LinkedIn’s Marketing Solutions division, which houses its ad business, typically falls in the shadow of its larger recruiter-oriented Talent Solutions group. But that hasn’t stopped the company's ad revenue from growing at an increasing clip.
On Thursday LinkedIn reported its fourth-quarter earnings, including a 68 percent year-over-year revenue growth for Marketing Solutions to $83.2 million. That’s a bit more impressive than the solid 60 percent year-over-year jump the segment saw in the third quarter. LinkedIn CFO Steve Sordello said the company has nearly doubled its number of active advertisers since Q4 2011.
LinkedIn's ad growth has been bolstered by the company's push to better target brands’ followers, custom groups like Citi’s Professional Women’s Network and more recently Capital One’s Jet: The Business Traveler Network.
But LinkedIn’s ad platform is just getting started. For instance, the company primarily runs ads on its desktop site. It began testing ads in its tablet app last year, but that effort remains a pilot. And the company’s smartphone app doesn’t feature any advertising. That will change.
Last month LinkedIn began testing with “blue-chip marketers” like GE, Xerox, The Economist and BlackBerry the ability to promote their content, such as white papers, within paid status updates targeted to specific nonfollowers, explained LinkedIn CEO Jeff Weiner during Thursday’s call. Weiner wouldn’t say when that product would roll out to all of the platform's 2.4 million active company profiles, but did say that LinkedIn is looking at introducing the same test to smartphones.
“The potentially larger opportunity [than tablets] is smartphones by virtue of the inventory generated there,” Weiner said, specifically citing the ability to serve sponsored content within the activity stream (akin to Facebook’s News Feed).
LinkedIn is also looking at a potentially sizeable influx of ad revenue after launching its ad API, which should facilitate more advertisers more easily running more ads. That tool for marketing developers to use in building social marketing management dashboards wasn’t introduced until late in the fourth quarter and likely had a negligible impact on Q4 revenue, but could make a larger contribution if it gains adoption.
At the end of Thursday’s call, Weiner was asked whether LinkedIn would consider putting its user data to work in establishing an external ad retargeting network, letting advertisers buy ads targeted to LinkedIn users according to their profile information on non-LinkedIn sites. “Give our context and audience, there’s potential there, and it’s an interesting opportunity. But one of the things we’re trying to do is focus on fewer things done better,” he said, before again emphasizing the push around sponsored content in the stream.
For now Marketing Solutions remains the little brother to Talent Solutions. Despite its growth, the business actually lost share in terms of contributing to LinkedIn’s overall bottom line. Marketing Solutions closed Q4 2011 as 30 percent of total revenue but ended Q4 2012 as 27 percent. That's because Talent Solutions grew Q4 revenue by a whopping 90 percent year over year to $161 million, or 53 percent of the company’s total revenue for the period.
LinkedIn’s overall fourth-quarter revenue hit $303.6 million, up 81 percent from Q4 2011. The company’s full-year 2012 revenue increased by 86 percent to $972.3 million.