Web 2.0 is cheap: Supply exceeds demand

The aim of this paper is to evaluate, from an economic perspective, the efficiency of Web 2.0. It demonstrates that, because of the non-monetary nature of Web 2.0, several sources of inefficiencies (search costs, externalities, crowding out and adverse selection) exist. Nonetheless, the economic nature of digital products and the expected low value of most online content make it impossible to adopt a simple market scheme for Web 2.0. In contrast, this paper introduces a concept of demand-driven Web 2.0 (as opposed to the current Web 2.0, which is supply driven) that is expected to provide stronger incentives, through financial reward, for high quality content within a Web 2.0 environment. 2010 Taylor & Francis.