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Could LinkedIn Be Adland's Next $1 Billion Player?

Content-Crazed Marketers Are Flocking to It. The Trick May Be Keeping Them Coming With Ad Innovation.

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Chip Bergh holds a coveted spot among the CEO set: He's LinkedIn famous.

The Levi Strauss & Co. president and chief executive's nearly 1,000-word "Dirty Jeans Manifesto" has racked up 93,000 views and 246 comments since being published on the social network in July. Until that post -- which, in the name of sustainability, advocated for washing your jeans less -- Levi's used LinkedIn the same way most consumer companies do: as a recruiting tool and to share the occasional company-related article.

Now, Levi's is working with digital agency Group SJR on a broad content-marketing strategy for LinkedIn. It's planning posts for up to 11 executives, drafting rank-and-file employees into sharing content on LinkedIn and earmarking part of its communications budget to test LinkedIn Sponsored Updates, which allow advertisers to reach members who don't follow their company.

All of this activity flows from Levi's company page, which has more than 90,000 followers. That may not sound like much next to Levi's 560,000 Twitter followers and 22 million Facebook "likes," but LinkedIn is the only major social network where it always feels OK for a brand to push its business -- in fact, it's expected.

"It gives us a platform to express company perspectives in our own voice without a lot of effort," said Kelly McGinnis, senior VP and chief communications officer at Levi's. "It's low effort, high return in our mind."

Whether promoting corporate values or turning top brass into thought leaders, there's no place quite like LinkedIn for content marketing. And the company has spent the last year reshaping its advertising business to tap into that zeal.

LinkedIn CEO Jeff Weiner
LinkedIn CEO Jeff Weiner Credit: David Paul Morris: Bloomberg

"It has become the fastest growing business in LinkedIn's history," LinkedIn CEO Jeff Weiner told Ad Age. "And I don't mean the fastest growing marketing-solutions business. I mean the fastest growing business, period."

Billion dollar business
LinkedIn's core business is still selling access to its recruiter database, which costs about $9,000 annually for a single user.

But there are now more than 3.5 million company pages on LinkedIn, many of which are pushing out a steady stream of content. The invite-only Influencer program, where Mr. Bergh posted his screed, now counts about 500 contributors, including President Barack Obama, Bill Gates and Martha Stewart. The average post from an Influencer generates 31,000 views, 250 likes and 80 comments, according to LinkedIn.

In February, LinkedIn began rolling out its publishing platform to all of its 313 million members. Currently, 100 million people can publish to LinkedIn, and they're kicking out more than 7,000 posts a day. Since February, traffic to publisher and Influencer posts has more than doubled. In many ways, LinkedIn is the ultimate b-to-b publisher without the heavy costs of producing what it publishes.

With content reigning supreme in the marketing industry, it might come as a surprise that there wasn't always enthusiasm for LinkedIn's content-marketing strategy, especially on Wall Street. In July 2013, LinkedIn officially introduced sponsored updates, signaling a broader move away from display ads to a focus on selling content-marketing products. The company said it wanted to carve out an ad business that could scale. In September 2013, LinkedIn's stock price peaked at $253 a share -- and then started a prolonged slide, hitting $136 in May.

"There was some uncertainty in the market as to whether this transition would succeed," said Mark Mahaney, managing director-internet at RBC Capital Markets. "It was one of the reasons the stock underperformed for six to nine months."

Since bottoming out, LinkedIn's stock has regained nearly 50%, with plenty of help from sponsored updates. Its advertising business -- the aforementioned "marketing-solutions" business -- generated $106 million in revenue during the second quarter, up 44% from a year earlier. After just one year, sponsored updates account for 28% of the company's ad revenue.

Mr. Mahaney expects LinkedIn's ad revenue -- which was $362 million in 2013 -- to roughly triple in the near future.

"In the next three to five years, this will be a company that will be generating $1 billion a year in ad revenue."

Aggressive rollout
In the thick of last year's transition, LinkedIn hired Penry Price, a former top ad exec at Google, as VP-global sales, marketing solutions, to steer the content-marketing effort. He now oversees a staff of roughly 600 globally working on the company's ad business.

