Why most online communities are failures

January 18, 2012: 10:27 AM ET

Plenty of smart companies and organizations have put together their own online communities. Some are pulling this off brilliantly; others, not so much.

By John Hagel and John Seely Brown, guest contributors

FORTUNE -- As anyone who has started their own blog certainly knows, it takes all of an hour (if that) to create your very own space to share your most brilliant ponderings for the entire world to see. But when it comes to building a space online that people want to visit regularly and contribute to, well, most of us never get there, and for good reason. It's really hard.

Plenty of smart companies and organizations have put together their own online communities. Some are pulling this off brilliantly; others, not so much.

Take AARP, for example. True, the organization's website has a sizable amount of free information on member benefits and its advocacy work. But AARP also offers members the opportunity to participate in an online community where they can connect with others who have common interests. At first, participants share ideas and information with each other. Anyone, member or not, can register to join topic-specific groups such as "retirement planning" and "seniors as entrepreneurs" or start a new group.

As participants' relationships deepen, they begin to move from a conversation to actually working together. For example, single travelers in one AARP group have moved from exchanging tips to planning trips together. At this stage, they are not randomly connecting but collaborating.

The term "online community" is often used loosely and includes any sites that aggregate customers or an audience even though there is very little contribution by the participants or interaction among them. We use the term in a much more specific way, to highlight a potentially very powerful form of ecosystem that businesses can organize and nurture. These communities require extensive and sustained interaction among a growing number of participants to function well.

Why should companies care about these online communities? For one, they can increase the value derived from, and the lifespan of, a company's customer relationships. But more broadly, online communities can become valuable tools to understand how customers use a company's products or services and what kinds of improvements or changes might make sense. Companies pay a lot for focus groups and yet virtual communities represent a kind of 24-7 focus group.

Building an effective virtual community is no simple task. Most importantly, it requires a deep understanding of the unmet needs of potential community members rather than simply approaching it as a marketing opportunity for the company. It is no wonder that so many have tried to create these communities and yet so few have succeeded.

Many companies hire consultants like LiveWorld to build and moderate their communities. EBay (EBAY), for example, started a group a decade ago by bringing together online vendors and encouraging them to exchange tips on running auctions and how to build successful online businesses. It has since grown into a full-blown community where people talk personally about their families, work, and other interests.

One member, a skilled quilt maker, was so moved by how her work and friendships had grown as part of the group that she invited members to mail her cloth to stitch a quilt representing the eBay bond. A total of 114 members sent specially designed squares. With agreement from the group, she then sold the quilt on eBay, with proceeds going to a special children's program at the Canadian Diabetes Association. It was bought by an active member of the group who then lent it to eBay to display.

In another example, members of the eBay community launched a discussion board in response to Hurricane Katrina to give each other advance warning of potentially dangerous weather conditions. Each October, a seller group self-organizes to raise funds for the Susan G. Komen for the Cure. "Hundreds of thousands of members are active in the groups, discussion boards, and forums where this deep engagement happens," says Liveworld CEO Peter Friedman, and "tens of millions participate in the larger eBay network that uses the trusted feedback mechanism through which buyers and sellers rate and review each other."

Campbell Soup Company's (CPB) community started out as a recipe exchange, which was prompted by moderators who shared personal stories about how they cook for their families. The site now covers a broad range of interests around raising families.

As participants in these online communities develop relationships, they can begin to take on projects that often benefit the company that sponsors the community, also referred to as "co-creation." As one example, Lego has increasingly relied on its virtual community not only for ideas on new products but actually for help designing these products.

To design your online communities, as a starting point you need to understand the broader context of how your customers use your services. What are their unmet needs? How might online interaction among customers themselves help to address these unmet needs or opportunities?

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About These Authors
John Hagel III and John Seely Brown
John Hagel III and John Seely Brown

John Hagel III is co-chairman and John Seely Brown is independent co-chairman of the Silicon Valley-based Deloitte Center for the Edge, which conducts research to support corporate growth. Hagel has nearly 30 years experience as a management consultant, author, speaker and entrepreneur. From 1984 to 2000, Hagel was a principal at McKinsey & Co., where he was a leader of its strategy practice. Brown is a visiting scholar and advisor to the provost at the University of Southern California. He was the chief scientist of Xerox Corporation and the director of its Palo Alto Research Center. Brown holds several patents and was inducted into the Industry Hall of Fame in 2004.

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