic s argue that if of 1000 users of an interac- tive website merely one is making a contribution to the sites content that this is not very exciting and meaningful. Yet if this very same site enjoys overall several millions of users, this, in t urn, does result in thousands of authors (The Long Tail econom- ics phenomenon ( see: Anderson [2], Wigand [23]). Popular social networking websites such as Face book with its 70 million plus users worldwide allows its users to take their per sonal profiles to any website that wants and is willing to host them and not jus t the sites that have partnered up. The fundamental driver of this most recent d evelopment is the actual dismantling of the so-called walled garden where social networking sites previously jealously guarded their users profiles. 2. WHAT IS WEB 2.0? Although the precise demarcations and delineations of Web 2.0 are still somewhat cloudy, one thing is clear: Web 2.0 is not a creation by business or the econom y, it is being created by mil- lions of users. Web 2.0 is a participatory medium . We may loose- ly understand Web 2.0 as the second or new Internet. There is so me debate how new Web 2.0 really is. Tim Berners-Lee for one, the founder of the WWW, views Web 2.0 merely as the logi- cal further development. In that sense t here is no new software or application with the name of Web 2.0. And yet what we observe with Web 2.0 is a paradigm shift how users use the web, a devel- opment that questions everything that has been developed and applied so far. Many agr ee that Web 2.0 is woven from a fabric of technologies designed to enable collab oration and break down information silos in an effort to aggregate and to publis h informa- tion. In that sense Web 2.0 is a social phenomenon, not a technology per se. New with the Web 2.0 era is that anyone can explore, join, build or depart any web community and can create and post content onto the Internet witho ut requiring extensive technical know-how. In a nutshell, Web 2.0 is broad range of websites that encourage interaction and collaborative work. Users do not jus t consume content, but they create, produce, edit, and remix con- tent as well. As much of what becomes popular on the web is remixes, the idea of remixing is r eally a fundamental part of Web2.0: Not only can users create their own content, but they can mixed this content with other content, thus adding value and creat ing something new, yet they release their original work out to be remixed by sti ll others. This is part of the collaborative na- ture of Web2.0. Obvious example s along this line of thinking are YouTube and the family photo album Flickr. You Tube has en- joyed uploads of several million videos within a few short months a nd functionally has become indeed the tube of the chip culture. When everyone ca n produce ones own video program, in the long-run, this may become a threat for t raditional television (see, e.g., The Future of Television [1]). Although there is no hard-and-fast definition of Web 2.0, the concept of Web 2.0 is generally attributed to Tim OReilly [17] coining the phrase in 2004, stating that One of the key lessons of the Web 2.0 era is this: Users add value.Therefore, Web 2.0 companies set inclusive defaults for aggregating user data and building value as a side-effect of ordinary use of the application. In general, Web 2.0 i s a broad concept that has been subdivided into three anchor points: technology, community and business. The challenge is that Web 2.0 is more than just a set o f technolo- gies. It incorporates also attributes with a social dimension includ - ing new business models, user-contributed content and user- generated meta-dat a, relatively open and transparent business processes, increased simplicity in d esign and features as well as decentralized and participatory products and proce

sses. The three anchor points for Web 2.0 are (Smith [22] Wigand [23] and oth- e rs): Technology and architecture consisting of the infrastruc- ture of the Web and th e concept of Web platforms. Examples of specific technologies include Ajax, repr esentational state transfer (REST) and Really Simple Syndication (RSS). Tech- no logists tend to gravitate toward this view. Community and social looks at the dynamics around so- cial networks, communities and other personal content pub- lish/share models, wikis and other collaborativ e content models. Most people tend to gravitate toward this view; hence, there i s much Web 2.0 focus on "the architecture of participa- tion." Business and process Web services-enabled business models and mashup (that is, a Web site or Web application that combines content from more than one source)/re mix ap- plications. Examples include advertising, subscription models software as a service (SaaS) and long-tail economics. A well-known specific exam ple is connecting a rental-housing Web site with Google Maps to create a new, mo re useful ser- vice that automatically shows the location of each rental list- i ng. - Of course, business people tend to zero in on this angle. We are asking ourselves how one might explain the popularity and phenomenal succ ess of Web 2.0 overall (with Web 3.0 loom- ing and emphasizing semantics as an o verlay in addition). This popularity is especially manifested in the hugely succ essful use of social networking sites such as MySpace and Facebook with tens of millions of users around the world. The remainder of the paper addresses how we might view, understand and possibly explain these developments. Our approach is to seek an understanding of the needs that m ight be fulfilled in users behavior on the Internet, more specifically, within th e Web 2.0 context. Table 1: Self Determination Needs and their Relationship to In- ternet Behaviors 2.1 Human Needs and the Internet

Self Determination Theory Internet Needs In this paper we propose that behavior on the Internet, as in the rest of our li ves, is motivated by our desire to fulfill our basic human needs. Further, once we understand the basic needs that motivate human behavior on the web, we can us e these needs to describe and predict future web developments. Need for Autonomy Desire to Acquire Goods Desire to Acquire Information Desire to Acquire Autonomy and Independence Desire to be Entertained Several human needs theories have been proposed, including Maslows Hierarchy of N eeds [11, 12], Self Determination Theorys Basic Need Theory [6, 7, 19, 20], and M otivation Theory[13-16]. The majority of these needs models have built upon prev ious proposed models. In our previous paper [4], we explored behavior on the Int ernet through the lens of Maslows Need for Competence Feedback Desire to Acquire Goods Desire to Acquire Information Desire to Acquire Social Status Desire to Acquire Power and Au- thority Desire to be Entertained hierarchy. In this paper, we have chosen to explore Internet beha- vior through the lens of Basic Psychological Need Theory, a sub- set of Deci and Ryans Self-De termination theory [6, 7, 19, 20].

