A third of businesses in Britain say Facebook is their No.1 way to attract new customers.
A study by technology company Basekit, reveals that Facebook is now the number one source for small businesses to create new customers.
Facebook has proven to be a more popular source than local business directories as well as print and online advertising.
The research reveals that 36% of small businesses in Britain used the social networking site for marketing purposes.
Twitter is also a popular source for small businesses to create new customers with 17% using the micro blogging site.
The growing use of Twitter by businesses could meet the site could pass online and print advertising in the near future.
Simon Best, co-founder of BaseKit says businesses are increasingly making the shift from using traditional directories to using social media for marketing purposes.
"Small businesses are shifting their marketing to lower-cost media like Facebook and Twitter and away from legacy media like the directories," said Best. "They tell us that one-to-one marketing is their most efficient and most successful way of generating new business - the fact that Facebook has become the number one source of new business within just a few years of its creation is remarkable."
A social media presence has increasingly become a necessity for building brand reputation and reaching out to customers with 74% of businesses saying social media marketing is critical to their company.
"The simple truth is that, for a small business with customers who may be under 40, if you're not on the web then you are more-or-less invisible," said Best. "We believe that every small business in the UK should be able to take advantage of the power of the internet as a tool to grow - and should be able to create a professional website cost-effectively."
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