LinkedIn's role in B2B social media advertising growth

LinkedIn Executive Summary LinkedIn is the fourth-largest social media advertising network and has a focus on B2B advertising. The reason for this focus is that LinkedIn organizes and groups its audience by their companies and careers, opposite to the friends and families approach used by Facebook. LinkedIn was purchased by Microsoft in 2016 and since that point has seen significant improvements in its platform. These improvements have increased the user base substantially and made LinkedIn more attractive to marketers as well, because of refined targeting, and easier interfaces, and better analytics. Overall, LinkedIn has been one of the leading drivers of the strong increase in advertising revenue in the social media industry. However, since the takeover by Microsoft, LinkedIn has no obligation to publish revenue data, and therefore it does not do so, making its precise market share a bit more difficult to understand.

Overview of the Industry Social media is a collection of websites and apps that bring people together around a common platform, allow them to aggregate and post content, and allow for interactions between the different users. The latter is the social aspect, in contrast to traditional media where the flow of information is from the media outlet to the audience. With social media, the flow of information is between audience members, and there is no singular source of content; audience members produce the content and consume it.
Social media is a relatively recent phenomenon, having developed over the course of the past couple of decades, with the most significant advances having come only in the past ten years. Today, the social media industry reaches 3.8 billion people worldwide, and 84% of people with access to the Internet use social media, making it one of the most widely consumed media forms and with very high market penetration. An estimated 90% of Americans use social media daily, and is it reasonable to think a similar figure exists for other developed nations (Cooper, 2020).
The development, administration, and hosting of social media platforms is expensive, so it became apparent fairly early in the development of social media that the platforms that were popular would need to raise significant amounts of capital. To address this need, these companies turned to the traditional media model, whereby they positioned their audience members as the product, and sold share of eyeballs to advertisers. A recent study by social media marketing management platform Hootsuite highlighted some important figures about the social media industry – that social media ad spending will increase by around 20% in 2020, meaning it is a high growth business. This growth is a reflection both of the popularity of social media among users and of the effectiveness of social media platforms for marketers – 52% of online brand discovery happens in public feeds, 72% of B2B marketers use social media platforms, and split testing ads improve cost-per-acquisition by 72% (Cooper, 2020).
Social media is an increasingly important component of digital ad spending. Digital ads (i.e. Google) has typically been the largest form of digital ad spending, but social media has become increasingly important as social media platforms have grown their audiences, and invested more into the development of their advertising platforms. The percentage share of digital ad spending attributed to social media platforms increased from 9.4% in 2013 to 16.1% in 2016 (Invespcro, 2016) and this trend is believed to have continued since that point. Today, social media is estimated to have around a 13% share of all global ad spending, worth $84 billion, and social media is now the third-largest advertising channel behind TV and paid search, having recently surpassed print media (Gesenhues, 2019).
This success of social media has been driven by a handful of leading platforms. In terms of user base, social media’s leading platforms are Facebook, YouTube, Facebook Messenger, WhatsApp, Instagram, Twitter, Google +, LinkedIn, Skype and Snapchat (Ahmad, 2019). However, there are differences between total users, and the share of marketing dollars for each platform. Most social media marketers utilize a number of different platforms. In 2019, the most popular for marketers were Facebook (94% of marketers), Instagram (73%), Twitter (59%), LinkedIn (58%), YouTube (54%), and then other platforms were much smaller by size (Statista, 2019).
Within the industry, the different platforms will each have their areas of speciality. Facebook is the largest platform for advertisers because of the size of its user base but works best for B2C communications. Instagram is highly visual. Twitter is often used for news and information, and that affects the way that advertisers use that platform. LinkedIn specializes in B2B marketing, because of the nature of that platform, and YouTube’s advertising platform is focused significantly on video. Knowing this, it is easier to understand how LinkedIn in particular can be used, why it is different than some of the other platforms, and then to understand that it may have a certain market share overall, but that it operates more within a unique niche, and it has a much higher share within that niche than within the broader market. Description of the Company LinkedIn is a social media network, founded in 2003, with the vision to ‘create economic opportunity for every member of the global workforce” (LinkedIn, 2020). The mission of LinkedIn is “connect the world’s professionals to make them more productive and successful.” The fact that LinkedIn is focused on professional networking, rather than friends and family, has proven to be a key distinguishing feature for the platform.