Since starting sponsored updates, LinkedIn has aggressively rolled out new products, including Direct Sponsored Content, which allows for greater targeting and personalization, and enlisted agencies and publishers to pitch LinkedIn to their clients. LinkedIn also introduced a score to measure engagement of paid and organic content, as well as Trending Content, which shows brands the topics certain groups of users are reading. It can tell IBM, for instance, that IT decision-makers in a certain geography are reading more articles about cloud computing this month than usual, according to Mr. Price. "You should be publishing about cloud computing if you want to engage with this audience," he said.

And in July, LinkedIn paid $175 million for Bizo, a tech company that will allow marketers to target professional audiences with content-based marketing messages on a network of more than 3,000 professional sites.

Broader platform
Business-to-business companies have long relied on LinkedIn's ability to target and serve clients and prospects with relevant ads. It stands as the top social-media platform b-to-b marketers use to distribute content, according to a recent Content Marketing Institute report. They also rated it the most effective social-media platform. But the company's transition to a content-first strategy has caught the attention of consumer-facing brands. The Content Marketing Institute found that 71% of consumer marketers in North America used LinkedIn to distribute content, up from 51% in 2013 -- the biggest increase among social networks. (Facebook, Twitter and YouTube still rank ahead of LinkedIn.)

Marketers are "talking and asking: What about next year -- what can we do better on LinkedIn?" said Asli Hamamci, managing director-senior partner at media-buying agency MindShare. Legal services and identity-theft protection company LegalShield, which sells directly to consumers and businesses, considers LinkedIn "foundational" to its marketing efforts, said CEO Jeff Bell, the former marketing chief at Microsoft's Xbox and one-time VP at Chrysler and Jeep. "If initially people were thinking of it as a place for me to post my résumé, as a place to find a new position, it has evolved into a much stronger and broader platform," he said.

For brands like Levi's, LinkedIn is more of a reputational play. Others like Mercedes and Procter & Gamble use it to market cars and deodorant to LinkedIn's members, which the social network calls "prosumers." P&G, for instance, maintains a page for Secret deodorant that shares articles and videos aimed at inspiring its audience to stay "100% fearless at work."

Mercedes-Benz launched a campaign over the summer to promote its 2015 C-Class line. "LinkedIn is becoming more and more important for the digital-marketing mix of Mercedes-Benz as it has highly attractive target groups and shows a rising, international performance," a Mercedes-Benz spokeswoman said.

"It's a great platform for marketing, given the relationship they have with their users," said Adam Shlachter, chief investment officer at DigitasLBi. "Everyone is a consumer of something."

'Actually pretty boring'
Since the company's founding in 2003, LinkedIn has become the social network for professionals. Its talent solutions business generated 60% of its $534 million in revenue during the second quarter, growing 49% from a year earlier. Advertising contributes 20% of overall sales, but several years ago the company started noticing trends that would reshape its ad business.

The first was a shift in what people were doing on LinkedIn. "When we first started as a platform, it was very utilitarian," said Jon Williams, head of global agency relations at LinkedIn. People updated their résumés, looked for jobs and built a professional network. "Once you have that network, it's actually pretty boring if it's just updates about my job or I got promoted or you got promoted," Mr. Price said.

However, members had begun sharing articles, and LinkedIn nurtured this behavior. In 2011, it introduced LinkedIn Today, where editors and algorithms compiled headlines from around the web. The Influencer Program debuted in 2012 and a year later it bought Pulse to better customize LinkedIn Today's slate of articles.

Today, users are six times more likely to read, post, share, comment or like content than engage in career-related activity, such as update a profile or make connections, according to LinkedIn.

A surge in mobile visitors prompted LinkedIn to further reconsider its ad business. About 45% of its global traffic is from mobile, with the 50% mark clearly in sight, according to Mr. Price. "As a marketing-solutions business that was heavy in traditional display, it was a signal that this was not sustainable," he said. "We can do a good job, with incredible data and great targeting techniques, but if all our traffic is on mobile, we need to figure out something to do here."

The response was sponsored updates. "Sponsored updates is the most important product they have right now," said Ms. Hamamci.

