Social Media: LinkedIn Proves the Power of Three-Way Action
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Written By Noah Mallin | June 19, 2008 | Share This
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One of the great things about social networking sites like Facebook or MySpace is the ability to see what your old buddies are up to without actually having to talk to them. Hey, that guy who wore a skirt and mascara in college is a corporate lawyer now!
On the other hand, sometimes you want to do more than just accumulate “friends”, you actually want to network and do some online schmoozing. LinkedIn, which has been described back-handedly as “social media for grownups” and has been all over the news this week, is a site that focuses on career connections with a clean low-widget design and a plethora of helpful tools. This has helped them to become the number 4 site for social networking on the net according to Nielsen. Even more phenomenal is their 146% year-over-year growth, making them the fastest growing social network in the U.S…. check da chart:
What’s really interesting about LinkedIn is their combination of three different approaches to building a successful network: The freaky-deaky Free-conomics approach, the pay for access approach, and the ad revenue approach.
What’s notable about the ad approach is the targeted nature of their audience and their limited set of ad formats – both of which have allowed them to grow revenues and audience simultaneously. This is a site that is very protective of their look, feel and user experience - their Inadmissible Advertising guidelines is ridiculously specific, including bans on “Occult Pursuits… Advertisements for fortune telling, dream interpretations and individual horoscopes except when the emphasis is on amusement rather than serious interpretation… Endangered Species Advertisements offering furs or products made from the furs or hides of animals included on government endangered species lists…Online Gaming Advertisements promoting online gaming or wagering sites.”
Well that puts the kibosh on advertising my Dionne Warwick’s Psychic Friends Mink-lined Sealskin Boots Collection.
Even more interesting is the cost breakdown on their rate card. Note that they allow you to target professionals by job function. Custom targeting can go as high as $76.50 per thousand impressions. By delivering a network of users who presumably have decent disposable income (LinkedIn describes them as “An Audience of Influential, Affluent and Ambitious Professionals”) , concentrating on the user experience and staying on target LinkedIn could end up being the most profitable social networking site on the net. With all that though, advertising still accounts for only a quarter of its projected $100 million in revenue this year. Much of the rest of this revenue is due to subscriptions.
While most of LinkedIn’s users were attracted to it initially because the core features of the site are free. That’s the Free-conomics approach that we have discussed before - giving away the good stuff for free to generate revenue in other ways. By offering a robust toolset for free, LinkedIn has helped amp its growth rate – the cost of entry is incredibly low.
However, a smaller group of power users pay LinkedIn for access to premium tools like the ability to contact people outside of their network. But the real value-added cash cow is when companies pay LinkedIn for targeted access to their network as a job recruitment tool, searching for users with specific criteria who may not even be thinking of changing jobs. When I mentioned this to one of my colleagues here at Reprise Media she said ‘So that’s where those requests are coming from…”
The result of this triple-play for LinkedIn has been this week’s billion dollar valuation and an infusion of $53 million from Bain Capital. The ensuing publicity will no doubt drive even more users to their network and perhaps shoot past Classmates.com into the number three spot.
Still, one thing I learned on the new CBS summer series Swingtown is that a 3-way is not the right approach for everybody. Given the rise of LinkedIn, does their approach suggest lessons for the two social networking behemoths MySpace and Facebook?
Facebook actually started out as a much more targeted platform with a user group mostly consisting of Harvard, then Ivy League, and finally college and then high school students and the occasional predator. Eventually all bets were off and if you were over 13 you were welcome to sign up. Though this has allowed the site to grow its user base phenomenally it has also diluted the targeted nature of its original base, taking them from vertical to horizontal. This is not to say that marketing opportunities don’t exist here.
I’ve been poked and bitten on Facebook more times than a substitute remedial kindergarten teacher thanks to their ubiquitous widgets. The open-source platform means that new widgets are created by users daily and marketers have already taken advantage of this. Sony rebranded the popular Vampire widget to promote their flick 30 Days of Night very successfully over 3 weeks. The widgets themselves are part of an ad network though the diffuse nature of Facebooks users has made it harder to monetize than it might appear at first. Many Facebook users are refuges from the busy, ad-spammy world of MySpace and resent the idea of being marketed to, making this a tough nut to crack.
Meanwhile Fox Media Overlord Rupert Murdoch’s MySpace is estimated to be raking in $800 million a year. Fo’ rizzle my shnizzle? The amount sounds pretty lofty but the reality is that this has been disappointing to ad partner Google and to the Fox suits. One analyst remarked, “We don’t have much conviction in the long-term ability to grow this business based on what we’ve seen lately.” Wow, harsh on their mellow, dude.
Like Facebook, MySpace was once more targeted though their low wall between profiles has led to faster growth. Originally it was oriented around music, especially unsigned bands like Seattle’s Tapes N’ Tapes or Brooklyn’s Vampire Weekend who both got record deals after MySpace led to favorable exposure.
Although their recent redesign has de-cluttered it somewhat, MySpace is still so ad saturated that there is a disconnect happening where users simply ignore the ad content. MySpace pages themselves can also function as promotional tools but that typically doesn’t lead to any revenue back to Fox and friends.
If there is a third way for MySpace to generate dollars it will have to come from mining their comparatively massive user base more effectively. MySpace may have reached the limit of their ad growth, but there is some opportunity for Facebook to find more ways to monetize those widgets and correlate them to a more behavioral type of marketing. Since I have a “Fan of Arrested Development” widget on my profile for instance, I might be a good prospect to go see Jason Bateman’s new movie.
What other ways are there for LinkedIn and MySpace to monetize effectively? Will sites that stay targeted like LinkedIn begin to dominate? Let us know what you think!
Topics: Advertising: Behavioral, Advertising: Online, ECommerce, Facebook, MySpace, Reprise Media, Social Media |
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