What LinkedIn -- Facebook's Boring Uncle -- Has Going in Its Favor

LinkedIn (Nasdaq: LNKD  ) was one of the hot IPOs in the summer of 2011, having gone public at $45 per share and currently trading at about $66 per share at the time of writing. As the first of the big social media names to go public, the company generated a lot of buzz last summer.

Can it keep the buzz going in 2012?

Last fall, late-night comedian Jimmy Fallon referred to LinkedIn as "Facebook's boring uncle." True, no blockbuster movies have been made about its founding, but it's to LinkedIn's advantage that it has differentiated itself from the social networking giant. The company has been focused on professional profiles specifically, rather than a personal social network. (Maybe your prospective employer or client doesn't necessarily need to know about how much you like dressing your cat up in costumes...)

With 131 million profiles at the end of third quarter, LinkedIn has a lot of valuable data -- to marketers, to recruiters, to job seekers -- and it sells packages to recruiters and advertisers. The company has three separate revenue streams: targeted advertising, premium services, and recruiting. Facebook is a competitor in only the first of that group.

On the recruiting side, the closest competitors are Monster.com or Dice as platforms for corporate recruiters and search firms. Revenue from this business unit is growing quickly and has nearly doubled in the past six months. And with all of its profiles, LinkedIn has access to passive candidates that those competitors do not.

So far, neither Facebook nor Google+ has truly established itself in the professional profiles space, leaving the coast (still) clear for LinkedIn's future growth. Its hope is that users continue to differentiate professional networking from social networking, which seems to be the case so far.

What's to worry about?
While the company continues to innovate in growing its profile database, LinkedIn's biggest challenge is to make its namesake site more "sticky" -- to make it a destination site for industry news and insights and to use its large profile database for marketing solutions.

The company has noted that the majority of website activity is done by a minority of users: "[A] substantial majority of our members do not visit our website on a monthly basis." LinkedIn users spend less time on the site than they do on Facebook, which makes advertising a tougher sell, and Facebook and Google+ can much more easily compete in this space. As mentioned above, the minority of users generate the majority of LinkedIn's page views, which suggests it has fewer engaged users.

That said, LinkedIn has a lot going for it: three revenue streams, a growing user database, and no debt. Boring or not, it's worth adding this stock to your Watchlist.

Kara Chambers does not own shares of any companies mentioned. The Motley Fool owns shares of Google. Motley Fool newsletter services have recommended buying shares of Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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