• by Mark Walsh  @markfwal, April 13, 2009

As LinkedIn approaches its sixth anniversary in May, Online Media Daily spoke with Steve Patrizi, the company's director of advertising sales, about LinkedIn's ad initiatives, the impact of the recession, and whether it has anything to fear from Facebook. Patrizi was previously the manager for Microsoft Digital Advertising Solutions in Northern California, and director of advertising sales for the western region at The Wall Street Journal Online.

LinkedIn currently has more than 38 million mostly professional members, whose average age is 41 and household income is $110,000. The business social networking site has raised more than $100 million to date from investors including Sequoia Capital and Greylock Partners.

Can you describe LinkedIn's business model?

We have the subscription business, where people can pay sums of $25 to $50 a month to have more LinkedIn access, things like deeper searches and being able to send requests for introductions. There's the jobs posting and recruiting business offering ways for HR departments and companies to improve their outreach, and the advertising business, which is about a year and a half old.

How much does advertising contribute to overall revenue?

All parts of revenue are equal contributors. There's also the LinkedIn Research Network. We have more than 30 million profiles, so if a marketer wants to survey -- say, IT professionals in a certain market, we'll work with them and get paid based on how many completed surveys we return. That business isn't an equal contributor yet because it's only a few months old, but I suspect it will be.

What types of advertising does LinkedIn offer?

We have very well-targeted display advertising based on information that people share publicly through their LinkedIn profile. We think that there is a much more crisp sense of intent on LinkedIn because people are going there for a very singular purpose and that's not true of other social networks. People show up on LinkedIn to move their careers ahead. We recently introduced polling ads that deliver polls to certain segments of the audience, and lots of businesses are using that including Fed Ex, Microsoft, Intuit and Mazda.

We also have targeted display sponsorships around LinkedIn Answers and we're just starting to develop the applications platform. We've been very deliberate in creating an environment where we can tap into work that outside developers are doing, but it must meet our criteria of adding to productivity for our users. We're not going to be interested in apps that let people throw things at one another.

One of more successful apps is one that Tripit developed that allows people to aggregate all their travel plans in one place. Courtyard by Marriott has been sponsoring that.

One new area that we have just started exploring is white paper distribution. A lot of companies have been doing that for a long time, and it's a good lead-generation vehicle. The first phase of this is simply using our ad server to run ads targeting certain members to say 'here's a white paper you might be interested in.' The next wave will allow for more searchable database activity and virally distributing white papers.

What about trying to integrate advertising more directly into communications among LinkedIn members, as Facebook does?

What we're not doing is anything interwoven into network updates. That includes status updates as well as any other relevant activity reflected in updates that are generated automatically or others you type in yourself. What we've not done is introduced commercial messages into that flow. We want to make sure that the network updates you see provide a really well-informed dashboard. If we could find a way to do (advertising) and not be overly interruptive or detract from the goal of being productive and efficient we might try it. That's not the direction we're going in the short term but it could be something interesting to explore.

It's been reported that the recession has actually helped accelerate LinkedIn's member growth. Has that growth translated into increased ad revenue?

From the first half of last year we started to add 1 million new members every month. That increased to 2 million every month since August. We've seen a couple of trends. Folks realize it's time to find new career opportunities. There's never been an environment this bad, so it's certainly a lot harder to find ways to cope with all the cutbacks. At the same time, what we're seeing more of is people who have great jobs but realize they need to be really good at what they're doing right now because the stakes are so high and their network can help them navigate through that.

I believe increased usage and the increased number of people using LinkedIn helped us outpace the industry in Q1 (2009) and Q4 was actually a great quarter for us in our subscription, corporate and advertising businesses. So, is all inventory being monetized as it would in an amazing economy? No, but we feel very good going into Q2.

How much did ad sales grow in 2008 and what's the outlook for this year?

As far as ad revenue, we had 200% year to year growth. (Starting from a small base in 2007). Our Q1 saw a very nice year-over-year growth, north of 35%. Our sense is we outpaced the industry, and that tells us that a little bit of market share was shifting hands. We seem to be picking up some business faster than others are in the space.

With Facebook's user base getting older -- the majority of U.S. users are now over 25 -- does LinkedIn face a growing threat from the world's largest social network?

We think less about demographics and more about intent. It just so happens we're serving an audience of people in their early 40s, but we don't think that's the only audience we can serve. In a couple of weeks we'll be launching a new service aimed at recent college grads to help them accelerate their careers. That's what we're set up to do, and what obsesses us is how we can help people be great at their jobs. Facebook is doing different things and serving different needs but we don't think they're serving the same needs as us.

As (LinkedIn Chairman and CEO) Reid Hoffman has said, MySpace is the bar, Facebook is the backyard barbecue, where you have friends and family and may invite some close business colleagues, and LinkedIn is the office.

We're very firm in the belief that people will probably have two networks: one that is more business and professionally oriented, and one that is a little more social -- and we have no intention of doing anything other than serving that business need.