Net Gain: Expanding Markets Through Virtual Communities [Hardcover]

John Hagel III (Author), Arthur G. Armstrong (Author)

Book Description

Publication Date: March 1, 1997

"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 community. From the offerings of commercial online services, such as the Motley Fool Investment group to Internet communities of book lovers, "Net Gain" offers a multitude of real-world scenarios and lessons for building value and creating competitive edge. The authors clearly show that in order to compete in the online economy, you must establish an entirely new approach to product development, marketing, customer service, and distribution, and rethink your company's relationships to customers, suppliers, and competitors. And, they show you how to do it.

Editorial Reviews

Amazon.com Review

Building relationships with customers has been a buzz phrase in many business circles for years. Now John Hagel and Arthur Armstrong declare that's not enough. They make a strong case that business success in the very near future will depend on using the Internet to build not just relationships, but communities. The payoff, they maintain, will be phenomenal customer loyalty and high profits. But, they warn, this race will definitely go to the swift. Here's a cyberspace book that could make your business future. Not everyone agrees with Hagel and Armstrong, but with stakes so high they deserves a serious reading.

From Library Journal

According to Hagel and Armstrong, both with the multimedia firm McKindey & Company, virtual communities are the marketplaces of the future. Representing more than a physical place on the Internet, they are an evolution in business dynamics. By providing a common forum on the Internet for consumers to share information, the authors argue, vendors are seeking access to these valuable market enclaves, hence creating a power shift from the vendor to the customer. The authors clearly demonstrate their professional experience and business acumen regarding this new market forum. Their book is a manifesto for a generation of entrepreneurs hoping to learn about the future of the online economy. Recommended for those seriously interested in the direction of business markets.?Dennis Krieb, St. Charles Cty. Community Coll. Lib., St. Peters, Mo.
Copyright 1997 Reed Business Information, Inc.

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Product Details

• Hardcover: 235 pages
• Publisher: Harvard Business Review Press; First Printing edition (March 1, 1997)
• Language: English
• ISBN-10: 0875847595
• ISBN-13: 978-0875847597
• Product Dimensions: 9.5 x 6.4 x 1 inches
• Shipping Weight: 1.2 pounds (View shipping rates and policies)
• Average Customer Review: 3.9 out of 5 stars  See all reviews (63 customer reviews)
• Amazon Best Sellers Rank: #643,101 in Books (See Top 100 in Books)

Customer Reviews

Most Helpful Customer Reviews

30 of 34 people found the following review helpful:

2.0 out of 5 stars Straight Line Depreciation, from Five Stars to Two., June 16, 2000

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H.C. Joiner - See all my reviews

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This review is from: Net Gain: Expanding Markets Through Virtual Communities (Hardcover)

This book was probably five stars when it was published - in 1997. However, too much has changed since then, obviously through no fault of the authors. I knew I was in trouble when the authors raved about Motley Fool and asked "can online trading be far behind?" Save your money.

16 of 17 people found the following review helpful:

5.0 out of 5 stars Finally an explanation of how to make a profit on the Web, April 23, 1998

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Joshua Silver ([e-mail]) (Sunnyvale, CA) - See all my reviews

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This review is from: Net Gain: Expanding Markets Through Virtual Communities (Hardcover)

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.

12 of 12 people found the following review helpful:

5.0 out of 5 stars Realistic and specific, within the usual limits, December 8, 1999

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Edward E. Rigdon (Atlanta, GA USA) - See all my reviews
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This review is from: Net Gain: Expanding Markets Through Virtual Communities (Hardcover)

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.