LinkedIn today has over 610 million members, and 303 million active monthly users. Of these, 40% visit the site daily. There are 90 million senior-level influencers on LinkedIn, and 63 million decision makers. Because LinkedIn not only has these large numbers of important contacts, but that their job titles are listed, has proven incredibly helpful for social media marketers, because they can more directly target the decision makers that they want to reach (99 Firms, 2020).
One of the challenge is that despite the high number of daily users and total user base, which is one of the largest in all of social media, LinkedIn users do not share content at the same rate as users of other social media platforms. Only around 3 million LinkedIn users post content each week. However, for advertisers the key statistics is that 80% of B2B leads from social media come from LinkedIn, as the users on LinkedIn tend to be engaged in a professional context. This has allowed for the platform to become something of a meeting of the minds between B2B marketers and decision-makers within companies who are actively looking for solutions on the platform, and are open to advertising on LinkedIn (99 Firms, 2020).
LinkedIn’s parent company is Microsoft, and LinkedIn is the primary brand. LinkedIn was formerly an independent company, but this changed in 2016 when LinkedIn was acquired by Microsoft for $26.2 billion (Lunden, 2016). LinkedIn was part of a greater strategy for transforming Microsoft, which at the time of the acquisition was struggling as its core businesses were mature, and the company as a whole faced a declining reputation and struggled to find an innovative approach. New CEO Satya Nadella saw LinkedIn as one of the important components to the overall turnover strategy for Microsoft, and injecting some of LinkedIn’s leadership and innovation mindset into the company was just one of many aspects of this plan (Himpel, 2017).
LinkedIn’s user based has climbed significantly since the Microsoft acquisition, highlighting some areas of synergy between Microsoft’s strategy of becoming a cloud provider of a number of business services, such as Office 365 and Teams, and the core LinkedIn audience. LinkedIn’s developed had basically been stalled at the time of the acquisition, and the acquisition injected both creativity and money into LinkedIn to help it get better (Forbes, 2018). Improvements to LinkedIn in the past few years have meant that more of its users are spending time on the site, spending longer, and engaging more with the content. Furthermore, Microsoft’s expertise has helped LinkedIn improve its advertising programs substantially – the infusion of capital and knowledge from Microsoft has helped fuel the spectacular resurgence of LinkedIn in recent years, and the powerful growth in LinkedIn advertising revenues. Best of all, this transformation came with Microsoft still allowing LinkedIn a high degree of independence. One of the downsides of the acquisition is that there is less clarity about exactly how much money Microsoft earns on LinkedIn advertising revenue, as such disclosures are entirely voluntary, and LinkedIn has been rolled in with a number of other units for the purposes of financial reporting in Microsoft’s annual reports. As part of the Productivity and Business Processes unit for reporting purposes, LinkedIn no longer reports revenues directly to the market (Microsoft 2019 Annual Report).
LinkedIn now has a number of other different products, leveraging Microsoft’s financial investment and the large user base that LinkedIn has. It has Talent Solutions, Sales Solutions, Premium Subscriptions, Marketing Solutions and LinkedIn Learning as different programs, each of which contributes some of the company’s revenues. Marketing Solutions is where most of the advertising revenue lives (Microsoft 2019 Annual Report).
As such, users interact with LinkedIn in a number of ways, and these interactions provide multiple avenues for advertisers. For example, users spend time building their networks, publishing original content, reaching out to prospects and customers, searching for job opportunities and interacting in Groups (Rynne, 2019). Product The main product of LinkedIn is eyeballs, as is the case with all media outlets. The eyeballs in question are the roughly 645 million users that LinkedIn has. These users are given a number of different means of interacting with LinkedIn, including the activities listed above, the most popular of which are building networks (75%), publishing original content (49%) and reaching out to prospects and customers (48%). The platform therefore draws in users, and these users spend a certain amount of time on the site each day or each week. That is the traditional means by which media works – create a means of attracting attention, or eyeballs, of people and then sell a share of that attention to advertisers.
Thus, advertising is the biggest component of LinkedIn’s product – it generates money by providing advertisers with access to its audience. Advertisers have a number of different objectives, and they are able to tailor their advertisements to meet these objectives. A survey conducted by LinkedIn showed that 63% of advertisers sought to generate leads, 62% wanted to increase brand awareness, 58% create better content, 40% wanted to demonstrate thought leadership, 38% aimed to create better sales and marketing alignment and 36% wanted to better understand their marketing ROI (Rynne, 2019). With these different objectives in mind, LinkedIn advertisers have a number of pathways to get there.
