On February 27, 2013, LinkedIn stock closed at an impressive $168.55 a share. An all-time high for the company, the closing price was even more impressive when compared to other public social media stock. Facebook, Groupon and others struggle in the stock market. So why does LinkedIn, generally considered the wallflower of social media, succeed?
Social Media Instability
Social media sites such as Facebook worry investors. Such sites are at the mercy of their users, who are a notoriously fickle crowd. Facebook can’t make a minor change to news feed formats without users rising up in arms.
Quick question: how does Facebook make money? According to Mashable, 46 percent of U.S. adults have no idea. The answer, of course, is advertising, but finding a consistently effective method of advertising has proven problematic, and every new attempt arouses the ire of users. To nervous investors, Facebook’s business plan seems to be in constant flux.
A Clear Business Plan
Not so with LinkedIn. From the start, LinkedIn sold itself as a unique resource for industry recruitment and headhunting. Unlike the standard online job board, which matches job hunters with open positions, LinkedIn allows headhunters to find professionals who may or may not be seeking employment.
Whether you’re a business looking for a new head of network or someone to oversee fleets of trucks, LinkedIn offers a rich resource for recruiters. Companies spend millions on LinkedIn to buy job ads, establish career pages and engage the services of the site’s recruitment talent finders.
The LinkedIn Niche
It’s a strategy that works. When the company went public in May of 2011, LinkedIn had a value of $4 billion. As of February 2013, the company’s value increased to $18 billion, an impressive achievement, especially considering the much larger user base of Facebook and other social media giants.
Perhaps LinkedIn’s smaller, more focused audience explains its success. Facebook may boast over one billion users, but it tries to be all things to all people. Any student of marketing knows that trying to please everyone rarely works.
In comparison, LinkedIn has about 200 million users, a far cry from Facebook’s billion. Those 200 million, however, have much in common. LinkedIn users are professionals, using the site to build and maintain ties within their industry. They may not be actively looking for employment, but neither are they adverse to the idea of switching employers if the right offer comes along.
So LinkedIn has a firm niche audience, which possesses something the company’s main business partners want: talent. And companies such as Pepsi and Starbucks are willing to pay to access that talent.
You can’t define Facebook or Twitter’s users as easily, because there’s simply too many of them. LinkedIn wins by being smaller, more focused, and more flexible than its competitors.