Social networking online has changed dramatically in the past 18 months. It's no longer just a meet and greet service — it's now a critical business tool. But there are lots of ways to do it smarter and deliver real improvements in your customer service and sales figures.Listening to customers (and competitors) with TwitterListening to customers is an essential part of any business, but with social networks it has become a very scary prospect. Five years ago, consumers had fairly limited and one-sided channels for feeding back to a business. Social networking has turned this on its head and now your customers can freely interact with other customers, discussing anything and everything about your business. You can’t control it and it has given tremendous power to consumers. You have to ask yourself, do you want to be part of that conversation?One way to get involved is to use the powerful Twitter Search tool. Have a search on your company name running permanently, at the very least. This gives you the opportunity to step in quickly if you spot a Tweeter in need of advice or who is unhappy. You could win a new customer this way, or retain one who was previously dissatisfied.However, Twitter is much more than an additional customer service channel. Listening to your customers is essential, but listening to your competitors’ customers is research! One such example is Intuit, the maker of accounting software QuickBooks. Intuit monitors Twitter for mentions of its competitors’ products and often contacts the Tweeter to offer its own product or service. Now this is fairly aggressive and it may not work for every business but it’s another example of using this mine of information.Use Digg.com to attract more customersIf you run a small business there is one absolute truth, it’s critical to have cost effective advertising. Used correctly, traditional advertising models such as Google Adwords enable you to reach customers who are specifically looking for the products or services you provide, but doesn’t enable you to reach people who aren’t already looking. However putting your business in front of a large crowd of casual browsers is both costly and provides mixed results.Digg is a great way of addressing this issue. Digg allows you to submit content of any type and have it immediately published and categorised. If another user likes your content they can “Digg it”. The more Diggs you get the higher up the site your content is displayed. If you are regularly publishing good content then more people will learn that you’re an expert in your field. Sales have a tendency to follow.Use Facebook ads to attract the right sort of customerAs I am sure you already know, there is a reason that children’s toys are advertised during children’s TV shows. It’s all about the demographics. The hot technique in online advertising is no different, and surprisingly Google is lagging behind the king of the social networks, Facebook.This is even more relevant if you look at the latest HitWise reports. One in every 20 UK web visits is now to Facebook, which is staggering.Facebook ads allow you to segment your advertising into the key demographics of ASL (Age, Sex, Location). These adverts are only displayed to people that fit your requirements. A recent experiment I carried out returned some interesting results. Ads were served up significantly more frequently than with traditional PPC schemes. Also, they were so targeted that the bounce rate was significantly lower once they had been clicked.If you twin this advertising model with a good Facebook profile or fan page for your business then FaceBook can really pay for itself.