Businesses Feed on Social-Networking Input to Grow

Whether it is an online lingerie retailer looking for SEO or a trucking company owner having problems getting a loan, social-networking sites provide tips, advice and contacts.

The owner of an online lingerie business posts a request on a social networking site to find an ethical, effective search engine optimization company. Within 24 hours, she receives nearly two dozen suggestions from other small business owners. With that information, the small business owner can reduce the risk of going with the wrong company.

The owner of a small trucking company explains in a post on a social networking site that because of late payments and financial setbacks, he is having trouble getting a loan. Immediately, several people respond, offering advice on which Web sites to visit and how to get out of financial trouble. Some of those responding are even loan officers, ready to lend a hand.

These are just two examples of how small businesses are using online social networking—the forums most often associated with teenagers or individual users—to ask questions, get advice, and make valuable business contacts.

The concept of online social networking is growing quickly. According to comScore, an Internet marketing research company, many sites are experiencing explosive growth. Facebook.com, for example, attracted 52.2 million visitors in June of 2007, a 270 percent increase over June of 2006, while MySpace.com attracted more than 114 million global visitors in June 2007, a 72 percent increase.

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Although data for online social networking sites geared to small businesses is difficult to find, the number of such sites is growing quickly. LinkedIn.com, for example, which links individual people but is often used for business purposes, has about 12 million members, while Microsofts Windows Live Spaces claims to have 100 million unique visitors per month. Others in this category include Plaxo, Ryze and Visible Path.

Other sites also focus on the on business-to-business connections. One example is Spoke, a business-to-business prospect database that counts about 900,000 companies as members, according to its Web site.

According to a March 2007 study by the Institute for Corporate Productivity, a Seattle-based research firm, 65 percent of business professionals use personal and professional social networking Web sites. Forty-seven percent use networks to connect with potential clients and market their skills, while 55 percent use them to share best practices with colleagues.

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"Social network sites are growing in popularity across the board, so its really no surprise that the SMB market would also see social networking as a means to improve customer relationships, build community and create feedback loops regarding their products and services," said Mike Gotta, principal analyst at Burton Group.

Social networking sites are a particularly good fit for smaller businesses, because they often dont have a peer group nearby with which to discuss relevant topics, said Steve King, a senior advisor for the Institute for the Future, an independent nonprofit research group, and co-author of the Intuit Future of Small Business Report.

"It makes sense that they would turn to a community site catering to small businesses that provides them with access to peers, information on starting up, and advice," he said.

In addition to using these sites to make contacts and get advice, they can be very useful in a business-to-business context, as a way to build relationships with partners or build contact networks with other small businesses.

"It [has] always been the case that business success is intimately linked to how well an organization taps into its relationships across employees, customers, partners and suppliers," Gotta said. "Social networking is just a means to that end—it helps humanize the organization [and] allows people to establish relationships and participate from a community sense."

Although there is no doubt that the use of social networking among small businesses will grow, managing expectations is key, Gotta said.

"The burden on SMBs is to live up to the expectations that people have when they participate in such a relationship. It has to be bi-directional. If it comes across as just another marketing or PR tactic, or if the company doesnt listen to the community (or in fact tries to exploit the community), then the results will be worse than having not participated at all."

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