Basic Psychological Need Theory [6, 7, 19, 20] describes three fundamental needs that motivate human behavior: The need for Autonomy: the need to be an independent, self- regulated individual with a locus of control. The need for Competence: the need to feel successful and competent. The need for Relatedness: the need to feel that one belongs, and is connected to others. This framework of motivation theory suggests that there are the three basic need s, listed above. In addition to these needs, we have added several more Internet needs, which we feel are basic behaviors on the Internet that related to these basic needs. These three Internet needs include: the desire to acquire informati on, the desire to acquire goods, and finally, the need for entertainment. In the case of the desire to acquire goods or information, these activ- ities are ofte n used to fulfill our needs at a very basic level: for instance, a person may de cide to purchase an item because they believe it will make them fit in with others (in order to better relate to others) or may seek information on the Internet a bout average scores on a test in order to compare themselves with oth- ers (the need for competence feedback). Additionally, we also added the need for entertai nment. The need for entertainment or the need to be playful is a behavior that i s strongly represented on the Internet: entire sites and applications have been developed and used to alleviate humans need to be entertained. Previous re- searc h has shown that being playful and entertained in the context of Internet gaming , leads to fulfilling different basic human needs, depending upon an individuals personality characteristics, the types of games chosen, and their playing style. For instance, play- ers who engage in Multi-Player Gaming may find that they ha ve their need for relatedness satisfied [21]. Based upon Deci and Ryans Basic Psychological Needs Theory, the various behaviors that are observed on the Internet can be mapped to these three basic needs. The se basic behaviors have been termed Internet needs as they describe the most be- h aviors that individuals undertake on the internet in order to satis- fy their ba sic needs. Need for Relatedness Desire to Acquire Goods Desire to Acquire Information Desire to Belong/ Relate Desire to be Entertained We argue that the basic psychological needs that are listed above can be met thr ough many services or applications available on the web, in many different ways. The web once was primarily a center for physical goods and services, which by p roviding in- dividuals with information and goods, allowed individuals to satisf y the basic needs listed above at a rudimentary level. How- ever, the technologi es associated with Web 2.0 have allowed In- ternet users to satisfy these needs in more complex ways. For instance, in the case of the need to relate to others, Facebook, a Web 2.0 social networking application, allows users not only to fin d out information about others, but also to connect through others by linking to their profiles, joining and creating groups, and the ability to send publi c and private messages to their friends. A more detailed description o f Internet-based human needs is detailed below, with the example of MySpace.

Table 2. MySpace as a Web2.0 Technology that Satisfies Basic Human Needs pace users is 29 minutes and the average number of pages viewed is 75.6. Eighty percent of the time U.S. adults spend on the Inter- net, they are involved in an other activity at the same time. Services offered within the Web 2.0 framework are now part of the Internets evolu tionary history. This implies that if a firm today wants to be active on the Int

ernet, it has no choice but to Need to Belong/ Relatedness Desire to Acquire Social Status Desire to Acquire Au- tonomy and Independence MySpace allows users to befriend other users, meet new people sharing common interests, and interacting with friends th rough blogs and guest books, fulfilling users need for belongingness and relatedness. Through their social networks, users can also acquire social status by linking t o more friends, with many users linking to hundreds of friends. Users can also i dentify their top friends (through the top eight feature), allowing a user to esse ntially sort their friends, indicating which friends users hold highest in estee m. Moreover, MySpace pro- vides users with the ability to customize their profile page, including using back- grounds, music, and pictures allowing users to fulfill their need of autonomy and inde- pendence. find its appropriate role via Web 2.0. Most major firms, including BMW, IBM, Goo gle, and many others, are positioning them- selves to find their strategic place , appropriate place and fit within these developments. Edmunds.com has created a social network, carspace.com, as part of its overall portfolio of services to the car buying public. In some ways, we may argue that the trends we have examined are just one more ev olution as the waves of IT cost performance inexorably continue. This is expecte d to impact interactive appli- cations in the living room and in the office alik e, and will find parallel manifestations in the mobile communications area, resu lt- ing in many subsequent development and evolutionary stages. These advances i mply that firms have no choice but to keep in step with these developments. The challenges for firms and users will be to blend, merge and consolidate these int o an integrated and comprehensive concept such that users enjoy a best possible experience while satisfying the widest range of human needs. How to do t his in the context of rapid and enormous growth of social network products whos e longevity and stickiness in the marketplace has yet to be decided upon. Moreo ver, we need to find out which pricing structures work best and what users are w illing to pay to fulfill their needs as well as many other ques- tions will have to be addressed by future research. We hope that 3. CONCLUSIONS AND IMPLICATIONS Based on a number of perspectives, including the authors own previous work, we ex amined the evolution of e-commerce and its capabilities to satisfy human needs. From this we researched the satisfaction derived from the fulfillment of human n eeds on popu- lar websites. We show how the fulfillment of those needs is re- fl ected in and serves as an explanation of human behavior manifestations directly observable on the Web. We provide an underlying conceptual needs-focused model h elping us under- stand todays commerce and consumer behavior on the WWW. These ob servations are scrutinized within the Web 2.0 context and demonstrate how the wo rld of conducting business has changed and how this world must link and embrace the unfolding new world of social relationships, developing communities and netw orks on the web. When reflecting on these developments and the issues ad- dressed here, we believ e that what we observe is not the emer- gence of a new theory or fundamental con cept within a theory, but it may well be described as a shift in how we view the web. This shift forces us to take a new look recognizing innovative opportuniti es and challenges while it crosses a number of dimen- sions, including media, th e Web, organizations, economics, socie- ty and culture.

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