Why LinkedIn Will Always Be Better Than Facebook

LinkedIn (NYSE: LNKD  ) versus Facebook (NASDAQ: FB  ) . It doesn't even seem to be a fair fight sometimes, does it? In May 2011, LinkedIn had its IPO, and has been posting decent numbers ever since. Facebook, since its IPO in May 2012, has received media scrutiny, and often scorn. So, why might LinkedIn have the long-term upper hand?

Facebook does... what?

As we all know by now, Facebook is a social network. Many social networks have come and gone, but by virtue of it captivating such a large user base Facebook has come out victorious as a real company that makes money. The problem is monetizing users can be troublesome. While the company recently said that they had increased the number of mobile users 51%, reporting user growth does not always mean year to year monetary growth. 

While the company was able to go from 618 million mobile users at the end of 2012 to 819 million by the first half of 2013, what does that really mean? In 2012, Facebook's revenue increased $1.38 billion, or 37% year over year. Ad revenue went up 32%, which is very good. That actually outranks user growth from 2011 to 2012, which was 25% Still, the demand for Facebook's ads is much slower than growth, with average price per ad only going up 3% from 2011. What does that mean? Well, the company better be able to perpetually add more users, because when the growth runs out, they'll have to only talk about revenue numbers and ad growth.

LinkedIn's different tactic

As a social network, LinkedIn doesn't talk much about its user base. Because unlike its competitor Facebook, its collection of registered users is possibly worth much more than that of Facebook's. With 150 million members, LinkedIn is much smaller than the 1 billion-plus users Facebook has. But LinkedIn has a plan to reinvent job networking, which has more monetary value than "sharing with friends" which is the number one way Facebook says it creates value for its users. 

LinkedIn's revenue growth over the past year has been quite good, with an 86% rise in revenue to $972 million. The company's highest expense is sales and marketing that stands at $324 million and 33% of revenue. LinkedIn is using this to find more job-seeking users. And while the company only made $21 million in profit, it is in building mode. Remember classified job ads? Well, those went away with Craigslist. We might remember Craigslist the same way at some point now that a professional network like LinkedIn exists. 

A social network literally out of this realm

Not enough is said regarding the Chinese social networking company Sina  (NASDAQ: SINA  ) . That's because outside of China the company is not well-known. But think about this, within China, companies like Facebook and sometimes LinkedIn are blocked for censorship reasons. That gives Sina tremendous advantage in a country with a more than one billion people. 

Sina's ability to thrive is only limited by its ability to cut costs. Yes, they have the user potential, but it appears that they are ignoring monetary responsibility. In 2012, the company had revenues of $529 million. But their operating expenses were $537 million! You can't make money if you're spending too much, and Sina's 64% increase in research and development costs to $108 million for 2012 is too much. It's no wonder they had a loss of $8 million last year, but it is better than their $33 million loss in 2011. 

Too much focus on users

Bottom line: both Facebook and Sina are too focused on users, possibly at the expense of monetization. The reality is that user growth will slow at some point and the big question that will not be ignored is how to make money from users. LinkedIn spent 97% more in marketing-related expenses in 2012, up from $164 million in 2011. But the company isn't sweating users, other than spending to acquire them and show HR departments that they have the tools to find the right job candidates. 

The job market is more complex than ever, and LinkedIn isn't just a social network. It's a professional tool. That makes it better than Facebook and better than what Sina offers, long-term. 

Americans reportedly spend nearly 34 hours a week watching television! With television viewing taking up almost as much time as the average work week, the potential for profits in the space is enormous. The Motley Fool's top experts have created a new free report titled "Will Netflix Own the Future of Television?" The report not only outlines where the future of television is heading, but offers top ideas for how to profit. To get your free report, just click here!


Read/Post Comments (3) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 26, 2013, at 12:14 PM, p8nthorse wrote:

    I use LinkedIn professionally, however, I find it cumbersome. It is never easy to access or find information you are looking for. I don't have time to take a tutorial everytime I want a bit of information. LinkedIn needs to "lighten up" and become more user friendly.

  • Report this Comment On August 26, 2013, at 1:08 PM, disankey wrote:

    I am still surprised when the media discusses the numbers and Facebook they don't mention all the fake accounts on Facebook.

    I know people who spend $10 bucks on phones so they can verify accounts but all in all it is one person with up to 10 and even 12 accounts if not more.

    I use to be part of the role play world on Facebook. I wanted to research and see just what they really do allow versus what they say they allow. I can tell you first hand the numbers you hear are not real. Businesses who advertise on Facebook don't reach real people about half the time. I have reported thousands upon thousands of fake accounts and Facebook threatened to shut me down for over reporting. From my 9 years on Facebook and yes, in the role play realm I would say that 51% new phone users in real numbers is closer to half that figure.

  • Report this Comment On August 26, 2013, at 6:08 PM, jbizca wrote:

    This is total BS I have added many people over the years for networking purposes and daily I get "endorsements" from them who I have never worked with. So ready anothers endorsements is a joke now. All social media is a waste of time for business. Millions were made by people with real networking so get offline and do you thing is what I say.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2609505, ~/Articles/ArticleHandler.aspx, 8/29/2014 8:17:26 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement