Despite such a significant shift in how people are using the web, socially and professionally, user generated content hasn’t been adopted for business as I had expected.

99% of companies, certainly in the UK, are completely unaware what is being said about them on the web, what conversations are happening about their competitors and their market sector and they are failing to capture the true power of the social web- the ability to reach new customers, garner better relationships with their existing customers and manage their reputations.

If something is posted online about a company, it stays there. Forever. Positive or negative.

Here are some basic ways that I believe businesses should be using social media:

1) Be proactive: Don’t wait for customers to find you- put your business in front of them

You shouldn’t assume just because you have a web site, a good brand name or even an active SEM strategy that customers will find you. Creating and managing a presence on sites like Twitter, Facebook, YouTube, MySpace, Xing and industry specific forums will enable you to reach and engage customers without them having to look for you.

2) Understand what is being said about your business, your competitors and your market sector; And who the key influencers are

Loaded with this information, begin entering into open online conversations, reply to feedback being left about your business, contact and engage journalists talking/writing/blogging about your space, share information that others may find useful and work to better manage your reputation.

The first step here is to start using Google Alerts. Set up alerts on specific key words such as your company name, your competitors, your product or the services you offer. Google will send you an alert every time (or at the end of each day, you decide) someone blogs or talks online about those key words.

3) Use the web to talk about your business

Set up a blog. Write about what you are up to. Blog about subjects that demonstrate you are thought leaders and highly knowledgeable within your market sector. Use the blog to encourage comments from others. The more fresh content you create on your blog the higher propensity there is of your business getting returned high up in the organic (free) search results of major search engines. The higher up you are, the more people will see you. The more you are seen, the more business you will win.

4) Sign up to Twitter-and make full use of it

Twitter is as powerful as you make it. Twitter works when you have a reasonable amount of followers. A great feature on Twitter is Re-Tweet, which enables people that follow you to re-tweet your twitter posts to their network, if they believe their followers would find it interesting. This makes Twitter one of the most viral channels to get your business in front of people on the web today.

a)    register on Twitter

b)    write a few interesting posts related to your business/market

c)     follow lots of people that you feel could be either influencers, professionals in your industry or potential customers

d)    post at least once a day

e)    check your @ reply box regularly to see who has posted something directed at you

For more on how to use Twitter efficiently, read this

5) Sign up to and integrate Get Satisfaction into your site

This is a great tool for businesses that care about their customers, are interested in their feedback and understand the importance of transparently managing their reputation. Believe me, by using a service like Get Satisfaction, it will do wonders for your reputation and is often the difference when a potential customer is weighing up whether to use your services or those of a competitor.

6) Dedicate time, effort and resource to managing your web presence

This is important. Managing your web activity is time intensive and even with the best will in the world, if this isn’t your FT role, you’ll most likely not devote enough time to it and lots of gaps will appear. I suggest you either dedicate a certain amount of your day to doing just web engagement or hire someone to do it.

7) Free stuff

Give things away. It is no surprise in this economic climate that money saving and voucher sites are the fastest growing sites in terms of traffic in the UK.

By running an offer, say 15% off, and using the web to promote it (Facebook, Twitter, your blog, voucher sites etc) you will not only  be pushing your brand but enticing new customers to spend with you instead of a competitor. It’s also a great lead generator for other services you provide outside the offer.

I wasn’t there but I have spoken to someone that was and TechCrunch Europe also blogged about Mr Hommels’ comments, which you can read here.

I agree with Hommels’ view but I think it needs closer analysis as to why.

I sold my tech business to a European tech company in 2007. I can name a bunch of other tech entities that have done the same since, including WeLoveLocal (acquired by GCAP), eMediate (acquired by AdPepper) and the most high profile of all, FriendsReunited (acquired  by ITV).

