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LinkedIn Wisely Continues to Copy Facebook

By Jamal Carnette, CFA - May 9, 2016 at 12:35PM

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LinkedIn is reportedly looking at its own Instant Articles system, which would help keep people on its site.

LinkedIn's (LNKD.DL) narrow focus is both a blessing and a curse. On one hand, the company's career focus has allowed the company to position itself not as a competitor to traditional social-media sites such as Facebook (META 0.25%) and Twitter, but rather as a complement to these sites. As a job-focused social-media website, LinkedIn has a niche that's allowed it to grow without direct competition.

The downside of LinkedIn's niche is that investors pay for increased users and engagement in addition to traditional stock valuation metrics such as revenue and earnings. While advertisers desire a targeted audience, the potential user base is limited. Where anybody over the age of 13 can open an account on Facebook or Twitter and find value in the product, LinkedIn is tailored for working professionals. 

LinkedIn has been able to split the difference between the two, with increased focus on social interaction to increase engagement. In recent years, LinkedIn has started to resemble Facebook as it relates to the user experience and interface. For example, LinkedIn has added a news feed, the ability to like or comment on updates, and an internal messaging service. According to BuzzFeed, LinkedIn is considering another idea from Facebook.

Instant Articles on LinkedIn?
BuzzFeed reports that "sources with knowledge of LinkedIn's plans" say the company is working with publishers to create a service similar to Facebook's Instant Articles, roughly a year after Facebook launched its service that loads articles more quickly and keeps people on its site.. Facebook's Instant Articles are hosted directly on its site instead of providing as a click-through to the publishers' websites. Such a system could be good for LinkedIn as it would increase its "stickiness" factor.

On the other hand, publishers face trade-offs. Most digital news organizations are paid on ad delivery, where site visits are an important metric in setting ad rates. Producing content to be hosted on another site is actually antithetical to growing website visits.

However, in the case of Facebook and its nearly 1.7 billion active users and 2 million-plus advertisers, it's difficult for publishers to say no to that type of potential reach. Additionally, Instant Articles have faster load times, which increases the likelihood a user will read the article rather than abandoning a slow-loading clickthrough.

Facebook instituted an ad-revenue-sharing model in which the publisher keeps 100% of ad revenue if it places ads in its Instant Articles, and Facebook gets 30% if it makes the placement, but the trade-off is that the publisher has to adhere to Facebook's restrictions on advertising. Early on, publishers complained that Facebook's restrictions were too strict to make meaningful revenue from the service. After some negotiations and fixes, publishers seem to be more amenable to publishing under Facebook's format.

Delivery versus content wars
Increasingly, sites that provide traffic are looking to control the user experience. In addition to Facebook and LinkedIn, Twitter has introduced its Moments feature, which features curated, hosted tweets.

Additionally, Alphabet's Google has introduced its Accelerated Mobile Pages, or AMP, format for faster mobile browsing. Alphabet's newest format doesn't host the data, but does ask the publisher to strip down the site for quicker load times. As advertising is generally a large part of a publisher's data load, AMP also limits per-visit monetization but delivers the publisher more search-based traffic in return.

The upshot of all this is that sites that deliver traffic are using their audiences to extract concessions from publishers; there's no reason for LinkedIn not to do the same. LinkedIn would be wise to make this move, as a system like Facebook's Instant Articles should increase engagement. If LinkedIn's instant articles were to resembles Facebook's, especially as it relates to the ad-sharing agreement, it could be a strong driver of future returns. 

 

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Jamal Carnette has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), 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.

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