Back to top

Analyst Blog

The concept of professional / business networking has come a long way. Companies such as LinkedIn Corporation (LNKD - Analyst Report), Xing and Viadeo have helped in a big way to add new features and revolutionize this field.

An increasing number of companies, irrespective of their sizes, are taking the help of popular networking and information sharing sites, such as Facebook Inc.(FB - Analyst Report) and Twitter, to market their products and services.With each passing day, these mediums of business communication are gaining an edge over their traditional counterparts, such as television and print media.

Online professional networks are gaining popularity among both young and veteran professionals. They are helping these professionals address professional issues online.

Although business networking has taken a little more time to gain a foothold, compared to social networking, which has grown in leaps and bounds, it is noticeably scaling up as we speak and is in the process of transforming the fields of recruitment, self-employment and product promotion. Sensing the opportunities available in the field of professional / business networking, social networking sites, such as Facebook, are also coming up with services to cater to business customers and professionals.

LinkedIn has come a long way since its IPO in 2011. The cash cow for LinkedIn has been its talent solutions segment, which connected recruiters to candidates. On an average, this segment generated over 50.0% of the company’s total revenues over the last couple of years.

Although the talent solutions unit is generating good business for the company, it is havingtrouble generating ad revenues from its growing mobile user base. The company’s premium subscriber base in the advertisement segment generates only about 20.0% of the revenues as most users do not get converted to paid subscribers.

Moreover, business networks are facing some other issues as well. One of the main issues is the absence of video interaction. As a result of this, members are unable to convey a sense of their personality to the prospective employer or business counterpart. Some industry veterans feel that this is an important part of networking and business interaction. It is for this reason that sites like LinkedIn are not preferred by recruiters for conducting a preliminary interview.

This is one of the main reasons behind people opting for sites like Yammer and Ning. Growth prospects of business networking sites are dependent on their ability to introduce new technologies so that employers, recruiters, marketers and public relations departments of companieshave greater flexibility and better use for the service. This will also attract new paid users and build customer loyalty.

Both LinkedIn and Facebook carry a Zacks Rank#2 (Buy). Investors can also consider investing in other stocks such as Yahoo Inc. (YHOO - Analyst Report) and Akamai Technologies Inc. (AKAM - Analyst Report) both of which carry a Zacks Rank#2 (Buy).

Please login to Zacks.com or register to post a comment.