Ads are generally served in content streams that a user sees. A user will see content from their connections, and embedded within that stream will be advertisements that are paid for. The advertiser can set a target. For example, a company that sells small business accounting software would be able to target people who have accounting-related job titles and work in companies of a target size range. That type of refined targeting has become one of the hallmarks of digital and social media advertising, and is one of the reasons why those forms have been growing so rapidly in the past couple of decades. Key information that LinkedIn gathers from its users that is served to advertisers includes job title, location, company size, and educational or work backgrounds. All of these can be used to help refine the targeting, which makes LinkedIn advertising especially attractive to B2B marketers. This stands opposite to something like Facebook, which gathers more information on personal interests and therefore is more effective for B2C marketers.
There are a number of different ways for advertisers to take advantage of the LinkedIn platform. For example, a post can be boosted, where the advertiser takes a piece of original content, posts it, and then pays to have that post boosted to a profile of users who are not presently following the brand. Ads can also be served to such external profile audiences without posting to the company’s page. This technique is useful when the ad in question is strictly targeting new client acquisition, and therefore there is no value to posting to the company’s page, the followers of which are probably the vast majority customers.
LinkedIn can also be used for marketers and sales people to message their audience directly. This tactic takes more time to reach people, but there is a case that it is also effective, because it allows for the creation of a personal connection with the audience. This technique is known as cold outreach, and is used by marketers, sales people and human resources professionals alike on LinkedIn. Because of the business context, this is not viewed as especially intrusive, the way it would be on Facebook – if you’re on LinkedIn you expect you’ll be talking business on LinkedIn (Patel, 2018).
In terms of product lifecycle, social media marketing itself is very much in the growth stage, and LinkedIn marketing is as well. This growth is being driven by the large increase in LinkedIn’s user base, overall industry growth, and innovations in the means by which LinkedIn allows marketers to reach their audience. Companies are still catching on to the power of LinkedIn as a marketing platform, and that is helping the company grow in this space. Price LinkedIn has a few different products, and these come with a number of different pricing models. The first is subscriptions, mainly LinkedIn Premium. This is a subscription that gives users access to a more enhanced version of LinkedIn, with a number of features that are not available with a free membership. Premium comes with data, analytics and training that are all unique to this level of membership, and the price for Premium comes in at $79/year, though this is sometimes discounted (Florentine & Kapko, 2019).
The model for pricing out ads on LinkedIn is similar to the model used by other social media networks. LinkedIn, on its website (2020), describes this model as follows: “The amount you pay to advertise on LinkedIn is up to you. You can get started with any budget and stop your ads at any time. LinkedIn ads are sold through an auction. When you run ads, you compete with other advertisers who want to reach a similar target audience.”
There are a couple of different components to this pricing model worth breaking down. First, the auction element is common in media, and standard in social media. Audiences have value, and marketers better understand that value than the media companies. In social media, when targeting can be very granular, the auction method allows not only for LinkedIn to gain maximum revenue, but it allows for LinkedIn to automate the process of setting prices, thereby making its pricing model efficient on its end. The other aspect of this pricing model is that there are controls built in that allow companies to choose and monitor their spending. Without these controls, a company could find its budget blown easily; so these controls are important for advertisers to have control over their spend, something that is necessary to attract advertisers to the platform. Place LinkedIn operates online, around the world, unless there are countries where it is banned or blocked. On its website (2020), LinkedIn lists these countries as Cuba, North Korea, Iran, Syria, Sudan and to specific individuals listed for ban by the US government. Otherwise, LinkedIn has a global scope, but of course its largest market by far in the United States. Thus, LinkedIn has an intensive distribution strategy. This is typical of social media companies, or any online company, really, that its product is not physical and therefore not bound by physical restrictions on trade or logistics.

Promotion LinkedIn promotes aggressively, but largely through its own platform. The main reason it uses its own platform is that its platform targets a B2B audience, and using its own platform showcases the effectiveness of LinkedIn to appeal to B2B marketers. Furthermore, the product that LinkedIn has tends to draw in the audience, and as a consequence of that it has strong word of mouth reputation among B2B marketers – ask any social media marketer and they almost always cite LinkedIn as a mandatory channel for their work. LinkedIn also manages its own mailing lists, using contact information that users store in LinkedIn to promote products like LinkedIn Learning and LinkedIn Premium, to those who have not already signed up for them. Again, this showcases the effectiveness of LinkedIn, by using the platform to sell itself.