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Why LinkedIn will always be better than Facebook

LinkedIn (NYSE: LNKD)  versus Facebook (NASDAQ: FB) . It doesn’t even seem to be a fair fight sometimes, does it? In May 2011, LinkedIn had its IPO, and has been posting decent numbers ever since. Facebook, since its IPO in May 2012, has received media scrutiny, and often scorn. So, why might LinkedIn have the long-term upper hand?

Facebook does… what?

As we all know by now, Facebook is a social network. Many social networks have come and gone, but by virtue of it captivating such a large user base Facebook has come out victorious as a real company that makes money. The problem is monetising users can be troublesome. While the company recently said that they had increased the number of mobile users 51%, reporting user growth does not always mean year to year monetary growth.

While the company was able to go from 618 million mobile users at the end of 2012 to 819 million by the first half of 2013, what does that really mean? In 2012, Facebook’s revenue increased US$1.38 billion, or 37% year over year. Ad revenue went up 32%, which is very good. That actually outranks user growth from 2011 to 2012, which was 25% Still, the demand for Facebook’s ads is much slower than growth, with average price per ad only going up 3% from 2011. What does that mean? Well, the company better be able to perpetually add more users, because when the growth runs out, they’ll have to only talk about revenue numbers and ad growth.

LinkedIn’s different tactic

As a social network, LinkedIn doesn’t talk much about its user base. Because unlike its competitor Facebook, its collection of registered users is possibly worth much more than that of Facebook’s. With 150 million members, LinkedIn is much smaller than the 1 billion-plus users Facebook has. But LinkedIn has a plan to reinvent job networking, which has more monetary value than “sharing with friends” which is the number one way Facebook says it creates value for its users.

LinkedIn’s revenue growth over the past year has been quite good, with an 86% rise in revenue to US$972 million. The company’s highest expense is sales and marketing that stands at US$324 million and 33% of revenue. LinkedIn is using this to find more job-seeking users. And while the company only made US$21 million in profit, it is in building mode. Remember classified job ads? Well, those went away with Craigslist. We might remember Craigslist the same way at some point now that a professional network like LinkedIn exists.

A social network literally out of this realm

Not enough is said regarding the Chinese social networking company Sina (NASDAQ: SINA) . That’s because outside of China the company is not well-known. But think about this, within China, companies like Facebook and sometimes LinkedIn are blocked for censorship reasons. That gives Sina tremendous advantage in a country with a more than one billion people.

Sina’s ability to thrive is only limited by its ability to cut costs. Yes, they have the user potential, but it appears that they are ignoring monetary responsibility. In 2012, the company had revenues of US$529 million. But their operating expenses were US$537 million! You can’t make money if you’re spending too much, and Sina’s 64% increase in research and development costs to US$108 million for 2012 is too much. It’s no wonder they had a loss of US$8 million last year, but it is better than their US$33 million loss in 2011.

Too much focus on users

Bottom line: both Facebook and Sina are too focused on users, possibly at the expense of monetization. The reality is that user growth will slow at some point and the big question that will not be ignored is how to make money from users. LinkedIn spent 97% more in marketing-related expenses in 2012, up from $164 million in 2011. But the company isn’t sweating users, other than spending to acquire them and show HR departments that they have the tools to find the right job candidates.

The job market is more complex than ever, and LinkedIn isn’t just a social network. It’s a professional tool. That makes it better than Facebook and better than what Sina offers, long-term.

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A version of this article, written by Daniel Cawrey, originally appeared on fool.com.

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