How LinkedIn is beating Facebook
Once overlooked, the professional networking service is making quiet gains on its rival. Here's why investors and advertisers are paying attention.
LinkedIn (LNKD) is finally getting some respect after serving as the Rodney Dangerfield of social networks.
The company is quietly and steadily gaining fans -- and emerging from Facebook's (FB) shadow -- by exceeding expectations, leading to a nearly 60% gain in its stock price in the last year. The shares were up an additional 18% Friday.
Friday's boost came after LinkedIn reported fourth-quarter profit and sales that beat analysts' estimates. Revenue jumped 81%, while its user base rose 8% to 202 million people.
So what's behind LinkedIn's resurgence? Investors are paying attention because the company's business model relies on subscriptions instead of ads or quick transactions. That's made it attractive to investors, despite the fact that LinkedIn's base is a fraction of Facebook's 1 billion users.
As the biggest online professional networking service, LinkedIn is finding it has the power to raise prices, which it plans to do in the second quarter when it will bump up subscription rates, chief financial officer Steven Sordello said on a conference call on Thursday, according to BusinessInsider.
Facebook, meanwhile, is suffering from user fatigue. People are increasingly concerned about the company's privacy issues and may be simply tired of reading about their friends' lunch plans.
More than a quarter of Facebook users will spend less time on the site this year, according to the Pew Research Center's Internet & American Life Project.
Sure, LinkedIn's 202 million members are dwarfed by Facebook's 1 billion global users. But LinkedIn taps into a raw nerve: employment, or lack thereof. Simply put, reading about your friends' winter vacation plans isn't a necessity. But with tens of millions of Americans still looking for work -- or who simply want to find a better job -- LinkedIn is proving invaluable. And advertisers, recruiters and corporations are willing to pay for that.
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