Net Gain: Expanding Markets through Virtual Communities

by Arthur Armstrong, John Hagel III, Arthur G. Armstrong

Book Overview

Net Gain identifies where the next level of value lies on the Internet and lays out the first economic model to quantify the revenue potential and the investment required to build a successful virtual... This description may be from another edition of this product.

• Format: Hardcover
• Language: English
• ISBN: 0875847595
• Release Date: January 1997
• Publisher: Harvard Business Review Press
• Length: 256 Pages
• Weight: 1.25 lbs.
• Dimensions: 9.5" x 1.0" x 6.4"

Customer Reviews

Virtual Communities = Real Prosperity

Hagel has co-authored two especially important books (with Arthur G. Armstrong III and Marc Singer, respectively), the other being Net Worth "which builds on a number of the themes originally developed" in this volume. As Hagel and Armstrong point out, Net.Gain "systematically [analyzes] the economic drivers for value creation that exist on networks. It [uses] one particular business model -- the virtual community -- to illustrate the unique capabilities of digital networks and how these might be harnessed to create a substantial business with very attractive economics." The material is carefully organized within three Parts: The Real Value of Virtual Communities, Building a Virtual Community, and Positioning to Win the Broader Game. Hagel and Armstrong also provide a "Management Agenda", followed by excellent suggestions for further reading.In the Preface, Hagel and Armstrong acknowledge three inevitable limitations in writing Net.Gain: "The first arises from the profound uncertainties associated with evolving electronic networks and the myriad business models emerging in the primordial brew known as cycberspace....Second, the need to be concise has led us to make some generalizations about the likely evolution of virtual communities and the key principles for success....Third, we do not expect virtual communities to be the only 'form of life' on public networks. Indeed, many other commercial and non-commercial formats (including dictionaries, market spaces, 'web'zines,' corporate sites and game areas) will thrive on these networks as well." Working within these limitations, Hagel and Armstrong succeed admirably when describing the power and potential of the virtual community concept. Also, when explaining (a) how to target the kind of community to start-up; (b) the principles of a successful entry strategy, emphasizing the need to generate, engage, and lock in traffic over time; (c) characteristics of community organizations; and (d) criteria by which to select the right technology. Then in Part Three, Hagel and Armstrong shift their attention to explaining the fundamental ways in which the emergence and spread of virtual communities will alter traditional business.My strong recommendation is that this book be read first, then Net Worth. My further recommendation is that both books be used to formulate the agenda for a workshop or what is generally referred to as an "executive retreat" (preferably for two days and located offsite) with all participants required to read both books in advance. In their Epilogue, Hagel and Armstrong suggest that "the most radical potential impact of the virtual community may well be its impact on the way individuals manage their lives and companies manage themselves. Communities will serve to connect, much like the postage system and telephone before them. But they will go several steps further than the telephone or fax, as they help the individual to seek out and find. Souls in search of relationship, colleagues

An easy to read and practical vision

A book which has been at the basis of our company. The book gives a clear vision on the futur of the Internet, especially on the commercial part of it. How to create a place on the Internet which your target group visits, where they talk about your products and services and where you can give them (and thereby your own company) added value. In other words: a Virtual Community. The book also explains how to manege such a community. By builing it up little by little and by letting go at the same time, so that members will over time derive great value from member-generated content. And best of all: the lay-out of the book ensures easy reading and fast skimming throught the book.

Realistic and specific, within the usual limits

The thing I really like about this book is the specifics. You find much more substance--including dollar amounts--in this book than you do in many e-biz books, even with the usual dollop of rah-rah. Several chapters are very helpful in making the business case for online communities, and in uncovering success/failure factors for this approach. I can't say that Hagel and Armstrong have it *all* right, but this is book will be one you refer back to on a regular basis. The management agenda in the appendix is a nice touch, as well.

Worth the time reading with practical application

According to Hagel and Armstrong, virtual communities that combine content and communication can expand market opportunities, and those who form these online communities will experience commercial success. Throughout the book, the authors stressed that those organizations who wait will lose out. However, the emphasis of the book is not about making money; rather it's about forming communities, collecting information on members' preferences, interests, etc., and using that information to meet their needs. In my opinion, two of the most useful components of the book are a listing of personnel required for the implementation and maintenance of an online community, and steps needed to help managers get started in organizing a virtual community. The book is certainly worth reading, whether you are developing websites for business, education, recreation, etc. Hagel and Armstrong present valid reasons and practical suggestions for developing online communities that will help members connect, as well as seek and find.

Finally an explanation of how to make a profit on the Web

I read this book pretty much cover-to-cover and found it very thought provoking. It does a great job of explaining the opportunities in creating "Virtual Communities". Virtual communities are described as areas where a group of users sharing common interests gather to learn about and discuss information. These communities create an information source that shifts power from the vendors to the customers. Longer term, vendors can capitalize on this community by selling directly to the community members, and more importantly by using the customer interaction to create word-of-mouth advertising. Who are you more likely to trust: another user of the product or some sleazy salesman? Up until this book, I have seen little written on the longer term business models on how to make money by aggregating users. This book will explain the rationale of why there is enormous value in web sites with a large base of users. The book has a very interesting chart which describes the return on various strategic investments for a startup trying to build a virtual community. The conclusion was that far and away the most important investments were vendor acquisition (i.e. companies wanting to sell products to the members of the community), member-generated content, and member acquisition. Interestingly, usage fees for the site had an enormous long-term negative impact for the site (despite their short term ability to generate revenue). There are a couple of points that I think were not well addressed in this book: 1) I don't believe that the authors make a compelling argument about how to sell the first vendors on the advantages of being a part of the virtual community. From my experience, vendors don't sign up for a new product or service because "that's where the market is going". They need to be convinced that there's an advantage for them to be first, and that reason was not adequately described in the book. 2) The book states the importance of member-generated content as a way to build up the community and keep traffic coming to the site. It was never clear to me from the book how to do this through a commercially sponsored newsgroup versus the already existing Usenet newsgroups today (which already have a pre-existing and active community). For instance, there are already many Usenet newsgroups related to Travel. Why should potential travelers use a commercially sponsored site instead of a Usenet group? Clearly there are sites that have been successful at creating their own newsgroup areas so I believe that there are justifiable reasons. I'm just not sure what those reasons are and the book didn't explain them. Overall, an interesting book and well worth your time.