Quick Thoughts on LinkedIn and Facebook Business Models

ent2Mashable’s article, Biz Networking on Facebook Could Soon Supersede LinkedIn, discussed Facebook’s relative prowess at attracting ad spending and concluded that Facebook was a better venue for business networking. I felt the need to weigh in on that, so I offer my analysis here, which compares certain aspects of each venue’s networking, demographics and strategy.

A better headline for this article might have been, “Facebook Likely to Supercede LinkedIn as Advertising Vehicle.” When I read “Biz Networking,” that seemed to say that more business networking happens on Facebook than LinkedIn. That has nothing to do with advertising revenue. You should qualify that statement and define what you mean to say. It certainly is not true for the enterprise executive demographic. It may well be true for certain types of “business networking” among certain demographics.

linkedinAlthough it’s open to interpretation, looking at social networks only from the aspect of the advertising aspect of their business models is too limited at this stage of the game. I have been a power user of LinkedIn for a couple of years, and I believe that their business model will increasingly shift toward enterprise process innovation. LinkedIn’s audience and community are completely different than Facebook’s. It’s more focused (you could say limited). But, when it comes to attracting enterprise executives to participate in social networking, it’s the leader in the U.S. Facebook is out of reach for most Boomer execs because it’s too Web 2.0. LinkedIn is trying to monetize that difference.

As a solid Facebook member for almost 2 years, I believe it is far better fit for a B2C advertising aspect of its business model. It reflects a far greater range of popular culture than LinkedIn.

facebookIMHO, social networks only use advertising revenue as a default setting when they can’t figure out another way to make money, and they’re in good company. Look at mobile; everyone is struggling to monetize attention, and advertising is the flogged horse.

But look more closely at *business* networking. Look at Faceforce. LinkedIn and Facebook will have the chance to monetize eyeballs in the enterprise. I am openly calling on LinkedIn to become the Swiss bank of executive profiles (see Faceforce.com Pioneers Enterprise Social Network Vision, Exposes Massive LinkedIn Opportunity: profile information will usually be superior than enterprise, so enterprise social networks should invoke external profile information, and LinkedIn profiles are enterprise-ready, unlike Facebook’s.

I am watching social networks’ business models with a lot of peripheral vision. Since Web 2.0 is about relationship, it will go in many directions. Within the next two years, business cases will begin emerging in earnest, and business models will run with them.

Another angle (many would argue heretical): social networks facilitating connections and taking a piece of them. Let’s say that, in two years, LinkedIn has dozens of testimonials by SVPs of BusDev of the deals they made, facilitated by LinkedIn. LinkedIn could monetize that in a less objectionable way (to many) than Jigsaw, for example.

Lastly, the thread that Facebook is “business-level competition” for LinkedIn is true when one considers ad spending. But you make a broad statement that you don’t back up fully. I’d like to hear more about your analysis.

I perceive LinkedIn and Facebook as very distinct venues that complement each other nicely. From a member perspective, they do compete heavily for the young Gen X and Gen Y category. Boomers aren’t doing serious business networking on Facebook. LinkedIn is all business; Boomers don’t integrate fun online with doing business the way Gen Y does. Gen Y does go to LinkedIn but as an afterthought, and without much commitment. As Gen Y assumes more influence, Facebook will undoubtedly see more business networking. But the players will all be different in the years ahead.

What is your experience in each venue? What are your thoughts?

2 comments to Quick Thoughts on LinkedIn and Facebook Business Models

  • Facebook is *so* powerful — I predict it is the network that will have *all* the externalities working for it . . . people will pay to have access to it, the way they pay to have cable. Or better yet, the way they have rent so that they have a place to sleep. It’s *that* fundamental of a human need . . . just a cost of doing business . . . .

    I see real problems for a conventional advertising model with Facebook: it just gets in the way. Now, what they do with all the preference data aggregated on the site . . . .

    At the same time, LinkedIn will survive to fulfill a different function. Whereas Facebook is the “big tent,” LinkedIn is the bargaining table where you get down to cases. Basically, *anybody* will be your friend on Facebook – it’s kind of an insult to say “no.” Though there’s a weak implicit recommendation there. But when you give someone an explicit recommendation on LinkedIn, that’s very serious. So it’s a place where a certain kind of decisionmaker focuses their attention. I see the potential for some very old-fashioned advertising there – the kind of thing ADM or GE achieved advertising on David Brinkley’s Sunday a.m. show . . . .

    LinkedIn will be connected to Facebook as a subsidiary utility.

  • Joe, thanks for taking this into a fascinating direction. I agree with your idea that Facebook is rapidly becoming the “portal of your life” – it’s really a platform, and the thing I love most is that customers are writing a huge chunk of it, they are its edge. Could you comment on their effectiveness at accommodating developers who provide the edge? In a sense, it’s like Threadless for a community, but this is more a hunch I make as an observer; I’m not a developer. Great call, too, on LinkedIn; you’re right on. I want them to expose profile information via RSS, so all the enterprise social networks can syndicate it; they can become the Swiss bank of executive profiles! Faceforce is great, too, but a lot of FB content not appropriate for work, and too many users don’t know how to manage their data.

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