What differentiates Facebook Inc(NASDAQ:FB) from LinkedIn? Why should Facebook shares be beaten down while LinkedIn shares rise?
Both companies offer people a platform to connect and network. So why should investors turn their backs on Facebook with scepticism while the same investors are eager to lap up shares of LinkedIn.
The answer to that would probably lie in the approach of the companies to get revenues. LinkedIn started out much like Facebook did, offering professionals and businesspeople a place where they could network and exchange notes and initiative discussions without being seen as intrusive.
Along the way the company has tweaked its business model. While basic services are still available to everyone and remain free, premium services need to be paid for. By keeping its subscription fees nominal, the company has managed not to raise the hackles of those who are regulars on it.
Of course, it also has to be noted that LinkedIn is a serious platform where professionals gather to either search for jobs, look for prospective clients and generate leads. The kind of people who populate the medium would not mind shelling out a few extra dollars if they can attain their end objectives.
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Facebook however is more of a social meeting place - it’s the online equivalent of a few buddies getting together at a bar or a hangout for a couple of drinks, where they let their hair down for a couple of hours, have a bit of fun and then disperse.
Would such users be willing to pay for this?
Though there are lots of users who spend a lot of time on the network updating their status, uploading photos, connecting with old and long-lost friends and generally chatting, would these people like to pay for that privilege?
Even Google, which offered its Gmail services for free for a number of years, has started charging for more storage. Its flagship search engine service uses non-intrusive advertising techniques, but since it functions like a Yellow pages directory, it provides a huge opportunity for advertisers.
Can Facebook emulate the Google model, without rustling the feathers of its users? Can it transmute the popularity of its platform and its 900-million users into a marketable opportunity to yield hard cash?
Facebook has to find the answers to that..soon.