Global Economics

Battle for the Future of the Net


The Semantic Web connects information in novel ways. Will EU tech companies drop the ball on another breakthrough?

Europe's technology landscape is littered with stories about what might have been. Take the case of Finnish engineer Olli Martikainen who started developing a router—network hardware that directs streams of data from one computer to another—back in 1982 at VTT, a research institute in Espoo, Finland. The Finnish companies financing the project, including Nokia (NOK), didn't see the potential, so the project was dropped in 1986, shortly before a U.S. startup called Cisco Systems (CSCO) went on to staggering success commercializing similar technology. Martikainen's prototype now gathers dust in a university display.

MP3 music compression was invented nearly 20 years ago at Germany's Fraunhofer research institute, but it was brought to market by U.S. companies. And the father of the Web, British scientist Tim Berners-Lee, created the technology in a Swiss lab only to see U.S. companies such as eBay (EBAY), Amazon (AMZN), Yahoo! (YHOO), and Google (GOOG) cash in on the idea.

High Stakes

Now, as the next generation of Internet technology edges toward the market, European companies and policymakers are determined not to suffer the same fate. In a bid to get ahead of U.S. researchers, they are underwriting research into the so-called Semantic Web—also sometimes called Web 3.0—to the tune of hundreds of millions of euros. "The U.S. and Europe are competing on funding something that could have an extraordinary strategic impact," says Whit Andrews, a research vice-president at technology consultancy Gartner (IT).

At stake is nothing less than the future of the Net. Developed in part by Berners-Lee, who is now based at MIT, the Semantic Web goes well beyond today's relatively static information highway to add richer media and support for vast pools of unstructured data—in effect, making all the world's knowledge available online. It also connects the information in ways that will let users discover novel associations among unrelated data. That has big implications for fields ranging from the military to medical research to business intelligence (see BusinessWeek.com, 4/9/07, "Taming the World Wide Web").

European engineers, working with researchers from the U.S. and elsewhere, already have played a big role in the development of basic Web 3.0 standards. Now, governments are raising the stakes to keep Europe at the forefront. "They want to create the defining technologies for the Semantic Web and give European companies an advantage in the market," says Mark Greaves, a scientist with Seattle's Vulcan, the asset management company started by Microsoft (MSFT) co-founder Paul Allen. "If you are looking to fund revolutionary technology with commercial importance then you have to put your money where your mouth is," says Greaves, who heads Vulcan's Semantic Web research program.

Can Europe Step Up?

The concern is whether Europe's traditional top-down approach will stimulate—or smother—creativity and innovation. After all, while Europe has plodded along in recent years with grandiose projects such as the European Commission's e-society initiatives, garage startups in the U.S. have revolutionized the Net—again—with Web 2.0 services such as MySpace (NWS), Facebook, and Digg.

Now, venture capitalists in the U.S. are jumping on Semantic Web startups. Vulcan has funded a handful, including San Francisco-based Radar Networks, which aims to use Semantic Web technology to help individuals and communities mine and share information from Internet sites, blogs, and social media services (see BusinessWeek.com, 7/9/07, "A Web That Thinks Like You").

Big U.S. corporations also are getting into the act. Pharmaceutical giant Eli Lily (LLY), Yahoo, and IBM (IBM) are funding their own Semantic Web research. And some, such as Oracle (ORCL), are already selling Semantic Web products. In fact, to date, nearly all of the commercial Semantic Web products on the market have been developed by U.S. companies.

Giant Patient Database

To be sure, there's some venture activity in Europe. British startup Garlik, which uses Semantic Web technology to root out online fraud, got funding from 3i Group (III.L) and Doughty Hanson. But the big bucks are coming from governments. Germany, for instance, could pour up to $168 million into a national research project called Theseus that aims to develop real-world commercial applications for the Semantic Web in six broad categories, including medicine and manufacturing.

One Theseus program involves engineering giant Siemens (SI), which is looking to create a vast database linking X-rays and scans of patients from around the world with information about their treatments. That way, says Thomas Niessen, the director of Theseus, doctors treating patients with similar illnesses could research the outcome of thousands of cases. Another Theseus-backed program involving software giant SAP (SAP) is looking at ways to improve business intelligence and supply chain management using Semantic Web technologies. And Bertelsmann subsidiary Empolis is tying to find a more efficient way to search the world's patent databases.

The French, meanwhile, have asked the EU's permission to pour $100 million into a research project on the future of Web search, known as Quaero. The program achieved unwelcome notoriety in 2005 when former French President Jacques Chirac clumsily called it Europe's answer to Google. In fact, it's aiming at a different target: multimedia and Semantic Web search. Much of the work is being done by private companies, including Paris-based Exalead, which aspires to become one of the world's top five search engines.

Government Funding for Some

European startups say government funding is needed because venture investors demand fast returns—a model that may not be suitable for long-range research into complex technologies like the Semantic Web. Indeed, the U.S. government also has invested plenty in Web 3.0 research: The Defense Advanced Research Projects Agency (DARPA) has put about $45 million into Semantic Web work since 2000, and now the National Science Foundation and National Institutes of Health are getting in on the act.

The difference for Europe is that DARPA funded work on the foundations of Web 3.0 and is now leaving it to the marketplace to devise applications. Europe is relying primarily on government funding for both, which could slow down the crucial next phase in Europe's commercialization of the Semantic Web. Policymakers say they're determined not to miss out on the next Internet wave, but if they don't move fast, the impressive collection of publicly funded projects could well end up like Martikainen's router, gathering dust in a back room.


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