Social Networking Can Be a Friend Indeed

A growing number of small-business owners are tapping into a vast array of social-networking tools to gain new customers, connect with their peers and share advice about common problems.

A host of networks, blogs and forums for small-business owners have sprung up over the last year, with several small start-ups joining the ranks of established sites like LinkedIn, Facebook, MySpace and Friendster. Visitors use the sites to post questions and answers, make connections with distributors and suppliers, hunt for employees or show off their products for potential customers.

Visa ( V) recently launched a small-business network on Facebook, which now has more than 80,000 small businesses as members. Visa is offering $2 million in advertising credits for small-business owners who join.

The credit-card company says it wants the network to become a "one-stop resource" that can "empower small business owners to expand their customer base, manage their business better and exchange ideas with other businesses and trusted advisers."

Bank of America ( BAC) also launched a small-business online community last fall, which now has 16,000 registered users. The site features threads, articles and forums with special guests.

For instance, stationery company owner Bonnie Marcus in late May answered questions from readers about how she turned her job as a wedding planner and event coordinator into a successful company. Bonnie Marcus Collection now sells chic invitations, note cards and holiday cards to over 1,000 retailers, including Saks Fifth Avenue ( SKS), Bloomingdale's, Barneys and Kate's Paperie.

Bank of America spokeswoman Tara Burke says the forums are popular with site visitors, who run the gamut from customers to browsers who happened to pull up the site on a Google ( GOOG) search. They often use the site as an resource to glean information from more experienced business owners. The most popular threads on the site relate to funding a start-up, effective branding, inventory tracking, the meaning of success, how to fire a customer and how to cut costs in tough environment.

"Basically, it's a great way for people to network with one another," Burke says.

Cynthia Trevino, a small-business owner who also maintains a blog called Small Company Big Image, says that companies will have to be selective about what sites they join, since each has a different scope and purpose.

Trevino, who lives in San Diego, recently needed to find a referral for a customer near San Francisco, about 500 miles away.

"I went online to LinkedIn early that morning and posted this question to everyone who works in the Bay area," she says, "and I got 20 responses within two hours."

While a site like LinkedIn has many more users and may be handy for headhunting, referrals and connections, it might not be the best forum for a discussion about handling payroll issues or firing an employee. Smaller start-ups and forums are better for those purposes and often home in on one specific industry. However, the network of users might be so small and spread out that it does little good.

"You go on bigger sites and there's a couple million people," says Trevino. "Maybe the category you're in has 20,000 users -- it's the wisdom of crowds."

Some small-business owners are even creating social-networking tools on their own sites to find out what problems or issues customers are encountering, and what they have to say about their products. Some small businesses on the bigger end also have intranet sites behind a firewall so that employees can discuss issues and pose questions to one another.

Ross Johnston, vice president of business development for Dotster, which develops and maintains Web sites for companies and consumers, says the company has gained a lot more small-business clients in recent months.

"It's booming," he says.

A Forrester Research survey found that at least one-fifth of businesses with under 100 employees plan to adopt some kind of social-networking technology this year.

Johnston adds that it's important for small-business owners to not only use outside sites for advice, networking and customer growth, but to drive traffic to their own Web sites as well. They can then sell advertising for additional revenue or simply benefit from more purchases and customer loyalty.

"If a customer signed up to be in your community, they will stay your customers longer, they will use your call center less," he says, adding that it costs about $12 per call but 25 cents each time a customer uses a discussion board. "And you're going to go back to that site with consistent loyalty, consistent traffic."

Forrester also suggests that companies "quickly and consistently integrate social media initiatives into online marketing campaigns."

Another important factor is the competition, says Johnston. If a competitor has a comprehensive site with blogs, forums, chats and other interactive tools but you don't, they also have a competitive edge.

Trevino cites Autodesk's ( ADSK) communities site as the perfect example of adding forums, blogs and discussions that are helpful to customers and can be monitored to provide useful information to the company. For smaller firms with limited resources, she suggests starting a blog to draw in visitors, then developing it into a marketing tool and forum for customers and peers.

"In the future, clearly, you have to be really successful at online marketing if you're a small business and search is key," she says. "Having a blog that you develop into a community develops a word of mouth factor, even if it's a small community."

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