For the stuff that I was building, we always needed enough control of the server to need our own. Perhaps people were building "real web applications" on shared PHP/CGI hosts but my impression was that sort of thing was used for lightweight websites with a submission form.

I do recall that there was typically shared PHP hosting.

ec-2 changed the game by making complete control over your own server simple, cheap, software controlled.

Shared hosting existing before but the ec2 formula was the one that worked.