LinkedIn Emerging as a David to Facebook’s Goliath [Video]
In the aftermath of Facebook’s monumental let down of an IPO, a silver lining is now emerging from the fog and frustration in the form of a social media trailblazer that has managed to quietly become an industry standard even amid an atmosphere of cynicism and acid reflux. That silver lining is LinkedIn, the professional social network now 160+ million strong, touting 2 signups every second. In CEO Jeff Weiner’s own words, “LinkedIn is in the business of connecting talent with opportunity on a massive scale,” and while they are already set to accrue a net profit of $70 million this year, or double what they generated last year, it has once again become refreshingly obvious that defined purpose is a key ingredient in the recipe of success.
Much of the latest buzz can be attributed to this month’s cover story from Forbes, in which George Anders, a leading contributor, reported a very interesting factoid based on calculations using ComScore’s Web-usage data and the public financial filings of LinkedIn and Facebook. That article can be found here. He has determined how much in dollars and cents each of the two social media giants are able to collect for every hour each user spends on their sites. The final verdict – for every $0.06 cents Facebook pulls in per user an hour, LinkedIn is able to generate roughly 21 times that at $1.30. Congruently, he reported that while Facebook users on average can spend somewhere between 6 and 8 hours per month socially connected in the digital stratosphere, LinkedIn users conversely average a meager 18 minutes in comparison.
This statistic, as Anders points out, starkly exposes key differences in how the two rivals generate revenue. Facebook is largely confined to monetizing user interaction on a face-to-face basis through ad revenue, which currently accounts for around 85 percent of the company’s income. With their user base approaching a cool one billion, that is certainly nothing to gripe about, but recent estimates have found that the average Facebook socializer will click on just one out of every two thousand ads, though this may likely change once their Exchange program rolls out.
Under Weiner’s savvy direction, LinkedIn on the other hand, is in the midst of an HR revolution and has devised three main sources of revenue generation, with the now-prestigious Recruiter Account being the focal point of their business model. While subscriptions and advertising continue to play strong roles, the shining star has become their corporate accounts, in the form of ‘seats’, which can cost as much as $8,200 per year. Through these coveted accounts, major corporations like Adobe, which currently holds 70 recruiter seats, have access to the global network’s best and brightest, where they can refine searches, target potential candidates and initiate the hiring process within hours, or minutes even. While 70 seats can cost upwards of a half a million dollars per year, LinkedIn’s corporate account services have become so invaluable, they are ultimately saving companies like Adobe millions of dollars in the long term.
It seems this is not where their prowess ends, because according to another study from Hubspot, LinkedIn is also four times better than its two main competitors for generating business to business leads. They reported back in January that for 2011 LinkedIn held the highest visitor-to-lead conversion rate at 2.74 percent, well beyond the rates of Facebook and Twitter at 0.39 and 0.67 percent respectively. While more recent tallies have shown LinkedIn’s lead generation rate to have fallen slightly from what it was last year, they are still riding tall at the front of the line, which is attributed primarily to their sole and laser sharp focus on business related issues.
So while the tech sector has certainly taken a dive since May, things are still looking pretty sweet for LinkedIn even with their stock price tumbling around 12 percent since Facebook went public. Pumping an aggressive 33 percent of revenue into sales and marketing, the company is certainly fixed on global growth on a gargantuan scale. And with more than half of all U.S. corporations actively engaging social media in the hiring process and the majority of professional recruiters turning to LinkedIn as an indispensable asset, the company’s future certainly looks bright.
By K. Cameron Lau
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