There are now three listed social networking companies
Facebook (FB), Linkedin (LNKD) and Twitter (TWTR). Social networks derive their
value from the number of users, the frequency of use and the information that
they share. While all three are social networks they do have different purposes,
see table below. In a social setting explanation LNKD is like a work party you
can have fun but you have to watch what you say and do you can’t totally let
your hair down. FB is a party where everyone you know is there, Instagram which
is owned by FB is a party that your parents don’t know about yet hence the
attraction for teens. Finally TWTR is a like a party where you don’t know
anyone, it’s interesting but you don’t stay long because you don’t know anyone
too well!
|
|
Facebook
|
Linkedin
|
Twitter
|
|
Market Capitalisation*
|
$161.9 billion
|
$25 billion
|
$30.2 billion
|
|
Monthly active users (MAU)
|
1.23 billion
|
187 million
|
241 million
|
|
Market capitalisation/ User
|
$131.6
|
$133.69
|
$125.31
|
|
Mobile Friendly
|
Yes 53% of ad revenue
|
No
|
Yes 75% of ad revenue
|
|
China
|
No
|
Yes, 4 million members
|
No
|
|
How they differ
|
Largest network of users with the most knowledge of user habits.
Everything that is liked is stored only on Facebook’s server Google has no
access.
|
Majority of revenue is not advertising but subscription fees for recruitment
and marketing. Only social network that is not banned in China.
|
Public, realtime news. An open broadcast system not a closed network
like Facebook news tends to rebroadcasted to other outlets.
|
*As of 11/02/2014
Linkedin an end of year work Christmas party
LNKD was actually the first successful original network incorporating in 2003 a year ahead of FB in 2004. LNKD’s mission is to connect the world’s professionals to make them more productive and successful. LNKD estimates there are over 600 million knowledge workers in the world. While LNKD’s addressable market is not every internet user the users that they have tend to be high income professionals. LNKD is different from the other social networks in that it is not just advertising but about creating opportunities in recruiting and marketing.
Advertising drives only 25% of LNKD revenues the majority actually comes
from recruiters paying for subscriptions. LNKD’s talent solution products help
recruiters find and engage the best talent by accessing LNKD’s database. This
access is compelling as it enables them to search and target certain skills
from the 85% pool of employees directly that are not actively looking for a
job.
While many are aware of the recruitment capability LNKD is also
a pioneer of social selling with a product called sales navigator which helps to make introductions. According to LNKD users with sales titles in their database are 5x
larger than the number of recruiters and hiring managers. An example being
instead of making a cold call the salesperson can check LNKD and find that a
colleague he knew went to high school with a lead and could provide an introduction
rather than a cold call. This is not only the users contacts but the network of all individuals in the company that can be leveraged to substantially increase the potential to find leads.
LNKD’s big leg up against competitors is its recurring
subscription revenue for its products. Investor’s value the visibility of a
recurring income stream they also value the growth opportunity that is China. Apparently
the LNKD service is so valuable to Chinese businesses that unlike other social
networks it has not been banned. LNKD has disclosed it has approximately 4
million users in China there is currently no Mandarin language support, the
users so far are bilingual professionals. We expect LNKD will announce a joint
venture in order to provide Mandarin and localised support.
Facebook a party where
everyone including your parents is there
Data and size is what differentiates FB from the other social networks. On its most recent quarterly call FB disclosed that the information they have on its users is larger than the index in any web search engine with more than a trillion connections of people and interests and over a trillion status updates and content. Zuckerberg also mentioned that around 5-10% of posts on FB are questions to friends. It’s a longer term plan but FB is building out its graph search product to answer these questions with a personalised search engine for users with answers and suggestions depending on what you have liked and who your friends are rather than a one size fits all approach.
Data and size is what differentiates FB from the other social networks. On its most recent quarterly call FB disclosed that the information they have on its users is larger than the index in any web search engine with more than a trillion connections of people and interests and over a trillion status updates and content. Zuckerberg also mentioned that around 5-10% of posts on FB are questions to friends. It’s a longer term plan but FB is building out its graph search product to answer these questions with a personalised search engine for users with answers and suggestions depending on what you have liked and who your friends are rather than a one size fits all approach.
