LinkedIn is one interesting “Social” network, and their new content strategy makes a lot of sense to me. Here is why.

Even though LinkedIn is not as viral as Facebook or Twitter, it has proven to monetize well ($8 annually per monthly user compared to Facebook’s $1.5). The higher revenue per active user opens the door to exploring new types of business strategies, including one that you might not expect a social network to go after – a content strategy. To clarify, this is not about LinkedIn buying paid content or distributing paid articles about how awesome LinkedIn is. It’s actually a strategy targeted right at heart of one of LinkedIn’s biggest challenges – increasing engagement.

Backing out a bit to restate the obvious, every freemium product needs to first nail acquisition, then engagement, and finally monetization. Each requirement is not standalone, acquisition is a pre-request for engagement, and without an engaged userbase it becomes extremely hard to drive meaningful revenues.

In it’s infancy, back in 2002-2004, LinkedIn was actually slow to grow and it took quite a few years to ramp-up user acquisition (One reason might be that LinkedIn was just early to the market and people could not see the value until the network effect was fully in place). A few years later and with a few great tricks up their sleeves (including rumored Reid Huffman’s “loss aversion” invite acceptance tactics) they finally got there.

In the meanwhile, building on one segment of super active users – recruiters, LinkedIn was able to launch money making products - Talent solutions (The companies cash cow accounting for ~50% of revenue), Advertising (~25% of revenue) and later premium subscriptions.

So LinkedIn has figured the first step – user acquisition (including activation and network effect) and then jumped directly to the step 3 – monetization. Meanwhile, engagement was doing well, but not as great as some of the other metrics compared to other “Social” networks. It all makes perfect sense. The long tail of LinkedIn users were not really using the product daily. Unlike Facebook, the action on LinkedIn is not as compelling for most people. Users don’t come to LinkedIn to check-up on their friends, they come to find their next big gig.

Circling back to content strategies, comes 2013 and suddenly LinkedIn is all about content. They started with the launch of the Influencer product and pushed it hard with massive email campaigns to users and front page promotion. More recently they bought Pulse to help target the best content for users.  What’s interesting about this is that it’s sort of opposite to anything else that is happening out there. Content businesses online are actually facing more challenges than ever – banner ads, the bread and butter for many businesses are becoming less and less effective (just look at Yahoo’s latest earning reports). Content players are finding it increasingly hard to drive revenues for their work and are becoming less sexy as a business.
Actually, the acquisition of Pulse itself is a good indication of the challenges content companies and content related technologies are facing. Pulse is reported to have more than 30 million active monthly users, which is big by any standard and especially so in mobile with challenges around retention. However, Pulse was bought for $90m - That’s $3 per active monthly user – Meanwhile LinkedIn has ~150 million active users each month but is worth over $19b, that is no less then $126 per active monthly user.

Then why is LinkedIn suddenly focus on content? well… LinkedIn has found a way to flip this model on it’s head. With great monetization it suddenly makes a lot of sense to engage users by leveraging content.  Think about it for a second – LinkedIn has the audience and knows how to make money out of it. Additionally, LinkedIn has a strong ad-based product. The equation in the ad business is actually really simple – more pageviews = more revenue, and that is exactly the low hanging fruit that LinkedIn is after.

The content challenge for LinkedIn to make their product one that is used daily and becomes part of a “ritual”, resulting is sustained engagement. If users get used to reading high quality news at LinkedIn the engagement challenge is essentially solved, driving ad revenue up first, but even more important for the longer term, fueling growth across all products.

For a couple of years now people have been fascinated by Social Networks and how they have impacted our lives. We have seen social networks raise to become some of the most prominent tech companies of our times – Facebook, LinkedIn and Twitter. When you think about it, it makes sense – People want to share, like and interact with others. Social Networks are the natural evolution of online interaction.

However, not all Networks were created equal, and they are not all “Social”. More broadly, in our lives there are three distinct networks that really matter – Social, professional and family (not necessarily in that order). The Social Networks, which can be divided to sub-networks (i.e. friends from college, friends from back home, etc.) was conquered by Facebook. The professional network, the digital extension of one’s rolodex, has been conquered by LinkedIn. The last big network that really matters is the family network.

The social Network builds-up on basic social behavioral needs – Sharing an exciting moment in your life, Peeking at a profile of a potential blind-date, and social conformity (You better like that wedding photo, or else…). Social Networks is where you go when you want to catch-up with your friends and see whats-up. Google+ is trying to rebuild the social network graph, and with the amazing tech machines called Google behind it, it’s bound to have an impact. A lingering question still remains – does the social graph need rebuilding?.

