Facebook and LinkedIn – Differences and Similarities

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Facebook and LinkedIn – Differences and Similarities

Very different animals – Facebook and LinkedIn are indeed very different companies, with different vision, focus, strategies and value propositions. One is not comparing like with like when they compare the two companies despite the obvious temptation. However, one could use both companies to evaluate the general health of social networking in the personal and professional space. So how are the two companies different or similar?

Mission and Vision – LinkedIn’s focus is to make the world’s professionals more productive and successful. Facebook seeks to make the world more open and connected. Basically Facebook would like to be the operating system of the web, touching every aspect of our lives on the net and covering everything that we do through the social graph. It has been successful to a great extent as several websites are incorporating Facebook login and other features in their site. To that extent people will most likely continue to spend much more time on LinkedIn than Facebook. More and more websites are also integrating LinkedIn API and Login but the focus will continue to be as a value adding tool for professionals. Thus LinkedIn will not be as widely adopted as Facebook across the web.

Listed companies – Both LinkedIn and Facebook are now listed companies. In fact Facebook listed just a few days ago on Friday, 18 May in probably one of the most eagerly anticipated listings that I can recall. I won’t read too much into the performance of the both companies’ stock performance. However, suffice it to say that both companies, especially Facebook will be under some pressure in the medium to long term to justify valuations especially Facebook. Figures of around $100 Billion valuation were going around at some stage for Facebook. Time will tell if this valuation is realistic. Since its listing LinkedIn has done very well financially and in terms of membership growth.

Different Business Models  – Facebook and LinkedIn have different business models that speak to their respective missions and visions. LinkedIn works on a Freemium model where it is free to open a basic account for individuals. For those who want extra features in their accounts such as greater visibility of third level connections and the ability to send InMails among other things, they will a certain amount depending on the features they need. Facebook on the other hand is completely free to members. LinkedIn also has products for Marketing and Branding, Hiring and Recruitment solutions. Facebook offers Marketing and Branding and Advertising products for companies. Companies can create free pages on LinkedIn and Facebook. However, on LinkedIn, companies would need to pay if they are looking for something much richer than the ordinary company page. Say for instance a company would also like a Careers Page on LinkedIn as a way to help branding. That is a paid feature.

Adoption by companies  –One area where these two companies seem very different is the way they have been embraced by companies. With the corporate tools that LinkedIn has for Marketing and Branding, and Talent and Management, companies have been very keen to embrace it. Facebook is very strong on Advertising and Branding space. In fact Advertising makes up the lion’s share of the Facebook revenue.  The question in my mind how much can Facebook diversify beyond Advertising.  The company is starting to get more revenue outside Advertising but is it moving fast enough?

LinkedIn not a job board  – Many people have positioned LinkedIn as primarily geared at Job Seekers and Recruiters. I believe the site goes way beyond this. It is a great platform to find potential business partners, getting sales and business leads as well. I believe that recruiters use the site more effectively and efficiently than anyone else. If there is one area that both Facebook and LinkedIn are very strong in, it is building corporate brands and LinkedIn has already shown how well it is monetising this as seen by the growth of their marketing business in their latest financial results.

Growth  – I get the sense that while Facebook is much bigger than everyone else, they are actually starting to slow down in terms of growth. Maybe this had to happen at some stage; it is just a matter of time before the website hits 1 billion users. LinkedIn on the other hand, is experiencing incredible growth not just in terms of members but sales growth as well. LinkedIn has been identified as one of the fastest growing tech companies in the US. Facebook needs to get into China to give its user growth a boost! Given that all the growth for LinkedIn is taking place while many economies are not in great shape I would feel that LinkedIn will have even better prospects when the global economy recovers and hiring picks up across the board.

Free versus Paid – While Facebook has always committed to having free services, there has been talk of late in the blogosphere about Facebook actually charging for some content in future (to promote newsfeeds). In fact I believe the company has been testing some features on the site. I think this could greatly upset some users as this seemed to be such a key thing for Facebook that they would never charge. Are they already starting to feel some heat from the listing?

Personal and Professional Networking  – I don’t ever see LinkedIn going into the personal sharing space. This is not their area. They identified their niche long back, professionals and have been very focussed on this. So anything non-professional, it’s very unlikely that LinkedIn will ever venture into it. On the other hand Facebook, which started out focussing very much on personal networking, has showed that it might reposition itself for professional networking as well given the evolving format of profiles on the site. However, some people simply do not want to mix business and pleasure though the lines between the two seem to be blurring more and more. Should Facebook venture more into professional networking, it will now be competing against one of its own Apps, BranchOut.

RISKS
Mobile – I believe that both Facebook and LinkedIn have a significant risk and opportunity in the form of the Mobile. How do both companies monetise on mobile to the same extent as they have done with the desktop-browser. This is quite a challenge as evidenced by Google’s performance in this area. Margins in mobile seem to be lower for everyone. It will be interesting to assess the full impact of mobile in a few years’ time on both Facebook and LinkedIn as things are very much going on that front.

Quality Content – One issue which I am starting to pick up from LinkedIn users is the issue of Spam on the site. I have been picking on quite a number of websites that some users feel the quality of engagement and content on the site has deteriorated over the years. Personally I feel that LinkedIn has great tools to manage the quality of engagement and these should be fully utilised. If a user is not happy with the quality of information they are getting from a connection they should mark the correspondence or even consider removing the connection.  One should bear in mind that the LinkedIn Networking Strategy they employ will have a direct bearing on the type of communication they experience. To give an example I would expect who is not looking for a job to be constantly accepting invites for recruiters. Facebook is also facing a challenge with the volume of newfeeds that inundate users’ pages. At least it has introduced tools to help manage the quality by hiding feeds that are not relevant.

Next frontier in social media – Facebook through its acquisition of Instagram for an incredible $1 billion showed just seriously it is viewing Mobile while LinkedIn has been busy rolling out Mobile Apps for the iOS and Windows 8 Platforms. With that move, Facebook may also have been acknowledging that it was already too slow in the next frontier of social media, mobile.

What about BranchOut – BranchOut, a Facebook App focussing on professional networking is very promising given its massive growth. BranchOut fills in the professional networking gap on Facebook quietly. The app already has 30 million users.  However one key strategic risk that BranchOut faces is that it seems overly reliant or dependent on Facebook for its revenues, user base as is the case with Zynga. I guess this reliance is good for Facebook as Facebook can be quite certain that BranchOut will be around for a long time to come. It is almost the same as the case of Zynga, the game app. However, Zynga is now trying to diverse revenues beyond the Facebook platform. I don’t know if such a diversification strategy would ever be feasible for BranchOut or its fortunes will always be directly tied to Facebook.

Privacy Issues – This is probably one of the biggest risks that Facebook has at the moment. How is going to be fully transparent with regards to Privacy and to fully respect its’ users rights while at the same time meeting its financial targets and projections which require to monetise to the greatest extent possible with companies and advertisers.  Facebook continues to tinker with its content features and sharing as it explores more ways of monetising. If this risk is not managed well, it could ultimately lead to the network’s undoing as users seek better platforms. LinkedIn has not had any major issues with regards to privacy. I feel they have been more forthcoming on this and I don’t see it as a risk for them at all.

Facebook and LinkedIn cater to different needs in our lives, the personal and professional aspect of our lives. We probably need them both and there is probably room for both as well.

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