Facebook, MySpace and the like are hugely popular with millions of people around the world using them to communicate with friends. But do these services offer real opportunities for entrepreneurs looking to grow a successful company?

It can’t be denied that social networking is huge. If you’re not a member yourself, the chances are that you’ll know at least one of the 31 million people who spend time poking and turning friends into zombies on the phenomenon that is Facebook.

According to data from Comscore, 78% of the UK residents who use the internet regularly use social networks. The average visitor spends 5.8 hours a month on at least one network with the top 20% dedicating at least 22 hours to the activity.

The networks were originally designed for students seeking a bit of fun online but with such massive user figures, the websites are now seen as sources business owners can utilise to boost sales.

Most people don’t respond well to in-your-face selling and that’s particularly true on social networks. Entrepreneurs who blatantly promote their products or services will not be well received.

Trust is key if company owners want to reap the rewards of social networks. If you’re thinking about buying a new car and ask people which model they recommend you buy, you give a lot more credence to what the people you know very well and trust tell you. The same is true for social networking.

There is a three-step process to developing trust. Firstly, entrepreneurs should spend time on forums and in groups looking for questions about issues in which they are expert.

Responding to the problem with free advice will demonstrate you are worth doing business with. Many entrepreneurs feel that by doing that they are giving away their crown jewels but in reality, if people see you have the knowledge they will want to know more. You then get into a deeper conversation – the second stage.

These conversations will generally be one-to-one and allow entrepreneurs to approach the third and final part of the process when business can be done. You enter sales mode. But it’s the sales mode in a conversation rather than an up-front, in-your-face kind of way which tends to turn people off.

Moving to LinkedIn, I discovered LinkedIn after someone contacted a friend with a particular requirement who told them to talk to me. When I asked them how they found me they said they had been speaking to my friend via LinkedIn.

After four years using the site, 20% of my business is now generated using the website which is a primary source of marketing activity.

One interesting benefit of LinkedIn is that it allows users to view people who have been looking at their profile and work out whether they are a competitor or a potential business opportunity.

Facebook fans in particular can’t fail to have noticed the plethora of downloadable applications. These widgets allow users to do all sorts of things – from throwing a sheep at a friend to working out the day you’re likely to get married. A year ago Facebook invited external programmers to get involved and now “useful” business apps are starting to appear.

Social networking can also be used as a cost effective staff recruitment tool. With such a vast amount of individuals it’s highly likely most entrepreneurs will be able to track down someone who could benefit their company.

Placing job advertisements can be an expensive process but finding potential candidates on social networking sites generally costs nothing but time.

Facebook, LinkedIn and others give small business owners the ability to find candidates who may not have even heard of their business but possess the just the right skills and experience required.

Employers should look at the groups or profiles that match a set of criteria, interests, qualifications, geography or industry. Searching for competitor names on sites such as LinkedIn may find suitable candidates quickly. Once a talent pool has been identified, engagement through online dialogue should be started to find out more and create a relationship.

It’s perfect for small business owners looking for temporary employees too. And useful when sourcing freelancers, consultants and the like, but less useful for sourcing in-house staff.

Entrepreneurs should post a short ad in relevant specialist groups. You can expect quick responses as many people check their Facebook accounts religiously. This is handy if you have an urgent requirement.

The plethora of social networking portals means businesses are open to an increased chance of being criticised. Dismissed staff, unhappy customers or devious competitors can post negative comments about your business all over the internet. But the experts agree that it is not necessarily a bad thing. It can actually be turned into a business benefit.

Attitudes towards negative comments need to change. We need to move away from the old ways where businesses are pushing a message to an audience that is supposedly passive to the new way, where you get live feedback from your potential or existing clients. If that feedback is negative, it’s an opportunity for you to improve.

How you respond is the important issue. It’s how you react to the negative publicity which demonstrates your skills, experience and professionalism more than the fact the negativity’s there. If I see something which looks a bit negative about me or my business I engage in a conversation and approach it in a professional manner.

It is clear that social networking provides businesses with a vast range of opportunities but entrepreneurs shouldn’t believe the benefits will start flowing in overnight. Security issues also need to be borne in mind but using the privacy controls provided by most sites means you should remain protected.

Ultimately however (and like most things in business), persistence is key. There are no shortcuts; it’s a long term strategy.

Blogging has come a long way in the past few years, from a social release for narcissists, to today’s required vehicle for promoting your business and gaining valuable online exposure, ultimately bringing in more customers.

Even though I’ve been saying for years that social networking will one day usurp email, it’s a bit shocking to see that it has.

There are some caveats. My kids use Facebook as their primary inbox (they also use gmail). So some of what they do on Facebook is actually email.

But even so, it looks like email’s reign as the king of communication is ending and social networking is now supreme.

When we landed back in the states recently after a long flight and got in a car to drive into the city, The Gotham Gal looked at me and said “why are you checking twitter and not email?” (as she was doing). I told her that email required a reply and twitter did not. And that I preferred twitter to email and always checked it first.

Whether it’s Twitter, Facebook, or some other social networking service, I believe the lighter weight communication paradigm (say less, reach more) is superior to email for many things and I’m certainly moving more of my communications away from email.

Ideally, that would leave the more important heavier weight communications in email. If it were only so. Email’s biggest problem is the inability to control other’s power to email you. That is also its greatest strength.
If email can solve the inbound overload problem, it can become a sustainable compliment to social networking and remain a powerful mode of communication for a long time to come. It’s a truly private channel and is more suitable for long-form serious private conversations.

And email’s usage is still growing (125bn minutes per month in the chart above). So don’t take this post as anti-email. We’ve got one email related investment that is doing great, and we are certainly open to doing more there.

But social networking is the king of communications now. Long live the king.

VC Fred Wilson saw this chart in Morgan Stanley’s latest Internet trends report, we share his blog (©)