Even with its network of more a quarter-billion members, Mountain View, Calif.-based LinkedIn Corp. (NYSE:LNKD) is often overlooked when it comes to social media companies. After all, for sheer number of users, it can't compete with the Menlo Park, Calif.-based Facebook Inc. (Nasdaq:FB), which boasts 1.2 billion, and for social footprint it bows to San Francisco, Calif.-based Twitter Inc. (NYSE:TWTR) and its 241 million monthly users who form a very loud microblog cheering section. But to its credit, what really separates LinkedIn from the pack is its business model.
Work's Social Link
LinkedIn was established on the premise of offering the public a website that serves a specific and essential service: Helping to connect job seekers and prospective employers. With unemployment remaining stubbornly high and employees tending to move around more during their careers, such a service would seem to be in the sweet spot of digital commerce.
Meanwhile, Facebook and Twitter, while hugely popular, largely help users kill time by enabling them to read their friends’ posts, play games and idly message one another. Compared with that record, LinkedIn would seem to present a business model of greater substance and utility.
“LinkedIn may well have a better chance than the others at showing staying power in the marketplace,” noted Michael Holland, chairman and founder of New York, N.Y.-based investment firm Holland & Co.
“Facebook and Twitter get a lot more media time than LinkedIn, but LinkedIn is unique in that it actually serves a greater purpose,” Holland said. “It has the potential to help young people with their careers and enables them to live better lives, so it has a hook for them. Facebook and Twitter can seem a little frivolous by comparison.”
This point is potentially crucial because of the ephemeral nature of social media. Already, we have seen studies that conclude Facebook is having a harder time now attracting and maintaining eyeballs among the key demographic of teen and “tween” users, who are turned off because Facebook has become a haven for their parents and other older-generation users. Facebook has had to engage in a buying binge in recent years to gobble up youth-friendly sites such as Instagram for $1 billion in 2012 and WhatsApp for $19 billion in February.
In the social media universe, even notably buzz-worthy websites can decline in popularity and eventually disappear for good. Remember Friendster or MySpace?
Discerning observers will eventually look beyond Facebook and Twitter in the social-media sphere. “LinkedIn has historically been a powerful driving force for engagement,” says Brian Reich, a social-media consultant to U.S. corporations. "Compare that to Facebook, which is about connecting around shared interests.”
“LinkedIn embraced the idea that it was a media company long ago,” Reich observes. “It started creating or curating content that has value to its audience. Facebook and Twitter have long depended on their audience to create all the content. But if you aren't interested in what your network is sharing, Facebook won't be as interesting to you. It’s why Twitter is so popular and influential during live events, when tragedy strikes – it’s real time, it’s instant, there are lots of views. But long-term value, day-to-day value, comes from things like LinkedIn, because it’s connected to your life and all the non-special events.”
The Upside of Uncool
Friendster and MySpace, and scores of others, ultimately vanished because other innovations came along to supplant them. This is the Darwinian way of life in the digital revolution. You can call it the survival of the hippest. LinkedIn doesn’t make its way by resembling a flavor of the month. It provides a valuable service, which gives it a promise of staying power.
LinkedIn also stands apart from other social media companies because it is far less dependent on advertising revenue compared to Facebook and Twitter. Instead, most of its revenue is derived from what it has referred to as Talent Solutions, when recruiters and companies searching for prospective employees pay LinkedIn to link with its member network.
“Q4 was a strong quarter that capped another successful year for LinkedIn,” its CEO Jeff Weiner pointed out during a conference call to Wall Street analysts on Feb. 6 when LinkedIn announced its 2013 fourth-quarter earnings. That’s not merely blather by the head of the company. In the fourth quarter revenue jumped 47% to a record $447 million and membership gained 37% year over year to 277 million. Professionals located outside the U.S. now comprise 66% of LinkedIn. LinkedIn and SlideShare (the presentation-sharing innovation that it acquired for $19 million two years ago) combined for an average of 187 million unique visitors in the fourth quarter, according to Comscore.
And what, you may ask, about New York-based Monster Worldwide Inc.'s (NYSE:MWW) Monster.com, another vaunted job-hunting and recruiting tool? With Monster, individuals actively seek jobs by circulating their resumes. LinkedIn, on the other hand, takes the approach that the burden is on the recruiter or the corporation to do the heavy lifting while the job seeker takes a passive role in the proceedings. For example, LinkedIn offers its Recruiter Lite premium services which connects headhunters to prospective employees utilizing the company's entire network.
The Bottom Line
The social-media industry is forever changing; tomorrow is promised to no one social media company. But LinkedIn has a good shot at longevity because of its various revenue streams and its firm grasp of the job and career audience.