On Wednesday LinkedIn announced a new ads API, which allows the company to start to build out an ad ecosystem similar to Facebook’s.
Up until now, LinkedIn’s ad business has been only about a quarter of its overall revenue mix (see Figure 1 below), dwarfed by the larger talent and hiring business and about even with its subscription business (LinkedIn Premium).
Given the company’s enormous strength in professional networking, it makes sense that it would begin to build out an ad ecosystem that will allow third-party partners to built on top of the LinkedIn API, which will create a scale-out effect as well as allow LinkedIn to keep its own ad sales force relatively small.
Figure 1. LinkedIn revenue mix 2012
Facebook’s lower user engagement combined with heavy pressure from Wall Street to monetize its large community has resulted in fairly heavy-handed (and unpopular) new initatives. LinkedIn, on the other hand, has been the social media darling of Wall Street, in large part because professional markets are easier to monetize in terms of premium subscriptions and professional services.
And now, with the company’s new ads API, LinkedIn can start to accelerate its ad business while not being forced into some of the more unpopular tactics that Facebook has been forced to explore.
One thing to be sure: Expect more love letters from Wall Street based on this recent move.