LinkedIn is a fascinating company. It’s a pretty ugly looking social network, but one that has actually figured out a way to monetize its user base. They have been profitable since 2006, and recently recently raised about $75 million at a $1 billion valuation. And what’s most interesting is that they’ve done all this in ways that Facebook and MySpace seemingly can’t: premium memberships, and high CPM rates.
The reason LinkedIn has been successful with this approach? Simple: their users feel they are getting a return on their investment.
Unlike Facebook and MySpace, which are used almost entirely for entertainment and social purposes, LinkedIn is a business networking platform. Users make contacts, get recommendations, and even find jobs. With everything on the web moving toward free, people are still obviously willing to pay a fee if it will help them advance their professional careers.
The paywall also creates a tremendous environment for advertisers, since the site’s heaviest users are generally professionals looking for ways to move up in the world. This means that a) the average LinkedIn user will be more well-to-do than the average Facebook or MySpace user, and b) the average LinkedIn user will be infinitely more likely to click on an ad for a product that helps them along the same lines.
What does this say about the notion that everything will soon be free? Well, most software and digital media will be free, but a product with a direct ROI to the end user may always warrant a premium.
Keep in mind that LinkedIn has done all this with a pretty poor design, and a less-than-intuitive interface. This is a business with a lot of room for growth, and a clear business model that should be sustainable for a good bit of time. The question is: will they be able to take online business networking mainstream, and win in this space long-term?
Feedback? Write a comment, or e-mail the author at shawn(AT)squawkingbaseball.com
Add New Comment