LinkedIn Corp (NYSE:LNKD) versus Facebook Inc (NASDAQ:FB). It doesn’t even seem to be a fair fight sometimes, does it? In May 2011, LinkedIn had its IPO, and has been posting decent numbers ever since. Facebook, since its IPO in May 2012, has received media scrutiny, and often scorn. So, why might LinkedIn have the long-term upper hand?
Facebook does… what?
As we all know by now, Facebook Inc (NASDAQ:FB) is a social network. Many social networks have come and gone, but by virtue of it captivating such a large user base Facebook has come out victorious as a real company that makes money. The problem is monetizing users can be troublesome. While the company recently said that they had increased the number of mobile users 51%, reporting user growth does not always mean year to year monetary growth.
While the company was able to go from 618 million mobile users at the end of 2012 to 819 million by the first half of 2013, what does that really mean? In 2012, Facebook Inc (NASDAQ:FB)’s revenue increased $1.38 billion, or 37% year over year. Ad revenue went up 32%, which is very good. That actually outranks user growth from 2011 to 2012, which was 25% Still, the demand for Facebook’s ads is much slower than growth, with average price per ad only going up 3% from 2011. What does that mean? Well, the company better be able to perpetually add more users, because when the growth runs out, they’ll have to only talk about revenue numbers and ad growth.
LinkedIn’s different tactic
As a social network, LinkedIn Corp (NYSE:LNKD) doesn’t talk much about its user base. Because unlike its competitor Facebook Inc (NASDAQ:FB), its collection of registered users is possibly worth much more than that of Facebook’s. With 150 million members, LinkedIn is much smaller than the 1 billion-plus users Facebook has. But LinkedIn has a plan to reinvent job networking, which has more monetary value than “sharing with friends” which is the number one way Facebook says it creates value for its users.
LinkedIn Corp (NYSE:LNKD)’s revenue growth over the past year has been quite good, with an 86% rise in revenue to $972 million. The company’s highest expense is sales and marketing that stands at $324 million and 33% of revenue. LinkedIn is using this to find more job-seeking users. And while the company only made $21 million in profit, it is in building mode. Remember classified job ads? Well, those went away with Craigslist. We might remember Craigslist the same way at some point now that a professional network like LinkedIn exists.