FBlog

Recent IPOs from LinkedIn, Groupon and Pandora have all eyes on the “social media” industry. While that label may be useful in contrasting from more traditional brick-and-mortar businesses or the dotcom darlings of the early 2000s, it does the companies it refers to a disservice by failing to recognize diversity within the group. Facebook, Groupon, Twitter, LinkedIn—while they all allow us to connect with each other online, they are otherwise quite different businesses. (In fact, doesn’t it feel a little funny to refer to Twitter as a “business” at all?)

The success of LinkedIn is based on a simple tenet of brand strategy, and something that Facebook, Twitter and even Google mostly lack. Namely, LinkedIn has a niche. What I mean by “niche” here is a relatively easily defined segment of users (professionals) who interact with the company for highly specific reasons. LinkedIn’s self-limitation—the decision that they are for this type of person and not that type—is often difficult for companies and brands to justify. Someone in charge will invariably ask, “Shouldn’t we try to get every customer we can? Shouldn’t we leverage our success by broadening to new market segments?” But LinkedIn’s power comes from its uncompromising focus on a niche, allowing extremely relevant content and functionality to a relatively small group of users. The tradeoff is fewer total users, but more motivation, activity and loyalty among those that feel the site is made for them. For brands, businesses and industries that rely on high levels of online user engagement and word-of-mouth promotion, this is a critical distinction.

Articles and comments surrounding LinkedIn’s IPO have referred to the site as a “glorified phone book” or a “place to post resumes.” In the past, coworkers have asked me “Why would I be on LinkedIn? I’m not looking for a new job” (and often, “I don’t want the boss to think I’m looking!”). While a fair share of LinkedIn profiles may be little more than post-and-leave resumes, these mentalities shifted long ago for LinkedIn’s core users. They use the site to learn and to share, to stay in touch and ask work-related questions, and to meet potential business partners. And they use it regularly, not just when they “switch jobs or need to update [their] accomplishments.”

Facebook and Twitter may be more likely to have self-proclaimed addicts, but as anyone who’s seen The Social Network knows, Facebook has relinquished its initial niche focus. Originally just for Harvard students, the site quickly became “just for college students.” Now, as many young people lament, anyone can join—even your parents. One of the Chinese “clones” of Facebook made this same shift in more dramatic fashion, changing its name from “Xiaonei” (校内网, on-campus network) to “Renren” (人人网, everyone network).

Twitter, on the other hand, is for anyone with a short attention span, whether they’re into politics, advertising or Justin Beiber. And for the most part, anyone can follow (connect with) anyone else, regardless of relationship or motive (no matter how nefarious). Both Facebook and Twitter are built around powerful, paradigm-shifting ideas, but LinkedIn’s advantage of focus gives it some serious credibility within a very tightly defined world.

As analysts justifiably question LinkedIn’s valuation, there is much talk of the site’s “potential” (or lack thereof, depending who you ask). But potential should not be determined merely by quantities—revenues and numbers of users. Included in an assessment of LinkedIn’s potential should be the fact that the strength of its brand, enhanced by its niche focus, may make it more monetizable. While Facebook’s ads and Twitter’s promoted tweets are mostly a nuisance, LinkedIn’s paid job postings, ads and premium services are often highly relevant. LinkedIn’s credibility in online professional networking will also make it easier for the company to create new revenue streams from on-brand services like SaaS performance reviews, salary negotiation tools, career planning advice, (more) recruiting services and offerings in other aspects of business consulting. Would you trust services like these from LinkedIn? Would you be interested in trying them (many would probably be free)? If you answered “yes,” LinkedIn and their new shareholders can thank niche focus for strengthening the brand.