The professional network is quite different. it’s social to the extent that people use it to communicate, but what drives the interaction is very different. It’s not about sharing a moment, it’s more about reaching a goal – Getting an introduction, finding your next exciting position, or poaching a key employee from a competitor. It’s business oriented and driven by a different set of wants and needs, which are not really “social”.

The Family Network is different then anything that came before it, and is even less “social”. Think about how families interact and what they do – families sit down for dinner 7pm, they ask “where are you? when will you be here?”, and they share their lives in different, more intimate, way.
That is exactly why the family network requires a completely different approach. it’s about a private network – not about shouting out to million of fans on Twitter, It’s about staying in sync – not about liking a cool filtered picture, and it’s about people you communicate with daily – not about a random friend you met 10 years ago at a party and can’t even remember why you like.

One big network has been left on the sidelines. Time is ripe for that to change.

Credit for most (if not all) of the inspiration for this post goes to Chris Hulls, CEO at Life360.

In late 2010 I wrote a blog post about how Facebook could easily be worth $100B. Some of my colleagues called me up and did nothing short but claim that I must be crazy. That’s perfectly fine. I have a feeling that I’m going to get even more calls about this post. My rationale isn’t built up from an analyst’s financial model or from leveraging traditional market sizing techniques, it’s mostly based on intuition about how Facebook can become the key player in the world of Online marketing and advertising.

Google is the leader in performance and direct response advertising, converting users wants and needs to e-commerce transactions and sales leads. Facebook competes with Google on direct response and is becoming more and more effective in doing so by leveraging the Social and user’s click-stream data, capturing a growing portion of Google’s market.

However, Facebook’s untapped potential is actually in brand advertising, a space that currently has no clear winner and will account for almost half of total online advertising spending in 2015, according to e-marketer.

Brands already get it and are willing to pay; But Facebook hasn’t yet found the right model to fully incorporate them. The value of positive engagements between consumers and brands shared across the social space is hard to match, and Facebook will find ways to scale the monetization of that on facebook.com across fan pages, ads and the newsfeed.

Analysts focus on revenues from ads delivered on Facebook.com, and Facebook has just started maximizing its potential there, but Facebook has not yet turned to monetize one of its greatest assets – the Open Graph.
Hundreds of millions of users are using Facebook’s open graph capabilities across million of websites (including most of the top sites in the world). More than 10,000 sites are adding the Open Graph capabilities each month. “Login with Facebook” is no longer an option – it’s a must.
Additionally, Facebook captures endless piles of data about people, their lives, and their friends. Think a lifetime worth of data and then multiple that by over 800 million users. Big Data indeed. This staggering amount of data will enable Facebook to deliver ad targeting capabilities which are unparalleled, optimizing performance and accuracy better than any marketing tool seen before. Whether this happens or not depends mostly on execution, not on the conceptual capability to deliver those tools. The data is there.

This all leads to Facebook having a unique opportunity to create an unparalleled display ad network outside of Facebook, adding social targeting to help drive up revenues. With this strategy, there is no reason why Facebook can’t control the same portion of the market in online branding as Google does with direct response. Facebook can eventually match Google ad revenues with a combination of brand and direct response ad products, inside Facebook.com and in many leading destination sites outside of Facebook. With other revenue streams, such as payments for virtual goods, Facebook can even outpace Google.

Compared to Google, Facebook’s business is potentially more defendable. In Search, Google dominance is driven by excellence in monetization, a powerful brand and great technology. However, Google does not “own” search, it just executes better than anybody else in the search world. as technology progresses Google’s tech advantage is becoming more incremental compared to some of its competitors, and can be potentially disrupted. It’s going to be crazy hard to disrupt Google, but it’s doable.

Facebook is not in the same boat. Social is already an inherent, must-have, layer in everything online – websites, mobile apps and smart TVs. Facebook “owns” Social, and in its dominance is driven by a powerful network affect. Technology is not the key driver here. Many can potentially try to create a social network service that outperforms or delivers more features than Facebook does, but it doesn’t really matter. What matters is that all your friends are on Facebook.
At this point in time, Disrupting Facebook requires more than a just better tech or flawless execution. It requires a paradigm shift to a whole new era of online computing, and even there it’s pretty safe to assume that Facebook will be all over the place.

So, whether it takes 12 month or 5 years, it’s pretty much inevitable – Facebook, as mission critical piece of our connected identity stack, will increasingly find ways to monetize its position and would be worth more than Google today at $200B.