The following video is part of our "Motley Fool Conversations" series, in which senior technology analyst Eric Bleeker and Chief Technology Officer Jeremy Phillips discuss topics across the investing world.
In today's edition, Eric and Jeremy look at how much major Internet companies are making per user. While Facebook has captured the imagination of investors, its challenge is that the company still makes only about $5 a year per active user. Compare that to Groupon, which makes more than $11 per user, and Netflix, which collects nearly $150 per user, and you can see the power in moving away from advertising and toward subscription-based advertising. To this end, Eric and Jeremy suggest that investors interested in the social media space look at LinkedIn, a company building out a powerful model that is reliant on recurring premium sales instead of advertising. While that model is still in its infancy, LinkedIn already gets more than two-thirds of its revenue from non-advertising sources and has ample growth opportunities in the years ahead.