Users moving to smartphones is a benefit to FB as
it is capturing 1 out of every 5 minutes spent on phones compared to 1 in 7
minutes on the desktop. The smartphone has increased usage of FB as everyone
constantly carries their phone with them but not their desktop and because
users tend to be on the go they are also finding increasingly valuable location
data. Mobile is extremely important with 53% of revenue from advertisements in
the newsfeeds. Ads in the newsfeed are estimated to make up about 5% or 1 in 20
stories. Pricing for this product has significantly increased as advertisers
are finding the returns to be attractive.
While teens leaving FB is a concern they tend to be using
Instagram which FB owns. Instagram is a photo sharing social network with over
150 million monthly active users. Founded in 2010 Instagram has grown faster
than FB did at a similar age and if this growth rate continues it could take
over TWTR by number of users within two years. FB has rolled out 15 second
videos for Instagram and has started trial advertising.
Engagement for FB is one if not the highest in the industry with 62% of users logging in daily. It is telling that other social networks do not disclose similar daily/monthly users a sign of how users are engaged with the product. Another disclosure on the latest conference call was the use of its famous like button. On the average day in December, FB saw more than 6 billion likes up 59% from 3.8 billion likes a year ago.
Twitter a party where
you don’t know anyone
While FB is about connecting with friends TWTR is about connecting to the world, it is an open public system. News wires and even Bloomberg monitor and incorporate tweets from celebrities as part of their services for the latest breaking news on events. TWTR became famous for breaking news on events like the Hudson plane landing miracle. As a user you might not be able to friend a celebrity on FB but you can follow them on TWTR. Even Warren Buffet has an account which amazed me given his aversion to technology. Though he has only posted three tweets and does not follow anyone. Carl Icahn has also successfully taken to TWTR to publicly rally for AAPL to return cash to shareholders.
While FB is about connecting with friends TWTR is about connecting to the world, it is an open public system. News wires and even Bloomberg monitor and incorporate tweets from celebrities as part of their services for the latest breaking news on events. TWTR became famous for breaking news on events like the Hudson plane landing miracle. As a user you might not be able to friend a celebrity on FB but you can follow them on TWTR. Even Warren Buffet has an account which amazed me given his aversion to technology. Though he has only posted three tweets and does not follow anyone. Carl Icahn has also successfully taken to TWTR to publicly rally for AAPL to return cash to shareholders.
TWTR has done a great job in cultivating television
advertisers, it is now commonplace for shows to create hashtags to generate
real time conversations around shows to generate more traffic. TWTR is even
more mobile friendly than FB with higher mobile revenues as a % of overall. What
differentiates TWTR from peers is that there is only one class of share. There
is no secondary class of share with extra voting rights, unlike other
technology companies shareholders will have a say in how TWTR is run. It also
opens up potential for TWTR to get taken over.
Apparently nearly a billion users have signed up to TWTR but
only 241 million are monthly active users. The downside to TWTR is that for new
users the experience is confusing it is hard to connect to and find people you know
and even then a lot of interaction is reading rather than tweeting. TWTR
admitted on their first conference call that they have plans to make the service easier to use when users first sign up. As the CEO mentioned they need to bridge
the gap between awareness of TWTR and engagement on the platform. TWTR is
popular for events but usage tends to dwindle afterwards.
As long as its a party
Just like many people have a separate email address and
phone number for personal and work its seems social networks have divided along
similar lines. FB is used to connect with friends and everyone you know, LNKD is
for professional contacts and TWTR for following celebrities and the latest breaking
news. Happy social networking!
Jason
Disclosure:
Decisive has a long position in Facebook (FB) stock
The
material in this article is for informational purposes only and in no way
constitutes a solicitation of business or investment advice. The material has
been prepared without regard to any client's or other person's investment
objectives. Before making an investment decision you should consider the
assistance of a financial adviser and whether any investment or service is
appropriate in light of your particular investment needs.
