Mobile Drives LinkedIn's Sponsored Updates

LinkedIn is early in shifting from traditional display ads on its site to ads that run in users’ news feed ads. Its Sponsored Updates ad unit is off to a promising start after being launched widely in July.
 
Similar to news feed ads on Facebook, Sponsored Updates have higher click-through rates -- especially on mobile, which currently accounts for two-thirds of ad sales for the new format, according to the report by JP Morgan analyst Doug Anmuth. Monetizing mobile is of increasing importance to LinkedIn, with about a third of its traffic now coming from devices.

The higher performance has already translated into better eCPMs for the in-stream ads compared to LinkedIn’s regular display ads. “Pricing should increase more as advertiser demand in the platform begins to build,” he wrote. During its third-quarter conference call last week, LinkedIn said it was pleased with early results for Sponsored Updates, based on the more than 1,000 advertisers using the ads so far.
 
“While the revenue base remains small, it is balanced across channels, and we are seeing a majority of marketers, including field sales customers utilizing CPC pricing,” stated LinkedIn CFO Steven Sordello during the earnings call. Anmuth today noted that feed ads for jobs have performed especially well, although he -- and LinkedIn -- have not provided further details on click-through rates or other types of engagement.
 
Sponsored Updates make up an estimated “mid-single digit” percentage of all posts a user sees in their feed. That would be roughly equivalent to the 5% ratio of ads to content Facebook maintains in its own news feed. The social network saw its share price initially dip after it indicated last week that it had no plans to increase the ad load, raising investor concerns about ad revenue growth.
 
Whether LinkedIn ramps up the frequency of Sponsored Updates any time soon is unclear, but the company has typically introduced new ad products gradually to avoid alienating its 238 million users. LinkedIn does not expect the feed-based ads to generate meaningful advertising until next year, as it transitions away from display and custom ad placements.
 
Macquarie Securities analyst Tom White estimates that LinkedIn will take in about $46 million from Sponsored Updates next year.
 
The company’s ad growth increased modestly to 38% in the third quarter from 36% in the prior quarter, but that was still well below the 56% ad revenue gain in the first quarter, and 68% in the fourth quarter of 2012. Unlike Facebook, however, LinkedIn has two other key revenue streams: recruiting services and subscriptions.
 
In addition to advertising, the JP Morgan report also provided updates on LinkedIn’s expanded publishing initiatives based on a meeting Monday with Daniel Roth, LinkedIn’s executive editor. The professional network’s Influencers blog network now counts 500 thought leaders, with each post generating on average 30,000 views and about 100 comments.
 
“We believe LinkedIn will continue to add two to three new Influencers per week, with an emphasis on international and further industry diversification,” wrote Anmuth. LinkedIn last week noted that adding the ability for users to respond directly to a specific comment about an Influencer post drove a 50% increase in the volume of comments.
 
To further enhance engagement, LinkedIn last month also launched a redesigned Pulse app that will tap into a user’s profile to provide personalized content recommendations. Pulse draws on content from 1.5 million publishers and uses algorithms to match headlines to professionally relevant selections. As a consequence, “the site drives a significant amount of traffic to long-tail publishers,” the report stated

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