LinkedIn (NYSE:LNKD.DL) is the latest social network to harness its data for advertisements outside its own website. The professional network joins Facebook (NASDAQ:FB) and Twitter (NYSE:TWTR) in their efforts to target ads to users even after they leave their websites.
LinkedIn hopes to differentiate its ad platform with its professional angle and a user base that's largely, by definition, tech savvy and upscale. The company already has 2,500 publishers on board, and the new audience network, dubbed LinkedIn Network Display, provides another path to grow its Marketing Solutions segment.
The easy comparison
It's easy to look at LinkedIn's launch and expect it to provide similar results to Twitter's MoPub purchase or Facebook's Audience Network and Atlas relaunch. But where Twitter and Facebook are largely targeting consumers, LinkedIn's ad network is aimed at businesses.
That makes a world of difference. For consumers, it's important that a retargeted ad show up quickly. That's where Facebook and Twitter excel, with users spending lots of time on those platforms, and checking in frequently. Both platforms ensure that users are likely to see an ad for a product they recently viewed within a few hours of leaving in their checkout cart.
Business purchases often take a lot longer to develop, so there's a lot more time. Ad sequencing can become important for conversions, but making sure the ads are timely falls down the list of priorities. That's where LinkedIn can excel with its user data. But with the vast majority of its 347 million registered users only checking into the website occasionally, it needs more inventory to sell to advertisers.
An ad network can certainly help. Facebook launched its Audience Network globally in October and saw third-party ad impressions quadruple sequentially. Twitter is expanding its ad inventory with MoPub as well as syndicated ads for publishers that use Twitter content on their own websites or apps.
Its fastest growing segment
Unlike Twitter and Facebook, which rely heavily on advertising for revenue, LinkedIn sees the majority of its revenue from its Talent Solutions tools that help recruiters find new employees. However, its Marketing Solutions segment is its fastest growing, and the expansion of its ads to other websites means it can continue growing in 2015.
Last quarter, Marketing Solutions revenue grew 56% year over year to $153 million. Sponsored updates, which appear in line with updates from other connections similar to Facebook and Twitter ads, accounted for a large portion of the segments growth in 2014. They accounted for one-third of ad revenue last quarter.
Over the next three years, CEO Jeff Weiner sees an opportunity for LinkedIn to grow its business-to-business marketing business to $1 billion in revenue, according to a leaked memo. That would represent 30% annual growth in the segment from 2014 to 2017.
With analysts projecting revenue growth of 34% in 2015 and 30% in 2016, Marketing Solutions will be a big part of that growth even though it accounted for just over 20% of revenue last year. Of course, the real workhorse will still be the company's Talent Solutions segment, which Weiner believes has an opportunity to become a $10 billion business.
The important thing to note is that LinkedIn Network Display sets up LinkedIn for continued growth beyond 2017 and beyond saturation in its user base and unique views. The business-to-business marketing industry is worth an estimated $50 billion, which means LinkedIn will have only a 2% share of the market if it reaches its goal by 2017. To capture more ad spend, it's essential for it to expand beyond its own apps and website.
Adam Levy owns shares of Apple. The Motley Fool recommends Apple, Facebook, LinkedIn, and Twitter. The Motley Fool owns shares of Apple, Facebook, LinkedIn, and Twitter. 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.