But there are other ways to achieve exits and relinquishing majority shareholding at the 3-5 year point when the business is generating meaningful revenues (t/o in the millions) is a really good way for  founders to realise value and still retain some equity. In most cases at this point the board changes, investors change and the founders step aside from day-to-day involvement. Not the same as a full exit but in my opinion, still just as attractive as it delivers value and ROI for investors, rewards shareholders and continues to build value for the founders, most likely at a much higher valuation than the previous round.

Again, I can name quite a few founders that have taken this route.

But I digress, back to the real issue debated by Hommels.

I think its a bit unfair to make the comparison between a US and a UK tech business. All of the major tech companies are US based, be it web, mobile or software. The eco system in the US is so more sophisticated and mature than it is in Europe and as such, the mind set is totally different.

For a start, US VC’s and investors actually have an appetite to invest in start-up’s, which promotes much more creativity and entrepreneurialism and enables start-up’s to grow and reach a proof of principle much earlier than European equivalents would. And because the big tech players are all in the US, naturally there is going to be significantly more opportunity to find an exit than in Europe.

Secondly, media in the UK is typically broadcast or publishing. Both are struggling to keep pace with todays technologies and are desperate to  protect their traditional offline revenues. As  result most are not liquid enough to go on the acqusition trail in the way US media firms do, whilst at the same time they are focused on not allowing digital to disrupt their flag ship offline brands.

And finally, what’s wrong with a European start up engineering a sale to a non-European business?

There are some fantastic European-based companies out there. What we need is more support and belief from investors, and a change in investors’ (both VC’s and Angels) preferences to only invest in proven, post-revenue companies. For me, this is the biggest one and the main reason why the US currently dominate the tech space. Its the reason why there are still lots of acquisitions in the US and until this changes, Europe will can’t compete.

It’s a shame US investors typically won’t look at investments outside the US, especially those in the Valley.

It continues to surprise me how entrepreneurs reach the valuations on their seed start up’s.
By seed, I’m refering to companies where there is no product, no IP, no assets, no users and no revenue.
I have been speaking with a number of founders recently, all looking to raise their first outside financing to take their “idea” into development. In almost every case, this is what I found:

• Most founders estimate valuation based on what they THINK the business looks like in year 5, not what it IS right now. We all know that with very few exceptions, a business will not look like you think it will by year two, let alone year 5.
• Nearly all founders I spoke with wanted to take a salary from the business immediately. This, for me, is an absolute deal breaker. Part of the investment and commitment founders make is salary sacrifice until the company at least has revenues and most likely, profits. Salaries should be reserved for employees deemed essential to drive the business IE: developers, sales and marketing.
• Half of the founders I spoke with had not (and were not planning to) invest themselves. Deal breaker number 2 for me. If I am going to take a risk, I expect the founder to. If they can’t, they aren’t ready to start a business. (For clarification, I’m not talking about tens of thousands, but an amount they are comfortable with (usually between £5-20k) to ensure they have real skin in the game and something to lose.
• The cost modelling within most budgets I have read are crazy. Highlights include £10,000 a month for office space, £35,000 a month on marketing, sunk costs of £100,000 on hardware, hiring of non essential FTE’s including PA, HR and QA. (now some of you may think QA is critical and I agree, but not for a seed business yet to develop a product and possibly not for a start up in its first year.

I don’t think this is a true reflection on UK entrepreneurs starting up in business, but even still, I’m staggered these people seriously expect to raise outside investment and fail to see their rationale, business planning and expectations are ridiculous.

In late 2007 an influx of local search start up’s appeared, with the trend continuing in early 2008 with new entrants such as BView developing wiki “anyone can edit” platforms.
The objective for all of these new entrants is to disrupt the Yell model with a “web 2” approach and over time grow their share of revenue. (In 2007 Yell reported online sales in the UK of £118m).

It’s a fairly straightforward space to enter with low start up costs and a revenue model that is based on low cost, high quantity of sales. (Yell.com has around 160,000 paying customers with an average sale in excess of £500 per annum).

