http://www.businessweek.com/articles/2013-04-18/why-linkedin-is-buying-newsreader-app-pulse

Social Networks

Why LinkedIn Is Buying Newsreader App Pulse


Why LinkedIn Is Buying Newsreader App Pulse

Illustration by Mitch Blunt

Come to LinkedIn (LNKD), and stay awhile. That’s the pitch behind the career website’s April 11 acquisition of Pulse, the three-year-old newsreading app, for $90 million. By incorporating Pulse’s stream of content from more than 750 media partners, LinkedIn plans to become more than just an occasional visit for job seekers. “The key for LinkedIn is to become a day-to-day site,” says Blake Harper, an analyst at Wunderlich Securities. “They want to become a publishing platform for professionals.”

Pulse is just the latest newsreading app to attract the interest of a big Web portal. CNN (TWX) bought Zite in 2011, while Yahoo! (YHOO) paid $30 million for Summly in March. Like those apps, Pulse suggests articles from hundreds of news and media outlets. It displays them in a photo-based grid that’s particularly well suited to smartphones and tablets, and it allows users to tailor their news feed by picking the sources and subjects that interest them. “We believe Pulse could bring fresh content to LinkedIn and help the platform transform to a professional knowledge hub,” Bank of America Merrill Lynch analyst Justin Post wrote in a report issued the day after the purchase was announced.

Providing more content could get people coming back to the site more often and spending more time on it when they do. That would improve LinkedIn’s revenue in at least two ways. It can help the company charge higher rates for advertising, and it can help generate data that can be sold. Right now, LinkedIn makes its money from premium subscriptions that have advanced search features for job seekers, from special search tools sold to corporate recruiters, and from help-wanted classifieds and other ads.

The latter two businesses made up nearly 80 percent of LinkedIn’s $304 million in revenue last quarter, and it’s those areas that stand to benefit from the Pulse acquisition. “Increasing the level of people, traffic, and engagement drives page views, which drive ad dollars,” says Harper. All that reading activity will generate new sets of data that can be analyzed and made useful to would-be employers. “That data may be able to provide more insight to recruiters,” he says. “It may help them identify people well suited for a position that would otherwise go unnoticed.”

The Pulse acquisition is the latest in a series of moves LinkedIn has made to transform itself from a résumé database to a more useful resource for people working in any field. It’s absorbed startups such as Rapportive, which helps manage personal contact information, and SlideShare, which allows people and companies to share PowerPoint presentations with the Web-connected public.

Adding Pulse’s tailored news feed will augment LinkedIn’s existing efforts to get people to return to the site more frequently. It maintains a roughly 250-strong network of business “Influencers” who post their thoughts there. Arianna Huffington is one of the contributors, and the Influencers network is reminiscent of a Huffington Post blog roll for professionals. Also greeting users at login is LinkedIn Today, a sort of pre-Pulse news feed of selected stories that LinkedIn’s algorithms customize for viewers based on their networks and profiles.

Investors and analysts generally like what they’ve seen coming out of LinkedIn’s Mountain View (Calif.) headquarters, a five-minute bike ride from Google’s (GOOG) campus. When the company went public in 2011, shares debuted at $45 and more than doubled on the first day of trading, and have since risen above $175. LinkedIn’s revenue figures have outperformed analysts’ estimates in every quarter since the IPO.

Trying to become yet another social network that demands people’s time and attention may seem like an uphill journey. Just ask the team over at Google Plus. But LinkedIn, which declined to comment on the Pulse purchase, is pushing ahead to try to build a group of users interested in both finding the right job and performing well in their current positions. That may distinguish the company from Facebook (FB) and Twitter enough for it to stand on its own. “Social is splintering into more narrow-based services,” says Michael Wolf, the founder of technology and strategy consulting firm Activate. “Facebook may not necessarily be the place where you want both your personal and professional friends.” For LinkedIn, content is king, but so is context.

The bottom line: LinkedIn is spending $90 million on newsreader Pulse to try to boost its ad revenue and corporate recruiting businesses.

Grobart is a senior writer for Bloomberg Businessweek. Follow him on Twitter @samgrobart.

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