A study released yesterday addresses the following question: As LinkedIn rushes to increase its user base (now around 100m+ users), does its size really generate revenues?Linkedin converts 0.8% of its active users into premium subscribers.
With 250k premium subscribers, LinkedIn is far behind its small European competitors. Among its European competitors, Xing converts up to 20% of its active users and Viadeo around 10% of them. Cheaper and more aggressive on the premium product, its competitors are far more efficient in generating direct revenues from memberships.
LinkedIn users not addicted enough for advertisers
While Facebook generates billions of advertising revenues, LinkedIn clearly suffers from a lack of addiction. The average time spent per visit by its active users is under 9 minutes, while Facebook keeps its users above 25min.
Therefore, a returning visitor on LinkedIn views 30 pages a month and Facebook about 1,000!
International expansion doesn’t generate a dimeAs LinkedIn expands internationally, its premium subscription rate falls dramatically and there are no revenues from its Holly Grail aka the HR Solutions.
LinkedIn’s hegemony is challenged in multiple key countries (Germany, France, China, and Brazil) by its small competitors, and its base revenue model doesn’t work there:
- Capturing revenues from HR Solutions and advertising requires a massive sales team in close proximity to the client (already more than 300 in the US) and such investments abroad would jeopardize the corporate organisation.
- Web marketing revenues has shown its limits (close to zero premium subscribers abroad).
How ahead is LinkedIn from its competitors?
In its IPO filing LinkedIn comes quick on its competitors:
“Other companies such as Facebook, Google, Microsoft and Twitter could develop competing solutions or partner with third parties to offer such products. We face competition from a number of smaller companies in international markets, such as Xing in Germany and Viadeo in France […]”
Reading this sentence leads to the sentiment that there is no real competition out there. Let’s be frank : nobody knows Xing and Viadeo among the investors who pushed the LinkedIn shares up to 100$.
Focus on user experienceFrom the issues listed above, it seems obvious that the fundamental challenge for LinkedIn is to increase addiction. Addiction creates premium and advertising revenues for sure, but is also key for its HR Solution business. Recruiters are concerned about the number of CVs but only with updated profiles, and users ready to engage and respond to recruiters. LinkedIn Today has been a effort in this direction.
LinkedIn knows how to think out of the box and now may focus on user experience rather than racing for international hegemony.
You can read the full study named “LinkedIn against its European competitors” issued by IKO System, a social sales intelligence company.
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