However sites such as
Welovelocal, Tipped, TrustedPlaces, LocallyCompared and Brownbook have all realised (pretty quickly) that generating classified revenues from an increasingly sceptical SME (small, medium enterprise) market is extraordinarily difficult and the costs of deploying a sales effort often far out-way the financial return.
This inability to monetise has led to a situation where bootstrapped entities in this space are now fighting for traffic and user adoption and are being forced into raising cash pre-revenue, which VC’s in the UK just aren’t interested in.
(I should point out that WeLoveLocal were acquired by GCAP Media in March 2008 and BrownBook secured seed investment sometime in 2008, although I doubt anywhere near enough to not require additional funding without sustainable revenues).

A notable success that bucks the trend is Qype, who have managed to find a formula that has generated a highly active community and the emergance of sustainable advertising revenues. However, what Qype had that many others didn’t was time, afforded to them by two rounds of investment totalling around €13m. They claim about 5m uniques a month, which dwarfs competitors.
I’m interested to see if they are able to deliver value and ROI to advertisers, which the likes of TouchLocal have failed miserably to do. And finally, just to make the space even more interesting, competitive and over crowded, Yelp!, the dominant reviews site in the US, entered the UK market in January.

What start ups in this space are now realising is:
1) the “local” space is exceptionally difficult to monetise
2) it’s a market that is very easy to launch into and has therefore become seriously over crowded
3) VC’s in the UK want to see proof of principle around revenue before committing funds, which is why local search businesses are forced to continually fund themselves

BView have tried to differentiate themselves by becoming a money saving site, offering vouchers from chains that enable their users to save money. They are also, as far as I am aware, the only business in this space to focus on building strategic partnership deals, such as their partnership with leading search engine ASK.com, which I believe is a very smart move.

To win, or even just to stay competitive in this market, businesses need to differentiate and stop developing me-too apps. Trying to compete for the same traffic & paying customers is making a hard task even harder.
There are ways to succeed and the revenue is out there but I suspect over the 12 months only a certain few will be around to reach that tipping point……

5 years ago the market was stacked with Angel investors looking for opportunities and willing to put £25-100,000 into start up’s, applying the 1 in 10 rule and being comfortable with the risks. Not today- Angels are preserving their cash and have become far more prudent.

And it is at this stage, seed & often post Alpha that entrepreneurs in Europe are suffering.

It is forcing founders to increasingly fund businesses with their own cash, which by the way I believe is a great thing, however it usually means that product development and technology deployed aren’t as robust as ideally desired and development time is extended, meaning longer from concept to market.
It also means marketing and scaling the business falls off the radar, which in my opinion is the most worrying and damaging facet of starting up right now.

And this is where the US is country miles, even years ahead of the UK.
I really struggle with VC’s that purport to invest in start up’s. They don’t.
A start up is defined as: “The stage at which a project is clearly defined or the prototype is finished and the business is starting commercialisation”.

So tell me, why do VC’s say they invest in start up’s yet at the same time insist on the business demonstrating traction on two proof of principles: Engagement/Users & revenue. It’s a f*&%ing start up- see definition above.

To build traffic/a user base and to develop meaningful, sustainable revenues can take anywhere from 6 months to two years, some times longer.
When a business is generating revenue and it has a healthy balance sheet and customers/users and the founders want an injection of funds north of £1m to help really scale it, VC money is regarded as the right route to take.

In the US, especially in the Bay Area of San Francisco, VC’s seem to have a much better fix on what a start up is and needs. They see the potential of the proposition; they believe in the management team and get excited about helping build great, successful companies.
They invest in businesses from concept, or as per definition, start up.

It is a mentality that VC’s in the UK must change if the British tech scene is ever going to rival that in the US and if UK entrepreneurs are ever going to be given the opportunity to develop and build great companies from within the UK.

Is it a coincidence that all of the mainstream start up’s like Facebook, Digg, Google and now Twitter are US companies? Maybe it’s even more of a coincidence that people like Loic Le Meur had to base themselves and Seesmic in San Francisco. (OK, so it can be argued that strategically Seesmic needs to have a base in the US but I’m sure at the outset Loic would have struggled to raise as well as he did had he stayed in Paris.)

