Why Are Advertisers Now Rushing to Facebook, Twitter, and LinkedIn?

What's all of a sudden so great about LinkedIn and Twitter?

Aug 6, 2014 at 10:30AM

The big three social networking sites -- Facebook (NASDAQ:FB), LinkedIn (NYSE:LNKD), and Twitter (NYSE:TWTR) -- all blew the doors off earnings expectations during the second quarter. While Facebook has been solid for five consecutive quarters, such success is new for Twitter, and it's a surprise for LinkedIn after it experienced some recent weakness. However, when we look at what's driving the results, such performance really isn't all that surprising.

How good was it?
To see the degree of improvement for both Twitter and LinkedIn, one needs to look no further than each company's respective first quarter.

For example, LinkedIn gets about one-fifth of its revenue from advertising, and in the second quarter its revenue growth from this segment accelerated to 44% from 36% in the quarter prior.

Lnkd Talent Solution

Source: LinkedIn.

The company's Talent Solutions and Subscriptions segments have remained strong in quarters past, as it was advertising that kept weighing the company down. Still, even its historically strong Talent Solutions business saw a boost, as the company added 2,200 new accounts, up significantly from the 1,400 it created in the first quarter.

Meanwhile, Twitter's advertising revenue was far from being a problem, as it increased 129% versus last year and accounted for just about 90% of its $312 million in total revenue. Notably, these metrics were higher than the first quarter's growth rate.

Becoming more like Facebook?
With all things considered, Twitter and LinkedIn's strong quarters have been called an inflection point, showing that both companies are monetizing users at a better rate. But how?

The answer to this question lies in engagement, which has been one of Facebook's strengths during its emergence. Facebook boasts a social-media best $6.44 of revenue per North American user, a number that continues to rise because of successful advertising.

Fb Advertising

Furthermore, Facebook saw its advertising prices more than double during the quarter, as advertisers showed a willingness to pay a higher price thanks to more beneficial targeting products. For example, Facebook has created an immense amount of data in the past few years via likes that tell it what consumers enjoy, and it has implemented products to allow advertisers to target specific users who have visited their site, liked their products, or even have mentioned them at some point. As a result, the value of its advertising increases.

Strides in the right direction
Now, neither Twitter nor LinkedIn is on Facebook's level, but both are making strides in the right direction, as something clearly changed in the second quarter. For Twitter, its Timeline views rose 10% to 173 billion from the first quarter's 6% growth clip. And on top of that growth, its advertising revenue per 1,000 views increased to $1.60 from $1.44 in the first quarter, a clear indication of better monetization.

Twtr Changes

Source: TechCrunch.

However, perhaps no single change was more influential than LinkedIn's success with its Influencers initiative, allowing experts in top industries to gain large followings and publish lengthy content on LinkedIn's platform. Essentially, this took LinkedIn from being a job-based platform to a site of unique content and a Web publishing platform. Twitter achieved this feat by rolling out new products of its own in order to boost engagement, such as bulking up its trending tool, which allowed users to find and engage with popular tweets in an easier manner. It also focused on videos, pictures, and prioritizing important content, all of which seem to be working in the company's favor.

Lnkd Influencers

Source: Stephaniesammons.

The company said on its conference call that traffic from influencers and top publishers has more than doubled during a four-month span. Analysts were initially skeptical as to whether publishers and influencers would produce content on LinkedIn's platform because of lower engagement rates, but according to the company, it now has more than 30,000 posts per week and has experienced success by alerting LinkedIn users who might be interested in reading these posts, and by monetizing it via advertising.

Foolish thoughts
Facebook, LinkedIn, and Twitter have all grown to become enormous social-media platforms and are now transitioning to companies that are leveraging that scale with the data that's been created to launch valuable and lucrative advertising tools. This makes today a very exciting time in these companies' histories, as potential turns to reality. If you're an advertiser, the high demand and growth serves as proof that these advertising products work, which along with engagement is the key difference for why each company is thriving.


Brian Nichols has no position in any stocks mentioned. The Motley Fool recommends Facebook, LinkedIn, and Twitter and owns shares of Facebook and LinkedIn. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information