Brand & Data

Strategic advantages for Web 2.0 companies

The most common definitions for the phases of the World Wide Web evolution are Web 1.0 was all about fetching, and reading information. Web 2.0 is all about reading, writing, creating, aka co-creation or the participative social web. Web 3.0 is the third generation of the World Wide Web. The vision for this is that of a decentralized web that is all about reading, writing, and owning. I think there is a lot of potential with Web 3.0 as some really gifted prognosticators have pointed out even years ago. But, today most of us still work primarily in the Web 2.0 world and I don’t think that’s going to change quickly. Even when Web 3.0 projects have proliferated and become ubiquitous in our daily lives, I don’t see a near-term future where we aren’t still interacting with lots of ecommerce and marketplaces that remain from the Web 2.0 era. Therefore, today I want to talk about what differentiates one Web 2.0 company from another and what allows them to form a defensive moat or provides them with a strategic advantage.

If you head over to any ecommerce, e.g. Amazon, or marketplace, e.g. eBay, there are no hidden features. Even as a guest, without signing in, you can generally see all the functionality available and all of the inventory. As for competitors, they can easily copy this functionality even going so far as to read your frontend code even if you try to obfuscate it. While I don’t condone copying someone else’s code, designs, or art work, I do often recommend that teams look at other sites and see how they solved a particular problem such as storing favorite items that you’re not ready to purchase. The folks at Pinterest, Airbnb, Etsy, etc. are smart and have put lots of time into thinking and testing what works for their customers. Will this exact functionality work on your site? Probably not, but it might give you a really big head start. 

So, if everyone can copy everyone else’s functionality and aesthetics, how are companies supposed to differentiate themselves? In the Web 2.0 era, companies can still differentiate themselves through their brand and their data. These two even individually are arguably your strongest tools in your toolbox for either defensive moats, that prevent competitors from entering, or strategic advantages, that provide you with the ability to enter certain markets and win. Together these two make an incredibly strong force that I’ve only seen beaten a handful of times and primarily in social media such as the demise of Friendster in favor of Facebook and other social media platforms. Friendster was founded in 2003 by Jonathan Abrams and had 115 million registered users in 2011 but ultimately shut down in 2018. Friendster had incredibly poor page performance because of the f-graph which recalculated connections everytime one was added. However, I would argue that they really failed not because of that but because of strict content regulation practices that limited how customers could express their self-identity. Alternatives were available and people flocked to them in order to better express how they wanted the world to see them.

There is only one Netflix, Apple, or Etsy. When you have a strong brand people know what you stand for, what they can expect when they visit your site, and how they will be treated. A robust brand identity is a powerful tool to carve a niche in the market, especially in the Web 2.0 era where differentiation is key amidst a saturated market. Take for example, Apple. Despite the sea of tech companies and gadgets, Apple stands apart. Apple's brand is synonymous with a sleek, minimalist design ethos, user-friendly interface, and premium quality. These characteristics have been cultivated meticulously over the years, epitomized by the meticulously designed products and the iconic Apple stores with their minimalist design and high level of customer service. A pivotal moment that showcases Apple's brand strength is the launch of the iPhone in 2007. Despite entering a market dominated by established players like Nokia and BlackBerry, Apple's strong brand identity enabled it to redefine the smartphone sector. Furthermore, Apple's advertising campaigns, like the memorable "Think Different" campaign, reinforce its brand ethos of innovation and individuality. The consistency in Apple's branding across all touchpoints from product design to advertising and customer service has engendered a loyal customer base willing to pay a premium for Apple products, thus creating a formidable moat against competitors.

The second part of this strategic differentiator is data. When you have millions of users worth of data you have the ability to leverage this both for better features, better recommendations, better targeting, etc. Data is the silent workhorse that drives enhanced user experiences, which in turn fortify the brand's reputation. Amazon is a prime example of this. With its vast amount of user data, Amazon has perfected its recommendation engine to suggest products that users are likely to buy. This personalized shopping experience not only drives more sales but reinforces Amazon’s brand as a convenient and personalized online shopping platform. Amazon's mastery in leveraging user data is a cornerstone of its success. The company collects a vast array of data points from customer searches, purchases, and even browsing behaviors, which are then used to fuel its recommendation engine. By analyzing this data, Amazon can suggest products that align with user preferences and past shopping behavior. For instance, if a user frequently purchases organic products, Amazon's algorithm will likely recommend other organic or eco-friendly items. This personalized approach not only fosters a more engaging shopping experience but also encourages additional purchases, driving higher sales. Moreover, Amazon uses data to optimize its logistics and inventory management, ensuring that popular products are stocked and delivered efficiently. This efficient utilization of data underscores Amazon's brand promise of convenience and vast selection, thus creating a competitive edge in the e-commerce landscape.

Now, when you put these two differentiators together you have a brand that means something to people and enough data to make the experience personalized and better than any alternatives. Combining a solid brand with a rich data repository can catapult a Web 2.0 company into a league of its own. A shining example is Spotify. Known for its personalized music experience, Spotify uses its extensive data on user preferences to curate personalized playlists and recommend new music, thereby enriching the user experience. This amalgamation of brand and data not only retains existing users but attracts new ones who crave a tailored music listening experience, setting Spotify apart in a crowded market. Spotify’s brand identity is intertwined with personalized music experience, which is heavily data-driven. Its “Discover Weekly” and “Daily Mix” playlists are prime examples of this synergy. These features use complex algorithms analyzing user listening habits, preferences, and even the time of day when different music is played, to curate personalized playlists. This level of personalization creates a unique value proposition - a music service that understands individual tastes and introduces users to new music they'll likely enjoy. Spotify's brand is further enhanced by its collaborations with artists and exclusive album releases which are often promoted using data-driven campaigns targeting likely fans. By combining a strong brand identity centered around personalization with a robust data analysis, Spotify delivers a user experience that not only differentiates it from competitors like Apple Music and Pandora but also cultivates a loyal user base that values the personalized music discovery experience Spotify offers.

The synergy between brand and data is indispensable for Web 2.0 companies aiming to build a defensive moat or gain a strategic market advantage. While a strong brand sets the promise, data delivers on that promise by enhancing and personalizing the user experience. This combination not only deters competitors but also engenders customer loyalty, which is instrumental in sustaining and growing the market position. In a rapidly evolving digital landscape, mastering the balance between brand and data could very well be the linchpin of enduring success for Web 2.0 companies. As we inch towards a Web 3.0 era, with all of its promises of improved verifiability and data ownership, we will still have Web 2.0 companies for many years, perhaps several decades. Many of us will continue working in these companies and take responsibility for their continued success. Understanding the power of brand + data is imperative that we be the proper stewards for these companies.