The web’s second coming

The energy at Library House’s Essential Web Forum this week in London reflected the excitement UK entrepreneurs and VCs are feeling following the Last.fm sale. But will web 2.0 solve its monetisation conundrum? Dave Keating reports.

Investors and entrepreneurs were in good spirits at Library House’s Essential Web forum at London’s IMAX theatre yesterday. The event, which juxtaposed presentations by up-and-coming European web 2.0 companies with discussions with VCs and corporate buyers, had a palpable energy to it. One could tell that the young, scruffy-looking web entrepreneurs felt that fortune was on their side.

the IMAX theatre

When London-based web start-up Last.fm was acquired by American broadcast giant CBS earlier this month for $280 million (€208 million), it was the first big acquisition of a web 2.0 company to come out of the UK. The hope is that other big companies will now be taking a closer look at European online start-ups.

Judging from the array of eager web entrepreneurs who presented at the forum, there are plenty of opportunities to choose from. Presenting companies came from the four hottest areas for web 2.0: search engines, music sharing, social networking and mobile. Some of the more interesting companies were Seatwave, where fans can buy and sell concert tickets; Quintura, a visual-based search engine; Jaiku, heralded as the European Twitter and enabling users to track the movements of their friends; and ParkatmyHouse.com, where property-owners can rent out empty driveways that others can use for parking.

But perhaps the most interesting company to present was Spotify, a site providing free music downloads supported by targeted advertising. Though the company downplayed its management pedigree in its presentation, it probably only did so because it doesn’t need any more money at the moment. The Luxembourg-based start-up, which has employees in Sweden, the UK and Romania, is run by an experienced team including Daniel Ek. Ek was the founder and CEO of Swedish startup Advertigo, a contextual online advertising startup acquired by TradeDoubler in 2006. In fact Spotify was just one of many presenting companies which boasted impressive management, reinforcing what many European VCs have been noting recently: that the most successful web start-ups in Europe are emerging not from professors and students at universities but rather from experienced second-generation management teams that have guided previous start-ups through the fundraising process – which is more along the lines of the Silicon Valley model.

Spotify was also indicative of a trend in its intense focus on advertising. New web 2.0 companies in Europe, like their American counterparts, are all looking for the magic bullet to monetize their sites, and most of the efforts right now are focusing on advertising. As VCs questioned the presenting companies, the consistent question was: how will you attract advertisers, and how will you target advertising to your audience? Given that internet advertising is still in its primitive stages, it seems no one has found an ideal solution. A panel of representatives of three potential acquirers – Newscorp, Yahoo! and Google – expressed their own concern over the advertising issue.

But beyond the need for new advertising strategies, perhaps the biggest thing one took away from this forum was the sheer number of web 2.0 companies out there in Europe. This was no more clear than when Library House set up a “soapbox” in the reception room and allowed entrepreneurs to stand and scream their business plan to the mingling crowd, rewarding the best speaker with the chance to do an actual presentation. Perhaps there was no better image for the second coming of the web boom than a scruffy-looking kid screaming his ideas to a room full of business suits.

In the end, however, it may not be the companies making the most noise that will deliver the solution to the web 2.0 monetization issue.