Mike Butcher, Editor at TechCrunch Europe champions the European tech scene till his blue in the face, and a great job he is doing, but until the mindset changes and people start to back entrepreneurs the way they do in the US, we’ll either be house hunting in Berkley or just content to be spectators as the giant tech businesses continue to rise from The Valley.

Other related blogs on this subject:
Let a thousand start ups boom. source: TechCrunch Europe
The way to seed start up’s. source: TechCrunch Europe

Whilst every founder wants their app to go mainstream, I don’t believe Evan Williams and Biz Stone (Twitter founders) imagined it would grow in the direction it has.
One of the key reasons Twitter has engaged so many is it’s simple model of enabling people to quickly stay in touch with what others are doing. This is most pertinent with the “celebrity” crowd who use Twitter to connect with their fan base, offering those that “follow” a much more personal insight into what they are upto-right now.
It is also a great platform for generating free PR and building connections with other interesting people.
Is their success sustainable? I believe so, as demand dictates longevity. The guys at Twitter HQ have to continue to keep the service simple yet iterate enough to ensure they stay ahead of the curve and in front of competitors such as FriendFeed.

Social & viral media have facilitated great PR & networking opportunities and Twitter embodies this.
However if you are new to Twitter, it can take a while to actually see the benefits of the service.
Twitter has become (probably) one of the most powerful platforms on the web to network and PR yourself/your business.
This medical student explains the power of Twitter really well in his blog http://www.medicalstudentblog.co.uk/twitter-a-medical-student%e2%80%99s-best-friend/

If you are new to Twitter, the key to making it work for you is:
1) Follow as many relevant, influential people as possible. How? Go to www.mrtweet.net
It’s a “butler” service that will suggest influential people for you to follow based on those who you’re already following/follow you. Or, look at who others are following and if they are interesting follow them.
Twitterholic is the league table of users ranked by followers (currently with the most followers is news service CNN with 437,000 followers, followed by US president Barak Obama with about 400,000) and can be a good way of following people to “get noticed”.

2) Think carefully about what you Tweet. “Just ate a donut” or “Train is packed again” isn’t going to engage people and chances are they won’t follow you. Tweet stuff that’s interesting, helpful & useful. I always find posting stuff on a subject you’re knowledgeable on that is informative and linking to articles or sites is a great way of getting people to follow you.

3) Get involved in conversations by openly and directly conversing with fellow users by starting the conversation @ followed by their username (example: @adambaker74)

4) If someone posts something that you think your followers will find interesting, re-tweet it by putting RT in the post followed by the entire post your forwarding. This is a good way of being useful and you will find alot of people will recipricate if they find your posts helpful

5) Download applications that make using Twitter easy and efficient. Three of the most popular are TwitterFeed and Twhirl and for the iPhone Twitterific
A good blog on applications for Twitter can be found here

6) Once you get going, use TwitterGrader to measure how popular your profile is

7) Follow me @adambaker74

The event, held in Berlin, is only two years old and seemed to be gaining momentum. Whilst it was always going to take time to build and gain the credibility the San Francisco conference enjoys, many European entrepreneurs attended last year, which made for some valuable discussion and a great opportunity to network and make new business contacts.

European start-up’s are already challenged enough with the current economic conditions and I believe news like this just compounds the challenge we all face in trying to consolidate our market positions, focus on delivering great web products and generate revenues during these difficult times. My fear is for those we are all seeking to influence, the end user and the “paying” customer (in many cases two different demographics) and for a great number of start up’s, VC’s/angels, it solidifies opinion that pre-revenue, pre proof of principle technology businesses are more prone to risk than usual.

