Internets Largest Professional Networking company, LiknedIn derives a quarter of its revenues from Marketing Solutions which is expected to touch $450 Mn by end of 2014.
LinkedIn continues to evolve and enhance its solutions for marketers. The initial focus on directly sold premium CPM-based sponsorships and guaranteed display deals to large advertisers was followed with the launch of a self service ad platform and most recently with the launch of a new native ad format for its news feed (Sponsored Updates).
LinkedIn’s Marketing Solutions is further divided into 3 categories – Premium Advertising, which is sold directly by its in-house salesforce on a guaranteed impression basis, Self-Service advertising , which leverages LinkedIn’s proprietary ad platform, and Sponsored Updates, which is launched in late 2013 is a native ad unit for the news feed. Sponsored Updates represents LinkedIn’s first opportunity to meaningfully monetize mobile.
Premium Ads – About 30% of total standalone LinkedIn pageviews have a premium ad unit, LinkedIn fills one premium ad unit on average for each pageview with premium inventory, and Premium eCPMs currently run in the $15-17 range. Importantly, and consistent with management’s recent commentary, we believe several broader changes occurring in Internet advertising (e.g. ad exchange market share gains) will continue to pressure premium inventory CPMs.
Self Service Ads – About 54% of total LinkedIn standalone pageviews currently have self-service inventory and self-service eCPMs will increase modestly (i.e. low single-digit) over time driven by continued strong engagement.
Sponsored Updates Ads – There has been significant excitement surrounding this launch partly due to Facebook’s success with its newsfeed ads. While LinkedIn management’s commentary and our own conversations with advertiser customers suggest early reception and feedback have been positive—given high newsfeed engagement, ability to target specific profiles, etc The fill rate, or the % of newsfeed views that contain a Sponsored Update ad unit, which we currently expect has reached 20% by the end of CY13 and expected to hit 75% by the end of CY14.
These changes coupled with the broader changes occurring in Internet advertising (e.g ad exchange market share gains, premium CPM pressures, etc.) and the growing importance of advertising to LinkedIn suggested that a deeper dive into what are now multiple drivers of LinkedIn’s advertising business.