Forrester Report: Global Enterprise Web 2.0 Market Forecast: 2007 To 2013

In 2008, Business Adoption Of Web 2.0 Tools Is Expected To Grow Strongly

Global Enterprise Web 2.0 Market Forecast – Who should read this report?
Anyone investing in the space such as VCs, leadership at Social Media companies, or those involved in purchasing at corporations for social media tools.

Caveat: Sans services and “organic” sites
It’s important to note that calculations do not include properties such as ‘organic social networks’ like Facebook (which is valued at $15b), nor do they include services (a report I hope to do soon), so the numbers, in our opinion are just a slice of the overall technology sector. For example, in 2008 we project enterprise spending on Web 2.0 technology to account for just 0.2% of the $364bn global corporate spending on software and to barely even register as part of the $1.7 trillion we expect to see spent on technology overall is a useful piece of context. When you think about social media tools for the enterprise, most often, these commodity technologies are cheap, easy to deploy, and often free.

Web 2.0 Expo, a Physical Manifestation
I spent the last two days at the Web 2.0 expo (I was an advisor to the show), where 7000 people from this market assembled into one building. Who are these people? they are the ‘market’;, vendors, clients, analysts, press, media, and users. It was clear to me many mainstream businesses were attending, I’ll take a guess that many early adopters within the enterprise (I was that guy at Hitachi Data Systems) are dragging their boss, and colleagues who were once nay-sayers to the conference to learn. I saw many Fortune 1000 brands there trying to learn and understand how to use these tools for business.

Mainstreaming
To me, last year’s Web 2.0 expo was far different, it was a geek fest, where live streaming was prominent, and there was much more fascination over the tools –rather than the business impact. This year, many of the questions and folks I met were interested in using these tools to improve their business, they weren’t enamored with the latest widget. On the show floor, I spoke to two CEOs who read the report and commented that the numbers looked in par to their expectations.

Technology Infrastructure moves in
SUN (Who’s had the startup essentials program for a few years), HP, NetAPP, EMC were all present on the show room floor. What do they have to do with Web 2.0? In most cases, this is not their core business, but they realize this growing market will need infrastructure and technology to power these websites. I was pushing for this nearly 3 years ago at the data storage level, but I guess I was too early. Another change is the strong presence of an analyst firm, in this case it was Forrester, we were involved with four sessions, hosted a party, and launched a book. I guess this movement really is headed mainstream now.

What others are saying: in agreement and disagreement
Our friends at ZDNet may have misunderstood what we were actually sizing, at first it was assumed it was just “enterprise 2.0″ (internal) purchases, but in reality, this sizing encompasses externally facing (marketing), and is the largest piece of the pie.

The above and following image was posted on many blogs on Monday, where I encourage you to following the conversation and analysis. First, start with Read Write Web (Oilver and I are big fans of this blog), then Andy Beal takes Here’s the Reason Why Small Businesses Won’t Adopt “Enterprise 2.0″, and for a counterpoint, the respected Dennis Howlett The problem with Forrester’s $4.6 billion prediction, I always enjoy Dennis’ contrarion position, it’s needed in the industry. (update: Oliver Young left a comment on his post)

Forecast: Global Enterprise Web 2.0 Spend By Technology, 2007 To 2013

Many Forms of Widget Monetization

Widget, Gadgets, Applications, Canvas Pages, Embeds, it goes on and one. One thing is clear, the rate of widgets continues to increase, take for example Facebook’s application platform has over 15,000, 20,000 applications in just about 9 months. Granted, many of those are slightly tweaked clones of each other, the top 100 widgets clearly has adoption.

In some cases, there are sophisticated companies developing widgets, the RockYou’s and Slides of the world can really zero in and focus, or take the garage developers such as the two Russian developers who created Scrabulouos, or lastly, the big corporations or interactive firms that are getting in on the action –often with limited success.

Yet, how do we monetize widgets? There’s only a few ways, some tied back to traditional methods, and some leaning on the new media.

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Many Forms of Monetizing Widgets

Advertising/Sponsorship: CPM models sit nicely here, yet research indicates that users don’t go to social networks for finding products, CTRs are pretty damn low. Why? because people go there to socialize and self-exprsess, not find products, (that’s what Google, eBay, Craigslist is for). Banner ads count too, such as this case study with Vampires and Sony.

Interactive Marketing: Some widget developers are selling their already existing application space to large brands, who can insert this branded engagement into an existing community. Take for example Dell’s regeneration campaign case study.

Branded Entertainment: Somewhat different than advertising and interactive marketing, popular media or widgets can be put forth from funding from large companies, while we’ve yet to see this occur, Intel comes to mind: they sponsored a feature on Digg, and paid for the development, all in the context of their brand.

Cost Per Install: I personally think this is a dangerous way to monetize, although I realize the top widget networks are getting sizable revenues from selling the opportunity for other applications to piggy back off their success, and sell installations. If everyone does this, we’re going to end up with an excess of applications installed, based upon lower value. I somehow imagine successful widgets should grow naturally and organically, not sold from a mercenary application.

Acquisition: No brainer here, but folks like Scrabulous (if they weren’t shut down) could sell of their application to an interactive firm or widget network and all the community members that come with them.

eCommerce: Surprisingly, we’ve not seen any great applications spur forth with adoption in social networks, it just isn’t happening yet, expect to see an existing eCommerce site to create a successful widget by end of year, and likely a new form of social shopping to appear. Update: Rodney is watching this new type of ‘classified’ widget Radical Buy make some traction.