The Changing Social Networking Growth Strategy

What social networking companies Facebook, Twitter, and LinkedIn are doing to boost growth.

Feb 16, 2014 at 10:00AM

The social networking business is quickly changing, as most large companies are facing the reality of reaching the growth limits for new users. This means that they must figure out ways to tap deeper into existing users, not only to find ways to monetize them, but also keeping them engaged and using the service.

At this time, Twitter (NYSE:TWTR) has been under pressure because some believe its growth is slowing down. This suggests concerns over how it will generate earnings going forward. It's likely that this is a premature concern, but it does point to the inevitable slowdown in growth and the fickle nature of engagement on the Internet.

Facebook (NASDAQ:FB) faces similar challenges. In its case, the largest of these the drop in usage among young people which many advertisers prefer to market to.

LinkedIn going forward
On the other hand, LinkedIn (NYSE:LNKD) continues to grow nicely, with membership jumping to 277 million as of the fourth quarter. This is a gain of approximately 37% over the same quarter last year.

LinkedIn only has about 4 million members in China, and with that market being the focus for international growth, there is a lot of room for improvement. This should help drive the company's growth for a number of years into the future.

When considering the successful implementation of its talent solutions business and advertising unit as well, it all points to many positives for shareholders. Its talent solution business, which is simply a phrase for recruiting, boosted revenue in the fourth quarter to $245.6 million; this equated to a gain of 53%. Advertising was up to $113.5 million, a gain of 36% from last year in the same reporting period.

Facebook's strategy
Facebook, which is much faster to experiment than Twitter, is trying a couple of new things to grow and increase user engagement and interest. To that end, Dan Rose, who heads up acquisitions and is vice president of
partnerships, is attempting to transform the site into more of a town square. The vision is to make Facebook a place where conversations about news, sports, and celebrities becomes a bigger part of the experience.

Rose is trying to move users away from predominately interacting with family and friends, to a broader interest in public figures and what they are doing and saying. In the short term, that means introducing popular sporting events and television shows into news feeds and other areas of the Facebook platform.

This is going to be a tough task to accomplish, as Facebook users have somewhat resisted major changes to the experience. What it does point to is Facebook understanding the need to do something to keep users on the site. It's a response to younger users leaving, as well as a preemptive strike against older users tiring of the site and trying alternative means of interacting online.

Facebook doesn't see it as being as big of a challenge as some believe. It sees targeting public content as a continuation and support of what is already happening on the network.

The major concern for Twitter, after its first earnings report ever, was whether it will be able to continue to grow. This was a concern because its Monthly Active Users were only slightly up from quarter-to-quarter, increasing only 4%. At this point in time for the company, this is a major concern.

MAU growth was slow domestically and internationally, with U.S. growth up only 3% for the latest quarter and international growth up only 4%. Again, this is a disastrous metric for its first quarter as a publicly traded company. Sequentially (month-to-month), timeline views on Twitter dropped 7%; this also points to a decrease in interest and interaction.

While Twitter can talk about changes and other strategies, the truth is that it needs to quickly turn its growth narrative around or it's going to continue to get hammered.

Twitter already relies heavily on celebrity engagement as part of its attraction, with a number of celebrities having a significant presence on the site. Facebook is attacking this strength by making deals like it did recently with Beyoncé during her latest album release.

Facebook, even in a challenging market, continues to grow. Twitter, meanwhile, apparently had a weakness exposed that it must quickly mitigate if it doesn't want to have its share price crushed.

For LinkedIn, it has more of a predictable path as it deals in interactions between professionals. If you want exposure to the social networking sector, LinkedIn is probably the safest bet of the three companies mentioned here. Facebook is the next safest bet. I would wait on Twitter until it proves that it has the substance to be a legitimate business model, which will take several quarters before a clearer picture emerges.

More compelling ideas from The Motley Fool
Opportunities to get wealthy from a single investment don't come around often, but they do exist, and our chief technology officer believes he's found one. In this free report, Jeremy Phillips shares the single company that he believes could transform not only your portfolio, but your entire life. To learn the identity of this stock for free and see why Jeremy is putting more than $100,000 of his own money into it, all you have to do is click here now.

Gary Bourgeault has no position in any stocks mentioned. The Motley Fool recommends Facebook, LinkedIn, and Twitter. The Motley Fool owns shares of Facebook and LinkedIn. 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.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers