Rumors continue to swirl that social media giant Facebook (FB) is in the process of creating a job board with its third party platforms to compete with LinkedIn (LNKD) and Monster Worldwide (MWW). We understand why Facebook would want to compete with LinkedIn, especially since LinkedIn earns materially more in revenue per hour of usage than Facebook.
However, we're unsure whether Facebook will be able to compete in the business networking space. Since its inception, Facebook has successfully captured a significant amount of its users' free-time by providing a (mostly) unfiltered social experience. On Facebook, there's a bit of a separation between one's work life and one's personal life.
On the other hand, LinkedIn commands almost a work-like atmosphere of professionalism. Most users have pictures of themselves in formal business attire, and users rarely, if ever, post status updates. We think users have a different relationship with LinkedIn than Facebook, and we do not think a mixture of the two would be very popular. Even though Facebook's application BranchOut has grown rapidly, we do not think the firm will come close to matching LinkedIn's amount of activity.
Further, though the Internet has made applying for jobs significantly easier, job boards are becoming less useful. With a challenging employment atmosphere, hundreds, if not thousands, of people apply for a single job. In response to this resume flood, some corporations have created algorithms that screen users without a single human having looked at the resume. If an applicant has wording on their resume that the algorithms do not select, they may not have a chance at a first-round interview. Therefore, we think the profitability of LinkedIn's business model lies in its enterprise offering that simplifies headhunting, rather than its job board. Facebook is rumored to be pursuing the job board model that, as shown by Monster Worldwide, is under some serious pressure.
Regardless of whether or not Facebook actually creates a job board, we doubt it will be material to the long-term profitability of the company. On the other hand, this event could provide a downside catalyst for LinkedIn, which we think is extremely overvalued and already registers a poor score on our Valuentum Buying Index (our stock-selection methodology).
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Additional disclosure: LNKD is included in the portfolio of our Best Ideas Newsletter.