Facebook Inc (FB) Versus LinkedIn Corp (LNKD): A Breakdown Of The Battle

Page 1 of 2

The Coca-Cola Company (NYSE:KO) vs. PepsiCo, Inc. (NYSE:PEP), Apple Inc. (NASDAQ:AAPL) vs. Microsoft Corporation (NASDAQ:MSFT) or American Airlines vs. decent customer service, corporate battles are a big part of global business history. Although it’s a much younger rivalry, Facebook Inc (NASDAQ:FB) and LinkedIn Corp (NYSE:LNKD) have emerged as the two leading social networks, and they directly compete against each other in areas like online advertising.

Let’s take a look at these two companies from an investor’s point of view. Which one is a better buy, Facebook Inc (NASDAQ:FB) or LinkedIn Corp (NYSE:LNKD)?

Facebook Inc

Different Business model

Facebook Inc (NASDAQ:FB) has more than 1 billion users, way above LinkedIn Corp (NYSE:LNKD)‘s 225 million, but this is not an apples to apples comparison, because the two companies have different business models. While Facebook makes most of its money from advertising, LinkedIn makes only 25% of revenues from that business. The big cash cow when it comes to LinkedIn Corp (NYSE:LNKD) is talent solutions for employers, which provided 57% of revenue in the last quarter, with the remaining 18% coming from job search services for candidates.

LinkedIn Corp (NYSE:LNKD) estimates that its addressable market is worth around $27 billion, and it’s an industry in which the company has positioned itself as the disruptive leader. The company benefits from the network effect; users need to be on LinkedIn, since potential business partners and job recruiters are using the platform. Hiring companies want to go where all the good candidates are, especially in the case of LinkedIn, the place where they can contact people who didn’t necessarily apply for a specific job.

The value of the service grows as it gets more users, and at the same time increases its usefulness and attracts even more users and companies, creating a cycle of strengthening competitive advantages as the company expands and grows. Over time, a growing platform means that LinkedIn should retain considerable pricing power as its services become more valuable.

Facebook Inc (NASDAQ:FB) on the other hand, is fighting against a giant like Google Inc (NASDAQ:GOOG) for a piece of the online advertising cake. It’s a tasty cake, and it will most likely continue growing over time, but Facebook doesn’t have the same competitive strength as Google.

Google’s search product is almost ideal when it comes to online advertising: when someone in a certain area is searching for “Chinese restaurant,” the owner of a nearby Chinese place has some big incentives to pay up in order to come out better positioned than its competitors.

Information and context are crucial assets in online advertising, and Google has access to enormous amounts of data regarding users of its multiple services.  The company knows what kinds of information its users have been searching for, and it capitalizes other services like Gmail, Maps and Chrome in order to grasp even more data about the user and make advertising as effective as possible.

While Facebook Inc (NASDAQ:FB) owns a lot of valuable information about its gigantic user base, the company has a big disadvantage versus Google when it comes to context; an ad in Facebook is more likely to be something bothering and invasive, while an ad provided by Google in search can sometimes be a valuable service.

Besides, traffic is shifting toward mobile, and Google is in a position of remarkable strength in that industry since it owns not only the leading mobile operating system on a global scale, Android, but also applications and services like Gmail, YouTube, Search and Maps, which are tremendously popular among different platforms.

LinkedIn is the top dog in online recruiting services, Facebook, on the other hand, is a relevant player in an industry clearly dominated by Google. When it comes to business model and competitive strength, LinkedIn looks stronger than Facebook.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

The 20 Most Underrated Movies of All Time

The 10 Fastest Growing Companies in America

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!