LinkedIn's stock price has doubled this year and Facebook's grew by 42 percent. Both companies are surging because they've outperformed expectations by growing revenue. They've also recently added new ways to advertise - sponsored updates for LinkedIn and mobile newsfeed ads for Facebook. While LinkedIn has multiple revenue streams, Facebook's is primarily driven by paid media buys. Both social media sites rely on selling advertising to drive some portion of their revenue.
Where's the beef? It's in the newsfeed!
LinkedIn's decision to offer ad placements in its newsfeed and Facebook's to go newsfeed-mobile will make their advertising far more effective. Eye-tracking studies have long shown that most people don't focus as much on areas where ads are likely to be. This is true across Facebook, LinkedIn, Google and pretty much every website on the Web. It's commonly referred to as banner blindness.
"It has been found that the less an advertisement looks like an advertisement and the more it looks like an editorial, the more readers stop, look and read." - David Ogilvy, The "father of advertising"
What's the user's intent?
Not many people visit Facebook and LinkedIn with the intent to consume advertising. Their intent and focus is primarily on those areas that deliver perceived value, areas they frequent and trust - like a newsfeed. Marketers understand this and are paying to have their messages there.
Google and the other search engines aren't any different, either; their perceived value resides in the organic search engine results. The whole SEO industry was spawned by this fact. Brands wanted to show up in the valuable area of the search engines, and agencies quickly formed and delivered.
Where the perceived value lies on a website is where the eyeballs go-and that's where brands want to be.
Public relations professionals have understood this for decades. Long before the Internet was invented, they were pitching stories to journalists that placed the brands they represented in the most valuable real estate on a newspaper or magazine - the story itself. Savvy marketers and PR professionals still earn media coverage today, but now they're doing it online as well.
This type of earned media coverage gets way more attention than paid media on those very same websites (see examples above). So much so, in fact, the company American Giant was forced to significantly grow their manufacturing capability by triple digits after Slate.com contributor Farhad Manjoo wrote This is the Greatest Hoodie Ever Made. Could American Giant produce those same results with traditional paid media on Slate.com? Not likely, because the perceived value was in the article itself. If American Giant was not part of the story, far fewer eyeballs would have been exposed to the message.
The same motivation that spawned the search engine optimization industry and carved out the earned media public relations niche is driving LinkedIn and Facebook's new advertising innovations. Brand messages that reside on the areas of a website which provide the greatest perceived value have the best chance of influencing consumers to take action.