Naturally I disagree and through experience know that there are some amazingly talented start-up’s out there (especially in London) with very smart people and products.
Conversely, with entrepreneurs forced to scale back and drill down their focus, now is a great time to show confidence in the start up community.
Just go along to a DrinkTank London event or one of many events organised in London (& across Europe every month) and you’ll realise founders and co-workers in start-ups are buoyant, resilient, passionate and hell bent on making their companies successful.

I just wish people would stop convincing themselves these are troubled times and find ways of using the challenges we face to their advantage.

What would I do if I was still managing a start up?
1) Get the team as lean as possible and bus/dev orientated
2) Move to cloud hosting
3) Cut out all paid advertising and concentrate on smart PR to generate awareness
4) Utilise the web & social media to extend your reach and get new users/win new business
5) Develop sustainable user-get-user initiatives
6) Talk to your competitors or strategic partners about JV’ing or collaborating. You’re all in the same boat so work together not against each other.
7) Think about giving your people more skin in the game by sacrificing some salary for shares. Make it worth their while.

Other European web conferences in 2009 include:
Le Web
The Next Web
Plugg

The sheer scale of the web today and the millions of blogs, forums and review sites on the net makes it easily accessible to leave feedback on a business and forces transparency upon us. However, for a business, managing their reputation gets time intensive, which is why many just don’t bother. But it just takes one blogger or irate customer to leave negative comments to shatter the reputation of a business that has taken many years to build.

A great example of conversations going on across the web about a business and how consumers should use the web to research a business prior to handing over money is Gwent Fleet Management, surely one of the worst businesses in the UK.
Without the web, we probably wouldn’t get visibility on fraudulent companies like this.

Here are just some of the links I found on Gwent Fleet Management and the horrific feedback that is publicly available on the web.
Mirror Online
Sheriff Ratings
BView
ITV Local
Free Press
This is Money
I suggest:
1) Monitoring what’s being said about your business on the web
2) Openly responding to any comments both positive or negative
3) Protect your reputation by finding out what information about your business is currently publicly available
4) Contact the sites holding information on your business to update any inaccurate information
5) Use the web to your advantage and encourage your customers to leave positive feedback on one of the many review sites in the UK. This will help build your reputation and provide free publicity for your business
6) Register with Get Satisfaction. It’s a nice site that enables you to record customer feedback and monitor customer service

Like most entrepreneurs, I have made more mistakes with PR than any other facet of running a business. I’ve also worked through valuable cash trying to make PR work for my businesses- money in hindsight would have been better spent in other areas.

Here are my tips for executing a successful PR strategy and making PR work for you:
1) have realistic expectations: If you expect mainstream/national press to publish you’re PR just because you think the story merits it, you’re setting yourself up to fail.
2) understand who you are trying to reach: Create a list of key press contacts & bloggers who write about your industry and set about starting a dialogue with them.
3) never send generic press releases out: Journalists receive press releases “on-spec” all day, everyday. By sending out your release en-mass you’ll be wholly disappointed with the results and could have invested your time much more efficiently. My advice is to execute point 2 above properly, then pick up the phone and speak individually to the relevant journalists you’d like to cover your story, followed by an email with a tailored piece based on your conversation and understanding of what they want to write about.
4) hijack competitor stories: The best PR opportunities often aren’t your own. Subscribe to blog feeds and alerts for your industry & competitors to keep abreast of what’s being written and who’s writing it. This creates valuable opportunities to comment on other stories/blogs and to create your own PR.
5) engage in forums focused on your industry: The web is full of people talking about your industry. Whilst time intensive, the rewards for investing time to engage in forum communities and develop credibility within these forums will prove time very well spent.
6) harness the power of social media: The web enables free distribution for PR. With a concentrated and dedicated approach, sites like Twitter can become powerful platforms for putting your PR stories in front of the right audience. A lot of journalists get their best stories from engaging in social media like Twitter.
7) get social: Enable others to distribute your content for you. It is simple to share content across the web. Over the last few years there have been an explosion of book marking sites such as Digg, De.li.ous, StumbleUpon and Reddit all of which will give your content a much wider reach and greater opportunity of being read.