Web 2.0 is the adoption of open technologies and architectural frameworks to facilitate participative computing. Web 2.0 has the potential to deliver rich peer-to-peer interactions among users, enable collaborative value creation across business partners and create dynamic new services and business models. With the emergence of new information technology it is necessary for organizations to redefine and reassess the new technology and its business value. Extant research does not provide managers guidance on how they can utilize their web 2.0 presence to add value creating activities for the organization. In this research we develop a conceptual foundation for the value propositions enabled by web 2.0 technologies. We provide taxonomy of features, capabilities and organizational value added activities. We develop a model of Web 2.0 capabilities and the nature of value adding services they can provide.