By Claire Prentice
Georgetown Cupcake uses social networking site for promotion.
It is the 21st Century equivalent of word of mouth.
From "mom and pop" diners to cupcake shops to technology start-ups, small business owners across America have been thrown an unexpected lifeline in the midst of the recession by social networking sites.
Companies that have jumped on the Twitter and Facebook bandwagon are reporting a surge in customers while others struggle.
With minimal marketing budgets available to many small businesses, social networking sites offer a quick and, more importantly, free means of promoting their wares to a global audience.
In the face of stiff competition and a global economic downturn, it is a route more and more companies are going down.
Virtual focus group
Sisters Sophie LaMontagne and Katherine Kallinis have been using Twitter and Facebook as a marketing tool since they launched Georgetown Cupcake in Washington DC in 2008.
"Together they work like a virtual focus group, a bulletin board, a marketing campaign and branding exercise rolled into one," said LaMontagne.
As well as posting details of new flavours, specials and events, they are using the social networking sites to promote their new nationwide delivery service together with their new store in Maryland.
For some small business owners, traditional advertising channels such as television, radio and newspapers are prohibitively expensive.
For others, the web is a medium more in tune with their potential customers.
"They're not a good fit for everyone, but if you're a small business with a customer base who uses social media, you can't afford not to use them," says Rachael Ritchie, who runs Goodfellas Pizza with her husband in the college town of Athens, Ohio.
She recently asked her Twitter and Facebook followers to vote on whether she should use Coke or Pepsi as a soft drinks supplier.
"That real-time feedback is invaluable," she says.
Goodfellas Pizza offers cross-promotions with other local businesses via Twitter.
They include Athens Relaxation Station health spa, which gives Goodfellas customers discounts, a deal which is reciprocated at Goodfellas.
"I am a one-woman business in a small town so free marketing is a huge bonus," says spa owner Jennifer Hunt.
"And if I get a last minute cancellation I hop on to Twitter and within minutes I've filled the appointment."
Small firms gain
"Every day we are seeing businesses using Twitter in more and more creative and exciting ways," says Anamitra Banerji, manager of commercial products at Twitter.
"We've got lots of restaurant and bar owners right through to plumbers and building managers."
Though multinationals such as Starbucks and McDonald's were among the first to realise the potential of social networking sites, anecdotal evidence suggests it is small businesses that have the most to gain.
Twitter, which allows users to post tweets of up to 140 characters, is currently developing products to sell to business users, including software to verify accounts and analyse traffic to Twitter account holders' profiles.
The company recently launched Twitter 101 on its website, which includes advice for new users along with case studies, describing how companies of all scales and in various sectors have used the site to grow their business.
Facebook, which has 300 million users worldwide and recently announced it had become cash-flow positive, offers businesses special pages and the option to buy ads to show to users who like similar companies.
As well as using social media sites to communicate with customers, small businesses are using them to connect with potential suppliers, stockists and other people they can trade skills with, such as accountants, marketing experts and technology workers.
One recent Twitter post from a graphic designer asked other business users for advice on computer software his company was thinking of buying.
Kogi BBQ runs three Korean mobile food trucks in Los Angeles.
It has 43,000 followers on Twitter and 3,150 on Facebook and uses the sites to post specials, discounts and details of where the vans will be parked each day.
"It's a great way to interact one-on-one and build a relationship with our customers," says Kogi BBQ's creative director Alice Shin.
"Customers feel a personal connection, which encourages repeat business."
But experts warn that social networking sites are not without dangers.
"You are losing control of your message by inviting customers into a dialogue and that could be problematic if they criticise you," says Arun Sundararajan, a professor of information, operations and management sciences at New York University.
He advised users to think of it as a conversation rather than an advertising space.
"There is a fine line between giving people a steady stream of useful information and bombarding them," he explains.
"If you do the latter you are in danger of turning customers off."
This view was echoed by Andrew Sinkov, vice-president of marketing at Evernote, a California-based online storage company.
"The key is to keep your messages concise, free of fluff or marketing jargon and only convey genuinely useful information," he says.
Evernote has 30,000 followers on Twitter, 12,000 fans on Facebook and has recently begun using Friendfeed, which was taken over by Facebook in August.
Evernote directs its followers between all three sites and its company blog, creating a sophisticated, inter-linked online presence.
"The days of large anonymous companies are over," declares Mr Sinkov.
"To succeed nowadays your company has to have a personality and it's easier than ever to create that."