Is Social Media Valuable for Entrepreneurs?

It may seem like a no-brainer: these days, businesses should use social networking tools like Facebook and Twitter as part of their marketing strategy. As reported in The Wall Street Journal, in 2009 social-media adoption by businesses with fewer than 100 employees doubled to 24% from 12%. If you're not addicted to social networking yourself, you're bound to know plenty of people who are.

But social media may not be as useful as we think. A survey of 500 small-business owners found that just 22% made a profit last year from promoting their firms this way. A lot of time and energy can go into maintaining the company's presence on social sites, and rewards in sales - if they come - can be slow to arrive. Indeed, using social media "could harm you if you end up inadvertently saying something stupid, offensive or even grammatically incorrect," says Larry Chiagouris, professor of marketing at Pace University's Lubin School of Business.

In order to see benefits from this kind of marketing, you have to be patient, dedicated, and consistent. Stephen Bailey, of John Fluevog Boots & Shoes Ltd., says his company saw a 40% increase in online sales in 2009, the first full year they consistently engaged in social media marketing. There are several free services available to help companies track Web traffic from social media sites, including Hootsuite, Google Analytics, CoTweet, and Lodgy.

For some businesses, social media makes sense. Like everything else, though, it's not a silver bullet. Build a better business by using a smart marketing mix.