LinkedIn now gets 45 percent of its ad revenue from native ads

LinkedIn has gone from being a supplier of traffic to publishers for a rival for their readers. Now, LinkedIn is growing as a competitor for native advertising, too.

Since it got its start as a recruiting site 12 years ago, LinkedIn has tried to get in on the platform game by getting professionals and companies to spend more of their time and money there. And with more than 110 million multiplatform unique visitors in June, up 46 percent year-over-year (comScore), LinkedIn still makes most of its money from selling recruiters access to job candidates.

But it’s been building out its ad business, which now accounts for 20 percent of company revenue. Two years ago, it introduced Sponsored Updates, a native ad-like unit that lets companies like Microsoft Office and Holiday Inn Express pay to push their content into the feeds of their target audience. Since then, LinkedIn revealed in its earnings release July 30, Sponsored Updates has become its fastest-growing ad product, accounting for $63 million, or 45 percent of its ad revenue, in the second quarter of this year.

That growth has come despite questions Sponsored Updates faced early on about whether LinkedIn provided companies large enough reach versus bigger social platforms like Facebook to make it worthwhile as a marketing avenue.

Russell Glass, head of products for LinkedIn Marketing Solutions, said the native ad product is an extension of LinkedIn’s development into a publishing platform, since LinkedIn in February 2014 began allowing all members to contribute to it. After that, publishers’ content became diluted, and their referral traffic declined. Today, according to SimilarWeb, LinkedIn sends online news and media sites just 0.2 percent of all their social media traffic in the U.S.

“Ultimately, LinkedIn wants to be the place where professionals come to further their business goals, become better at their jobs,” said Glass. “Content and thought leadership as well as consumption is a critical part of those goals. It’s a place professionals are coming to accomplish those goals and also where companies that want to get more promotion can do so.”

Glass added that Sponsored Updates is well-suited for mobile, which now accounts for more than half of LinkedIn’s traffic, as the product takes up most of the screen.

It’s easy to see how Sponsored Updates has strong appeal with B2B marketers. One is software company Percolate, a client that LinkedIn arranged to provide an interview about Sponsored Updates. Chris Bolman, director of growth at Percolate, said his firm may only reach about 12,000 followers on LinkedIn. But its membership and targeting ability gives it an edge over other social networks, while the traditional content publishers don’t know enough about their audience and can’t guarantee results. As a result, LinkedIn is now Percolate’s biggest digital marketing outlet.

“The cultural and social pressure on fudging your LinkedIn profile are pretty high, so we know empirically we’re getting our message to the right people,” Bolman said. “We’ve seen organic reach be pretty good. We’ll post something, and it’ll reach half of [Percolate’s followers]. On Facebook, it’d be 10 percent.”

Success like that may make LinkedIn a strong rival for publishers’ B2B ad revenue, but the jury’s still out on how much of a threat it poses to publishers’ consumer ad business. Kunick Kapadia, director of performance marketing at The Gate Media in New York, uses Sponsored Updates to help clients in financial services and risk management fish for prospective clients.

“If you’re going after a niche B2B audience, there’s no platform out there that’s better than LinkedIn,” Kapadia said. “If you have a broad buy, however, LinkedIn’s not the right place.”

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