Web 2.0: Where does Europe stand?

This report provides a techno-economic analysis of Web 2.0 and an assessment of Europe's position in Web 2.0 applications. Firstly, it introduces the phenomenon of Web 2.0 and its main characteristics: technologies, applications, and user roles. It then provides an overview of its adoption, value chain and business models, before moving to an analysis of its drivers, industrial impact and disruptive potential. Finally, the report assesses the position of the European Web 2.0 applications industry and its prospects for growth. "Web 2.0" is defined as a set of applications (blogs, wikis, social tagging, social gaming etc.), technologies (including AJAX, syndication feeds, mash-ups, and wiki engines) and user roles. The most pertinent characteristic of Web 2.0, as compared to the previous "version" of the Web, is that it enables users to become, with little effort, a co-provider of content. The available figures about recent Web 2.0 diffusion deliver two messages. Firstly, its spread is extremely rapid by any standards, although not uniform for all its applications. Secondly, the intensity with which users participate differs a lot. At the centre of the Web 2.0 value chain are the providers of Web 2.0 applications who may be pure Web 2.0 players or traditional players from related industries such as the media and Web 1.0 industry. They provide opportunities for users to network and/or to create content. As yet, no dominant revenue model for Web 2.0 content-hosting sites has been established, although advertising is the most common one. The content hosting platforms may in turn choose to remunerate content creators through different revenue-sharing schemes, or simply rely on their voluntary contributions. We discuss four aspects of Web 2.0 which may have a disruptive impact on industry: (1) Providers of Web 2.0 applications are becoming increasingly numerous and large, and contribute to growth and employment. (2) They already constitute an important threat to other industries, in particular content industries. The content industry is responding by diversifying into Web 2.0. (3) Web 2.0 applications and software are being increasingly adopted by the enterprise and public sectors as tools for improving internal work processes, managing customer and public relations, innovation, recruitment and networking. (4) The growth of Web 2.0 leads to a derived demand in the supply of ICT hardware and software. Europe's current position in the supply and development of Web 2.0 applications is rather weak. Although Web 2.0 is used almost as much in Europe as it is in Asia and the US, Web 2.0 applications are largely provided by US companies, while Europe and all other regions are left behind. About two thirds of the major Web 2.0 applications are provided by US companies, with similar shares for revenues, employees, and even higher shares for innovation indicators such as patents, venture capital and R&D expenditures. The corresponding shares for the EU are around 10%. Nevertheless, Europe could have the advantage in some areas of the Web 2.0 landscape, for example social gaming, social networking, and Mobile 2.0.