Are online communities working?: September 03, 2001 issue of New Thinking

September 03, 2001 New Thinking:
Are online communities working?

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September 03, 2001

Are online communities working?

By Gerry McGovern

Around 1995/96, it was believed by many, including myself, that online (virtual) communities were going to have a radical impact on the way people socialized and did business. Five years on, there are lots of these ‘communities.’ However, few have figured out how to make any money out of them, and their impact has remained marginal.

In 1997, John Hagel and Arthur Armstrong released ‘Net Gain,’ a book on the online community model that became very popular. In an interview with Amazon.com, the authors were asked if anybody would actually make any money from such communities.

“Obviously it's still early in the game,” they replied. “There are not yet any good examples of robust virtual communities out there, much less of people who are making a lot of money organizing them. But our extensive work with clients that are heading in this direction indicates that virtual communities will have the opportunity to create very substantial economic wealth for organizers. This won't happen overnight.”

Indeed, it didn’t happen overnight. An article published recently in Wired.com had the heading, “Salon's Free Speech: $10 a Month.” It went on to discuss how the struggling Salon.com was going to charge people $10 a month to participate in its online community of discussion areas. Salon should be able to make online communities work, considering it owns The Well, one of the very original and best-known online communities.

However, as Salon’s managing editor Scott Rosenberg pointed out, “Advertisers, unfortunately, do not tend to want to pay for ads in community and discussion spaces.” Personally, I had the same experience with an Irish online community I helped establish. Lots of discussion but little revenue.

Usenet, with over 500 million messages posted since 1995, is the prototype of the online community model. It is a collection of thousands of groups discussing practically every topic under the sun. Largely unmoderated, often unruly and certainly unprofitable, a financially unviable Usenet was recently acquired by the Google search engine.

So, are online communities are a waste of time and money; a type of walking dead in cyberspace? It depends. Trying to make money out of such communities may be a very difficult task, but that doesn’t mean such communities don’t have value and power.

A Knowledge at Wharton article entitled, “How companies sponsor, listen in and learn from chat rooms,” cited Chrysler, Sony Music, Procter & Gamble and the Wharton school itself, as examples of organizations gaining benefits from online community strategies. Wharton was not wholly enthusiastic of the community model, however, with one professor stating that such approaches are “not something that will necessarily boost your sales numbers.”

While the positive economic value of online communities is debatable, their negative potential is clear. Public affairs company, APCO, states that, “A poorly handled response by Intel to an online rumor about the Pentium chip cost the company a half-billion dollar write-off. The Yahoo directory lists over 300 consumer opinion sites that attack major corporations.”

The online community model was undoubtedly over hyped. As a business model it has shown little sustainability. However, wherever there is a subject that people can get passionate about, the online community has a role to play. The Internet is the ultimate grapevine and, in particular, the organization should not ignore voices of discontent.

Gerry McGovern

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While the positive economic value of online communities is debatable, their negative potential is clear.

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