DFS Discover Financial Services

Social networking by small business owners has nearly tripled in the past three years, jumping 23 percent in the past six months alone, according to a new survey from Discover, but less than a third of owners are using it to promote their businesses.

In polls conducted in April and October of this year, the percentage of small business owners who are members of an online social networking community increased from 48 percent to 59 percent. But only 29 percent of all small businesses said last month that they have ever used social networking websites to promote their businesses.

“Before social networking caught on, small business owners were limited to more traditional methods of finding new business through face-to-face outreach, local advertising, basic e-mail and word-of-mouth, which can be time consuming,” said Ryan Scully, director of Discover’s business credit card. “Now that they see some opportunity for reaching specific web audiences exponentially through their own core contacts, it’s conceivable that skilled entrepreneurs are already using social networking as a very surgical marketing tool.”

Discover has been surveying U.S. small business owners about the issues that affect them for more than four years through the Small Business Watch. The first poll about social networking was conducted in October 2007, when only 22 percent of small business owners said they were members of a “popular general-interest online community.” In April 2010, the question was rephrased to ask if they were “a member of any online social networking community such as Facebook, Linked-In, MySpace or Twitter,” and 48 percent said they were. By October of this year, the number climbed to 59 percent.

Are you a member of any online social networkingcommunity such as Facebook, Linked-In,

My Space or Twitter?

 

Are you a memberof a populargeneral-interestonline community?

      October 2010 April 2010 October 2007 Yes 59% 48% 22% No 40% 51% 78% Not sure 1% 1% 0%

Discover’s polls also show that 76 percent of small business owners are spending more than an hour online every week related to their businesses, up from 66 percent in October 2007. Looking closer at the numbers, the percentage of owners who were spending more than seven hours a week online for business reasons actually dropped from 26 percent to 20 percent in three years, but the percentage of those working from three to seven hours per week climbed from 19 percent in 2007 to 33 percent in 2010.

How much time do you spend online everyweek related to your business?

      October 2010 October 2007 < 1 hr 21% 29% 1-3 hrs 23% 21% 3-7 hrs 33% 19% 7+ 20% 26% Not sure 3% 5%

Of the 29 percent of small business owners who now say they are specifically using social networking sites to promote their businesses, 48 percent cite the biggest benefit as “getting new business leads” over getting business tips, finding new suppliers or benefiting in some other way.

“Small business owners don’t have a lot of time to waste, so if they’re online they have a specific reason to be there, and they want to get something out of it,” Scully said. “Because it is a virtual word-of-mouth marketplace, social networking would appear to be a natural extension of what small business owners do every day. The issue is how to make it pay off.”

In 2010, 31 percent of small business owners say networking online has had an impact on their bottom lines, up from 19 percent in 2007.

Consumers are warming to the idea of social networking as a way to hear about small businesses: 36 percent of approximately 3,000 consumers told Discover that they would consider using a small business that they heard about through a social or business networking site, up from 31 percent in 2007.

“Friends and family members have been recommending their hair stylists, accountants, plumbers, doctors, decorators and mechanics forever,” Scully said. “Exactly how entrepreneurs will tap into those networks proactively remains to be seen. Now that they’re seeing social networking as a way to get new leads and influence the bottom line, it’s only a matter of time.”

The views and opinions expressed by small business owners who participate in the Small Business Watch survey are their own and do not necessarily reflect those of Discover Financial Services or its affiliates.

About the Small Business Watch

The Discover Small Business Watch is a monthly index measuring the relative economic confidence of U.S. small business owners who have less than five employees, a segment that consists of 22 million businesses producing more than a trillion dollars in annual receipts. The Watch is based on a national random survey of 750 small business owners. It is commissioned by Discover Business card, which strives to offer the best business credit card for American small businesses, and is conducted by Rasmussen Reports, LLC (www.rasmussenreports.com), an independent survey research firm. The numeric index is calculated by assigning values to responses to a set of five consistent questions. The base value of the Watch was established at 100.0 based on surveys conducted in August 2006. In addition to generating the index, the Small Business Watch surveys small business owners every month on key issues, and polls 3,000 consumers four times per year to gauge purchasing behavior and attitudes towards small businesses. For past results and survey data, visit www.discovercard.com/business/watch. For information on Discover Business card, visit www.discovercard.com/business.

About Discover

Discover Financial Services (NYSE: DFS) is a direct banking and payment services company with one of the most recognized brands in U.S. financial services. Since its inception in 1986, the company has become one of the largest card issuers in the United States. The company operates the Discover card, America's cash rewards pioneer, and offers personal and student loans, online savings accounts, certificates of deposit and money market accounts through its Discover Bank subsidiary. Its payment businesses consist of Discover Network, with millions of merchant and cash access locations; PULSE, one of the nation's leading ATM/debit networks; and Diners Club International, a global payments network with acceptance in more than 185 countries and territories. For more information, visit www.discoverfinancial.com.

Appendix

Rasmussen Reports, LLC

Discover Small Business Watch

Gauging Attitudes on Social Networking

1* How much time do you spend online every week related to your business?

  October 2010   October 2007 Less than 1 hour 21% 29% 1-3 hours 23% 21% 3-7 hours 33% 19% More than 7 hours 20% 26% Not sure 3% 5%

2* Has online networking had any impact on your bottom line?

  October 2010   October 2007 Yes 31% 19% No 56% 72% Not sure 12% 9%

October 10-12, 2010

3* Have you ever used social networking sites to promote your business?

October 2010

29%

 

Yes

68%

No

2%

Not sure

4* [only those who answered yes to #3] About how many sites have you used?

37%   1 44% 2-3 11% 4-5 7% More than 5 1% Not sure

5* [only those who answered yes to #3] What is the biggest benefit to your business of being part of an online networking community?

13%   Getting business tips 48% Getting new business leads 9% Getting new suppliers 0% Getting new employees 20% Benefited in other ways 4% Not benefited at all 5% Not sure

6* Are you a member of any online social networking community such as Facebook, Linked-In, My Space or Twitter?

Consumers   October 2010   Small Business Owners   October 2010   April 2010 Yes 50% Yes 59% 48% No 48% No 40% 51% Not sure 2% Not sure 1% 1%

7* Are you a member of a popular general-interest online community?

Consumers   October 2007   Small Business Owners   October 2007 Yes 23% Yes 22% No 77% No 78%

8* Would you consider using a service or small business that you heard about on a social or business networking site? [Asked of 3,000 Consumers)

Consumers   October 2010   October 2007 Yes 36% 31% No 42% 55% Not sure 22% 14%