Brands can pay for sponsored updates on either a cost per click or cost per impression basis, selecting a daily or total budget for the campaign and how long they want it to run.

The cost is reasonable -- depending on whom you ask. "Compared to b-to-b clients, it's proving to be not that expensive," said Ms. Hamamci. But the price may surprise b-to-c brands. "If you're comparing it to the Facebooks and Twitters of the world, then I think it's expensive," she added.

Huge following, but…
Betting 20% of a company's revenue on content marketing comes with its share of risks. If marketers change their minds about content -- a tempering of the enthusiasm around content marketing seems inevitable -- LinkedIn could be forced to again rethink its ad business.

There's still plenty of doubt among marketers. "They have a huge following, but it gets used most by salespeople, job hunters and job posters," said one ad buyer. Several marketers agreed that this perception exists inside their companies. And Ms. Hamamci conceded that LinkedIn is not as relevant to every brand or client in the same way as Facebook or Twitter.

Part of what's so intriguing about LinkedIn is that, while CVs are known to have an embellishment or two, accounts are tied to users' real identities and their résumés. On Facebook and Twitter, opening multiple accounts and providing false information -- or at least very little -- are commonplace.

Just think of the data LinkedIn members readily provide: age, where they live, the schools they attended, jobs they've held, associations they belong to, content they share and people with whom they're connected, personally and professionally.

"It's more valuable because it's real," said one media buyer.

And marketers are hungry for what LinkedIn has. "From a data standpoint, we want to see more from LinkedIn," Ms. Hamamci said, adding that she'd like more customizable data.

Increasing the site's video inventory is another item on marketers' wish list, buyers said. Rolling out ad products is a delicate balance, though. "You want to be careful not to overdo it," said Mr. Shlachter of Digitas. "I'd like to see that they don't dilute the consumer experience on the site and they don't clutter it with irrelevant advertising or with marketing messages that feel out of place."

During a lunch-hour conversation inside LinkedIn's noisy cafeteria, Mr. Price sought to allay concerns that LinkedIn will inundate its users with ads. LinkedIn, he said, has the ability to target users with content they want to read. Mr. Price had just come from the first-ever Partner Day focused on sponsored updates and content partners. Agencies, publishers and ad-tech firms working with LinkedIn on its content-marketing products gathered to learn best practices, ask questions of LinkedIn and share their concerns.

Publishers' frenemy
The Atlantic and Bloomberg are among LinkedIn's content partners. That means they're using LinkedIn to distribute the content they're producing on behalf of ad clients. (Group SJR is another content partner.) Other publishers, however, are wary of the social network's ambitions. A dollar spent on LinkedIn is one not spent around someone else's content. One publishing exec said LinkedIn keeps him up at night. "I've always worried that they'd get sophisticated … about selling brand advertising around content," he said.

"They have all this data, most of which we don't have in a first-party sense," he added. "They've also got scale and they've got content that is written for their platform or shared on their platform."

Mr. Weiner said LinkedIn doesn't compete with publishers. "We're not trying to become a principal in creating content at the expense of publishers," he said. "We're trying to help publishers get their content in front of the right audience and in doing so create value for that audience and the publisher. So they're core constituents in our publishing ecosystem."

The next billion
LinkedIn's defensiveness about its relationship with publishers comes amid high hopes for Bizo, which can easily be imagined as a massive ad network for sponsored content overlayed with LinkedIn's trove of career-related data. Mr. Weiner sees it as a potential multibillion dollar business.

"Through Bizo, you now have a highly effective means of continuing to nurture that relationship [with a potential customer] on a going-forward basis," he said. "Not just in that one-time engagement on your website. By virtue of the LinkedIn.com website and by virtue of our platform, by virtue of our content and publishing platform and our sponsored-content capabilities, you can now target and nurture that relationship on and off of LinkedIn with highly effective and relevant content."

"When you marry with that our sponsored-content capability, you're not just talking about display ads, you're not just talking about banners, you can also introduce sponsored content into that mix on LinkedIn today and increasingly off of LinkedIn in the future," he added.

In other words, LinkedIn is thinking far beyond dirty jeans.

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