Internet and social media are becoming an increasingly powerful part of everyday life, impacting social, economic, and business activities, among others. Because companies operating in this space offer unique investment opportunities with massive potential for growth, prudent investors are wise to closely track the nuances of major industry players.
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With that in mind, Pew Research Center has published its Social Media Update 2014 -- a report providing nuanced insights on American adults' social network use. Let's take a look at some of the key findings in this report and what they mean for investors in companies such as Facebook , Twitter , and LinkedIn .
Who's who in social media
The dominant social media player should come as no surprise. According to Pew -- which surveyed U.S. Internet users aged 18 years and older -- Facebook is the most popular social network by a wide margin, with 71% currently on on the site.
Interestingly, Facebook's overall user growth has slowed down (the percentage is flat versus 2013 numbers), but the site has rapidly gained acceptance among users aged 65 or more in the past several years. Today, 56% of Internet users aged 65 and older are on Facebook, a material increase versus 45% in 2013 and 35% in 2012.
Data source: Pew Research
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Other notable players, of course, include Twitter and Instagram -- both of which have grown their online adult user base in the past three years, largely due to their popularity among young adults. Meanwhile, Pinterest's user base has surged among online adults because of its appeal to women -- 42% of online women now use the platform, according to the study.
However, one social media platform deserves some special attention. According to the study, LinkedIn was particularly popular among college graduates, those in higher-income households, and the employed. LinkedIn was the only platform where those aged 30-64 were more likely to be users than those aged 18-29, and a full 50% of college graduates use the site.
When interpreted in the context of the company's business model and its long-term potential for investors,LinkedIn's performance signals opportunities. Specifically, LinkedIn's popularity among college-educated consumers under 50bodes well in terms of its opportunities to monetize the platform, as this is segment is particularly coveted by advertisers.
The case for investing in LinkedIn
While social networks such as Facebook and Twitter make most of their sales from online advertising, LinkedIn's business model is quite different. The professional network, as different to a social network, makes a sizable 24% of revenues from online advertising. However, a big 57% of total sales during the last quarter came from the talent solutions division, meaning companies and recruiters who pay LinkedIn to have access to potential job candidates. The remaining 19% of revenues was produced by the premium subscriptions business.
Online advertising is an exciting market offering plenty of room for growth, but social media companies in this space need to compete not only against each other, but also against a global juggernaut such as Google . The online search giant has a market share of more than 88% in the global search market according to Statista, and the company brought in over $59 billion in online advertising revenues during 2014.
With so many players competing for a piece of the pie, it's hard to tell what can happen in terms of ad prices and company-level profitability in the online advertising business over the coming years.
LinkedIn, on the other hand, is the undisputed leader in online job searching and professional networking. The company is also broadening its portfolio of solutions, expanding into promising areas such as social selling to better capitalize on the value of its platform and database.
The business is a textbook example of the network effect; LinkedIn becomes more valuable as it grows in size over time, incorporating more individual users and companies to the platform. For this reason, user count and engagement are of utmost importance, and the company seems to be clearly firing on all cylinders.
As of the fourth quarter of 2014, LinkedIn had 347 million registered users, a year over year increase of 25%. And considering that six years ago, there were only 31 million members in the platform, growth rates are truly impressive.
There is still plenty of room for growth according to management; the company believes its current addressable market is nearly 780 million professionals, knowledge workers and students, while on a longer term basis LinkedIn intends to create economic opportunity for each and every member of the global workforce, which equates to 3 billion people worldwide.
Individual users of all kinds, companies, recruiters, and universities attract each other to LinkedIn. Fortunately for investors in the company, it looks like LinkedIn is on track to continue capitalizing on the network effect in a powerful way over the coming years.
The article 50% of College-Educated Internet Users Do This originally appeared on Fool.com.
Andrs Cardenal owns shares of Apple, Google (A shares), Google (C shares), and LinkedIn. The Motley Fool recommends Apple, Facebook, Google (A shares), Google (C shares), LinkedIn, and Twitter. The Motley Fool owns shares of Apple, Facebook, Google (A shares), Google (C shares), LinkedIn, and Twitter. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.