On LinkedIn’s move into content

Today s going to be a bit light on posting as I am under the weather and have been in bed all day. But there are one or two stories I wanted to say something about while it was still topical. One of those is LinkedIn. This post isn’t about valuation. Rather, it is about strategy, loosely based on the news that LinkedIn may acquire mobile content platform Pulse.

If you recall, LinkedIn was pilloried for its post-IPO performance as a stock. It has since turned that around and then some. As 2012 began, the stock was near all-time lows. But it has since tripled in value and still sports only a $19 billion market cap, while Facebook has more than triple the valuation at $67 billion. There is a lot of room for improvement if LinkedIn continues to execute. Here’s why?

Let me talk about four social networks and where LinkedIn stands in relation to the other three to give you a sense of what the competitive advantages are. First, there’s Facebook, an extremely important social network that has the deepest kind of networking potential because it is largely based on real-life friendships. The beauty of Facebook is that it allows someone to keep engaged with her friends and share fairly personal information, views, and pictures and have intimate e-mail- or letter-like conversations. Of all the big social networking sites, Facebook is clearly the most sticky for this reason. And its success is in large part because of the fact that it is geared around real intimate relationships.

The problem for Facebook, however, is what I would call the creepiness factor (see pdf here for instance) A Wall Street Journal article on this subject is here. Selling against the kind of content that Facebook users create is difficult because of the hornets nest of potential privacy concerns. We have seen this with Gmail, where ads served based on personal email conversations create a sense that someone is watching you in your most intimate moments. Google has still been able to get advertisers to buy keywords in this space, but the creepiness factor will always be a limiting element.

Then there is Twitter. For news junkies like me, it is the go to place. I see Twitter as being at the complete opposite end of the spectrum from Facebook in terms of intimacy, meaning that you follow or are followed by complete strangers, often in an asymmetric way where you follow them or they follow you but not vice versa. This is a perfect place to sell into from advertising perspective given the right ad content because it is seen as a more legitimate space for advertising since most of the conversations on Twitter are public and users follow each other based on affinity by topic. In my view, the reason Twitter has not done as well as Facebook owes more to execution than to potential. I think Twitter has a lot of potential as an advertising platform going forward. Moreover, there are other ways twitter can make money in the future other than sponsored tweets. The biggest limitation for Twitter is the character limit, which makes the site much less robust in terms of content.

Google Plus is the weird hybrid that meshes networks of intimate Facebook-like relationships with anonymous Twitter-like asymmetric following. I don’t find the platform as compelling because of this. But Google has great experience in serving ads on the Internet and should be able to moneitise this offering well as a result. I see Google Plus as a defensive me-too kind of product, with Google realizing it needed a better social media presence if it wanted to continue making money from Internet advertising.

Then there’s LinkedIn, which was a symmetric platform like Facebook, meaning users could not follow someone without the other user’s permission. However, LinkedIn is a network based on work relationships that are by nature much less intimate than the relationships on Facebook. An that has made it easier for LinkedIn to become more and more asymmetric i.e. more and more Twitter-like. First, from the very beginning, the platform was a gold mine for recruiters, who would pay money for an asymmetric access-to-your-profile kind of networking. And while this is a perfect use of LinkedIn’s work-based network, it is by nature a more limited and finite revenue stream. LinkedIn has been forced to broaden it’s scope in order to be able to add revenue streams and stickiness. I see this developing in two ways.

First, LinkedIn now has a content-oriented overlay that started as a Twitter-like platform of quick messages between users. Of course the symmetric nature of LinkedIn’s basic social media presence made this a limited play. So, LinkedIn has moved much more heavily into asymmetric and longer content. Think of this as a platform for people to sell themselves, their ideas or their companies’ ideas to a larger targeted audience that has similar interests. The revenue stream in the future can come from both those creating the content who want to reach more people, as we are seeing with Facebook Pages or the revenue can come from advertisers who sell against the content type based on affinity.

Second, while LinkedIn is less intimate than Facebook, the advertising revenue streams are identical on the symmetric Facebook-like original platform without the creepiness factor because the conversations are less intimate. I believe that if LinkedIn could execute well in terms of growing its user base – and it is doing so in the US and abroad really well at the moment – then it has better advertising revenue potential than Facebook.

The Pulse acquisition talk is interesting because it tells you that LinkedIn is moving in a very different direction regarding content. Think of it as having the potential to be a 21st-century Yahoo!, which attempted to become a content powerhouse during the dot-com bubble days. The difference here is that LinkedIn is sticking to its knitting and only slowing building out additional functionality that is supported by its original platform. Yahoo!, my former employer, was in a race with the likes of AOL and a number of now bankrupt portals to become the first and last place for information seeking (news, search, music, photos, etc). The LinkedIn approach is really about user-generated content – which is what Web 2.0 is all about – rather than company generated content. This keeps costs low while not at all detracting from the advertising opportunities.

I see a move into content at LinkedIn as a very good sign. It says that LinkedIn understands the difference between Web 1.0 and 2.0 is the efficiency of user-generated content. The question is how to filter this content in a compelling – and legitimate, professional – way. What users want is to be able to gain quality content in areas of their affinity or to profile their own knowledge in those areas. And LinkedIn just needs to set up the right platform to do that, keep costs low, and sell against that. To me, this is a winning strategy. Amd I don’t see Facebook or Twitter or anyone else doing this the right way.