E-Commerce 2.0 – From Social Commerce to Virtual World

In the recent decade, Web 2.0 apps, notably online social networks, have made a stunning comeback. Because of the large number of people who utilise these networks, many businesses use them as marketing tools. The latter is critical because most Web 2.0 programmes provide their services for free and rely on advertising revenue to make money. This predicament has prompted the owners of the major online social networks to develop and offer marketing services that businesses are ready to pay for, allowing them to generate cash to cover their costs while still providing their core services to users for free.

Regardless, Web 2.0 has become a hazy idea. According to Clarke, “the Web 2.0 movement is diffuse, and does not permit simple definition.” Using Web 2.0 applications for e-marketing therefore requires clarification to determine with precision their purpose and scope. This is essential to put such applications in a clear perspective with regards to e-commerce, which currently is a fundamental e-marketing tool.

What Is Web 2.0?

Darcy DiNucci invented the phrase Web 2.0 in 1999, and Dale Dougherty of O’Reilly Media characterised it as a second generation of technological development and web design at the first Web 2.0 conference in 2004.

Turban et al. refer to Web 2.0 as “a popular term for advanced Internet technology and applications including blogs, wikis, RSS and social references.” These authors stress the importance of Web 2.0 apps being created for and by people. Therefore, the main difference between Web 2.0 and traditional web, which O’Reilly referred to as Web 1.0, is collaboration.

Constantinides and Fountain refer to Web 2.0 as “a collection of open-source, interactive and user-controlled online applications expanding the experiences, knowledge and market power of the users and participants in business and social processes.” By allowing the efficient generation, dissemination, sharing, and editing/refining of informative content, Web 2.0 apps facilitate the creation of informal user networks, facilitating the flow of ideas and knowledge.

Web 2.0 Tools and Examples

Web 2.0 is defined by tools that enable users to exchange information via:

• Blogs – Chronological collections of entries
• Wikis – Collaborative editing of web pages
• Chats – Real-time online conversations
• Syndication – RSS, Atom
• Podcasts – Multimedia broadcasting

Examples include Blogger, Facebook, Flickr, Google Docs, LinkedIn, Picasa, Skype, Twitter, Wikipedia, WordPress, and YouTube. These platforms enable users to generate and share material (text, images, sounds, video, music) and interact with each other.

Tim Berners-Lee noted that Web 2.0 is more of a social movement that restores the original purpose of the WWW: user-generated content.

Web 1.0 vs. Web 2.0

Network Effects and Collective Intelligence

Web 2.0 applications gain value as more users join — a phenomenon called network effects. This leads to provider lock-in, as higher user counts increase user loyalty.

Collective intelligence is key: O'Reilly and Surowiecki (in The Wisdom of Crowds) emphasized the value of pooling individual knowledge. However, Turban et al. questioned its reliability due to misinformation and lack of editorial control.

Despite this, user traffic, visibility, and open feedback mechanisms allow high-traffic Web 2.0 platforms to self-correct errors.

Online Social Networks (OSNs)

A social network is a structure of interconnected individuals or organizations. Online social networks (OSNs) like Facebook, LinkedIn, and MySpace replicate this digitally using Web 2.0 features.

Boyd and Ellison define OSNs as platforms that allow users to:

• Define a personal profile
• Connect to others’ profiles
• View their connections’ connections

OSNs enable communication and visibility within “closed” networks and have become powerful for mass communication, news, and opinion-making.

From Social to Commercial Networks

Market Perspective

Businesses view OSNs as marketing platforms due to their vast user base. Young people and professionals have led the adoption of platforms like Facebook (college students) and LinkedIn (professionals). Companies can:

• Create brand profiles
• Send free messages to followers
• Run targeted ad campaigns

Viral marketing plays a vital role — recommendations from friends are more influential than traditional advertising.

Focus groups can also emerge within OSNs, allowing marketers to analyze candid conversations and customer sentiment.

Community Perspective

The community perspective is about building virtual communities, which can be:

Companies like Procter & Gamble build user communities to:

• Increase brand awareness
• Collect consumer data
• Reduce ad spend
• Test direct sales

Sites like Amazon and eBay use user-generated reviews and ratings to support buying decisions and reduce information asymmetry.

Social Commerce and Integration

The term social commerce (first used in 2005) refers to integrating e-commerce with social networks. By 2011, Facebook hosted over 100,000 stores, generating over $1.5 billion in f-commerce revenue.

E-commerce platforms now integrate with OSNs, using features like:

• Product catalogs
• Shopping carts
• Embedded storefronts

This has blurred the line between social networks and e-commerce.

OSNs vs. E-Commerce

Despite differences, OSNs complement e-commerce. High-traffic OSNs help boost visibility and promote small business e-stores.

The Future: From Virtual to Physical Integration

As social and commercial networks evolve, physical integration is on the horizon. Social commerce represents this hybrid model.

For online social network operators, transforming into commercial hubs creates necessary revenue streams to sustain free services and satisfy investor expectations.

Companies now focus on performance-based advertising, preferring to pay for actual results like sales rather than just impressions or ad views.

However, fake users and spambots undermine ad effectiveness. Distinguishing between active and registered users is key to ensuring accurate performance measurement.

Conclusion

Online social networks and e-commerce aren’t alternatives—they’re complementary forces in digital marketing. Social networks offer unmatched reach and interaction, while e-commerce delivers transaction capability.

Together, they form the backbone of E-Commerce 2.0, blending the social and economic lives of users into a single, powerful virtual marketplace.