At a recent roundtable debate hosted by IT consultancy Conchango, industry experts discussed the impact of Web 2.0 technology on businesses and the challenges firms face in differentiating themselves and generating revenue in a rapidly evolving market.

While many recognised that the Web 2.0 concept has been the subject of a lot of PR hype, there was general agreement that it is also strongly connected to a growing trend in society where users are becoming much more demanding, and to an extent dictating the technology solutions they want to see.

“We are in a chicken and egg situation because the whole premise of the internet is changing,” explained Graham Benson, IT director of The Web Factory, which powers Play.com. “Because it’s now mainstream [and mature], technologists are reacting to what the customer wants rather than telling them what they want.”

This has partly resulted in greater focus on the user experience, and on building more inclusive relationships with customers, for example by inviting user reviews of products and comments on corporate blogs. And because users are demanding information more quickly, firms are incorporating RSS feeds so that visitors to their site can pull the information on demand, rather than have it pushed out to them, he added.

E-commerce consultant Ian Jindal said firms should not be afraid to look outside for technology or content, because increasingly that is what site visitors expect to find. “They’re saying, ‘Just be grown up – we live in a linked world, you get linked too’,” he argued. “The challenge for retailers is one of developing appropriate tools and linkages.”

Conchango’s head of interactive media, Paul Dawson, argued that firms must follow Google’s lead and take more risks if they are to reap the rewards of Web 2.0.

“A Web 1.0 company [by contrast] is probably a largish corporate entity that is reasonably risk averse, lazy and sits in an ivory tower – they don’t particularly care about the user experience or investing in it, [although they may] pay lip service to it,” he said.

There was disagreement about where the real Web 2.0 innovation was coming from in online retail, and some argued that retailers have been slow to embrace Web 2.0 technologies and attitudes after being “burned before” in the dot-com crash.

Jindal suggested that it is the “relevant, focused and overhead-free” affiliates and search engines, not the retailers, who are innovating, and becoming the first port of call for consumers.

“It is lightweight, flexible, contributive and there is a focus on the customer,” he explained. “They [provide] relevant, deep experience that is appropriate to what you need – it is disempowering the retailers.”

Conchango’s Dawson agreed, saying affiliate sellers provide a great short-cut for users, and retailers are still a long way behind by “not doing innovation around those areas”.

Looking to the future, The Web Factory’s Benson predicted that as the industry matures online retailers would soon be competing on the basis of range and quality of service, rather than price alone, making features such as user reviews, blogs and other ways of gaining user feedback more influential.