LinkedIn Pivoting From One-Off Marketing Deals to Content-Based Ads

Marketing biz swelled 56 percent to $74.8 million in Q1

When it comes to LinkedIn’s suite of revenue streams, Marketing Solutions (read: advertising) is the Theodore to Talent Solutions’ (job recruitment) Alvin. While Talent Solutions generated $184.3 million in Q1 revenue—amounting to 57 percent of $324.7 million in overall revenue in the period—Marketing Solutions chipped in $74.8 million, up 56 percent versus last year but accounting for just 23 percent of revenue.

During LinkedIn’s quarterly earnings call Thursday, CFO Steve Sordello projected the company's ad business will see “more moderate growth” in the near future due to lapsing onetime deals signed in Q2 last year.

LinkedIn likely would prefer that those custom branded partnerships—branded communities of which Citi’s Connect: Professional Women’s Network is an example—were repeat business on account of their revenue contribution, and yet the company is aiming for something more “sustainable” and more “scalable,” keywords Sordello and CEO Jeff Weiner repeated throughout the call (another favored by Sordello: “predictable”). In other words, they'd like to turn on an ad-revenue stream that will keep the dollars flowing while expanding LinkedIn into a multibillion-dollar ad platform like Google and Facebook. Still, LinkedIn’s model may more closely resemble that of Amazon, which has been ramping up an ad business as a robust support to its primary revenue stream.

A crucial piece to LinkedIn's new-look ad business is its Sponsored Updates ad units (akin to Twitter’s Promoted Tweets), where companies pay to market their posts in users' feeds. More than 20 brands including Shell, American Express and Intuit have piloted Sponsored Updates. The units began rolling out to users of LinkedIn mobile apps last month, leading Weiner to dub the product the company’s “first content marketing revenue stream to be offered at scale.”

There’s that word again—but the other term to pay attention to there is “content marketing.” Multiple times during the call, Weiner said LinkedIn wants to become “the definitive professional publishing platform.” The LinkedIn Today editorial page and email newsletter, the LinkedIn Influencers blog platform and the recent acquisition of aggregation platform Pulse are all part of that goal. LinkedIn is entering the content business a bit late, lending it a hindsight-is-20/20 perspective that content marketing, or native advertising, could pick up the slack left by traditional display ads.

Weiner made clear the content-marketing push is a “strong complement” to existing display products like video ad banners and SlideShare Content Ads. (SlideShare should really be considered a content-marketing product, though Weiner classifies it as display.) But for all the hype around content marketing/native advertising, a deal breaker for many marketers is its perceived inability to scale. That may be the case for advertorials dubbed native ads, but as Facebook and Twitter have demonstrated with Sponsored Stories and Promoted Tweets, content marketing can, in fact, scale.

That scale is accelerated by the introduction of an ad API to allow ad-tech firms to build their own platforms enabling brands to buy ads on a given social network. Again, LinkedIn did things a bit backward rolling out the API last November, but that conceivably gives those ad firms that have already integrated it a head start supporting content-based ads like Sponsored Updates for advertisers. And now that LinkedIn is finally running ads via mobile devices, its direct-sales teams can for the first time begin to hawk desktop and mobile ads to brands, Weiner said.

As with seemingly every ad-related business these days, mobile is boom or bust. Like Google and Facebook, LinkedIn is seeing an uptick in mobile usage. Between LinkedIn and its presentation-sharing platform SlideShare, the company recorded 170 million monthly unique visitors in Q1, and 30 percent came via mobile apps.

Asked whether mobile might mitigate how much revenue LinkedIn makes from its ads, Sordello responded, “We continue to see very high levels of [CPM impressions].” He went on to note that the company’s ad-revenue stream has been “offset by a lower sell-through rate because of more impressions coming through the system.” He then transitioned directly into describing Sponsored Updates as “a much more efficient and predictable … and scalable model.”

In other words, LinkedIn has an opportunity to fill that expanding inventory more easily, meaning Marketing Solutions’ share of revenue this time next year could be a whole lot bigger.

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