State of Social 1Q14: LinkedIn, the Dark Horse Stumbles

In our final report for the first quarter of 2014’s state of social media, we’re going to take a look at the dark horse of social networks, LinkedIn. What’s changed, and what does it mean for marketing and PR professionals?

So, what’s on the books for the 1st quarter of 2014 for the network? Is their strategy of becoming a content network paying off in real dollars? How are their efforts to expand ad revenue?

LinkedIn’s user base continues to grow, reaching 296 million monthly active users, a 7% increase in the number of people actively using the site, both new and returning. It’s obvious the network is delivering enough value to users to keep its audience base growing steadily.

One of the difficult parts of charts with millions of users is that looks can be deceiving; it can be difficult to discern changes. That’s why looking at percentage change can be illuminating:

For the last two quarters, LinkedIn’s audience growth has been below its four-quarter trend line, indicating that its growth is slowing down. It’s not a massive drop off, but it’s significant in light of the fact that for the first three quarters of 2013, the network was thriving and outpacing its four-quarter growth trend.

In our report earlier this week on Twitter, we saw a rapid decline in audience growth. LinkedIn isn’t dropping off the cliff like other networks, but is the social network in danger of eventually tapping the audience that exists for their network? Only time (and more quarterly reporting) will tell!

Next, let’s take a look at revenue. How has the business network’s ad revenue performed in the past quarter?

We see an obvious decline here in the number of ad dollars the network is receiving. LinkedIn experienced record growth between 3q13 and 4q13, but it looks like they couldn’t sustain that rate of growth. There’s no way to be sure what caused the growth to hit a brick wall, but it’s been our experience that their advertising tends to be much more expensive than other social networks’ advertising.

When you look at all the other social networks, even though their audience numbers are stagnating faster than LinkedIn, their ad revenue continues to increase on an annual basis. Compared to other networks (Facebook and Twitter), LinkedIn is on a significant downward trend for ad revenue. If LinkedIn didn’t have other lines of revenue there would be a lot of ‘splaining to do. Fortunately for the network, advertising makes up only 22% of their total revenue stream, but these declines over time are worrisome.

While ad revenue is on the decline, total revenue for the company isn’t so much:

Overall company revenue, including their enterprise HR software unit and premium user subscriptions, help make up the shortfall in ad revenue.

LinkedIn, to its credit, has realized that not every business can afford their enterprise software for recruiting so they’ve created other avenues for generating income, such as their content network (and deals like the one with FH) along with other acquisitions such as Pulse, Bright and Slideshare. But is it enough, fast enough?

Another decline shows that the multiple streams aren’t having an impact fast enough. We must ask if LinkedIn’s diversifying into becoming a publisher and content network has distracted them too much from their core purpose. With luck, they’ll quickly realize that the continued heavy declines in ad revenue mean they need to make some changes in their focus. Carrying those losses in the long term aren’t feasible. The next question is, is the network’s strategy driving bottom line results from users?

The absolute number shows a modest increase, but the declining growth rate is visible even without looking at the rate of growth chart. It’s beginning to flatten out and quickly. To make this even more understandable, look at the next graph and more importantly the trend line:

LinkedIn’s per user revenue fell down the stairs in 2013, and is flat so far in 2014. While they may be attracting users with their acquisitions and content network, those users are clearly not paying off the way they used to be.

What does all of this mean for marketing and communications professionals?

LinkedIn appears to have stumbled a bit. They’ve got the eyeballs, but the eyeballs aren’t converting into bottom-line dollars. Wall Street’s appetite for experiments and pivots that are unprofitable or profit-reducing is incredibly tiny, so we would expect added pressure on LinkedIn to either aggressively monetize their content network offerings or return their focus to being the social network about hiring.

Our bet is that LinkedIn will roll out additional advertising options rather than reduce focus on content. Their new Sponsored Updates Partners program and Content Partners program could potentially turn the ad revenue ship around while providing brands and communicators with new ways of reaching and engaging their audiences. Marketers and communicators should be paying attention to these new options where it makes sense to do so.

In the bigger picture, Facebook and Twitter have both recently launched mobile native advertising options with Facebook Audience Network and Twitter MoPub, respectively. It would make sense for LinkedIn to have a similar offering, but focused on their current integration partners and offering the same level of precision targeting that they offer in their on-site properties. While no current product offering from them exists to fit this need, it’s probably on the drawing board and worth keeping your eyes open for.

Chel Wolverton
Marketing Account Manager

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