Business Owners Meet on Social Networks

CU360
April 21, 2009 | COMMENTS

Hoping for insight into the financial needs of small-business owners, some banks are creating social networking Web sites to help them figure out how to approach this large and diverse market.

The online communities offer small-business owners a way to communicate with one another, reports American Banker. The sites' interactive nature also enables banks to build closer ties to desirable customers and find out more about their financial needs.

Bank of America was one of the first banks to explore social networks, launching its Small Business Online Community Web site in October 2007. The site has no advertising and doesn't charge user fees. The goal isn't to generate revenue, but to learn more about the users.

The site provides business owners a place to get tips and suggestions from business experts and coaches. The bigger draw for users is letting people trade stories, solicit opinions on new ideas, and ask for advice from peers who have encountered similar situations. To that end, the site features users' stories on topics such as how to establish credit in the name of a business or the unexpected resources found in an electronic Rolodex.

The site had 30,000 registered users and 130,000 visits in January. That level of traffic allows Bank of America to fine-tune its strategy for the small-business market and develop products users need.

A handful of other financial companies have tried to reach small businesses through social networking, including HSBC's Business Network, American Express, and the personal financial management software developer Intuit. Last year, Visa set up the Visa Business Network on Facebook. As part of that effort, Visa promised to give away $2 million of Facebook advertising to small-business owners. The promotion helped Visa enroll 20,000 users quickly, and the community has since expanded to more than 70,000 users.

Targeting business owners makes sense because they're desirable customers who benefit from an online forum where they can communicate with one another, according to Alan Maginn, senior analyst for market research firm Corporate Insight.

The idea that social networking is geared exclusively toward a younger audience is no longer the reality. About half of all Facebook users now are 35 and older, according to comScore Inc.

Early results show that bankers are attracting a diverse but generally well-positioned following for their small-business community sites. Sixty-four percent of the site's users run their businesses full-time, so it has attracted more than just people who run a business as a sideline to another job.

Perhaps the poll's most compelling finding: 70% of respondents said the site "improved their perception and image of the Bank of America." That's a huge payoff, coming at a time when the banking industry's reputation has been tarnished by the financial crisis.

Though the sites don't generate revenue, observers say the small cost of developing and maintaining them is paying off in increased awareness of bank brand and increased chances of selling to a group that has already shown an affinity for operating online.

In turn, the Web site host can act as a virtual fly on the wall and find out what issues are most pressing to a customer group that is used to paying regular fees and tends to use more banking products and services than consumers.