The two biggest social media growth stories continue to evolve in 2013 similar to how they did in 2012. Facebook (NASDAQ:FB) is still searching for the right way to monetize users while LinkedIn (NASDAQ:LNKD) continues to improve monetization while searching for more ways to integrate LinkedIn itself into the daily life of its users.
Graphing the Growth of Mobile
Ultimately Facebook has evolved into an advertising platform with ad revenue making up 84% of the total in the quarter. Mobile advertising now represents 23% of the total ad revenue, which is rising rapidly; up from 14% from the previous quarter. This trend also correlates nicely with the company's recent acknowledgment that people spend more time per month using Facebook on mobile devices - 8.5 hours vs. 6+ hours - than on PCs; effectively proving that it has begun cracking the mobile ad revenue nut. Something that Google (GOOG) and others have struggled to do yet. However, innovation costs and expenses for the quarter went up by 82% killing short-term profitability. But, again, in growth stock stories, top line revenue and efficacy of new products far outweigh bottom line numbers.
The mobile monthly active users reached 680 million by the end of the year, a 57% increase year-over-year. Out of the total of 1.06 billion users on Facebook, itself a 25% increase over 2011, mobile users now represent 64.15% of the total users. The switch to mobile revenue sources is critical to Facebook's future.
For the fourth quarter, the social network suggested that it would see a fall in average revenue per user as it expands into the developing markets of Asia. However, revenue per user has not fallen yet as Facebook reported a 6% increase in revenues per user to $5.32. Following the announcement, its shares declined 5.5% to close at $28.11. This would be the company's second-biggest fall after the disastrous IPO last year as it still struggles to justify its $60+ billion market cap.
In Q4 of 2012, Facebook reported a net income of $64 million ($0.03/share) compared to $302 million ($0.14/share) in the same period last year. More importantly for a growth story like Facebook's, top line revenue rose by 40% to reach $1.585 billion.
Creating a Social News Network
On the other hand, as I have repeatedly stressed, LinkedIn has almost none of these issues with users; having built its social network on a person's professional rather than personal resume. As such, it continues to outperform the lofty estimates of analysts. This last quarter it posted an 81% increase in revenues to $303.6 million, which translated into a net income, excluding one-off items, of $40.2 million or $0.35 per share. This was considerably more than analysts' estimates of $0.19 per share. Between a premium subscription model and its target audience that fundamentally sees it as a business development tool, LinkedIn can weave new services into its framework with a lot less push back from users.
It recently launched its "Job Board" tool in November. The majority of LinkedIn users are based outside the U.S. and the company is looking to target markets in Hong Kong and Brazil. International sales for LinkedIn doubled to $114.6 million - now 37.7% of the total revenues.
However, LinkedIn has seen a slowdown in its user growth along with a decrease in total page views. To counter this LinkedIn has added social media features that encourage visitors to spend more time on the site. I'm not sure these will ultimately generate much more traction but LinkedIn is becoming a much better information and news aggregator for people than it had been in the past. LinkenIn Today is a very powerful news and information service that pushes content posted on LinkedIn out to users that coincide with their profile and user habits. Marrying LinkedIn Today with personal blogs written by successful business personalities creates a measure of stickiness that had been absent in the past.
The Global X Social Media Index ETF (SOCL), which focuses on some of the leading social media firms primarily from the U.S, China and Japan, has lagged these two media heavyweights in the past 6 months. Both Facebook and LinkedIn are two of the biggest holdings in SOCL. Facebook has so much important money behind it that its every move is dissected and considered in grave detail. LinkedIn, on the other hand, simply continues to build value and add services, executing on its business model to replace most of the functions of human resources. LinkedIn still has no real competition in its niche and has a far smoother path to continued growth.