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Social Media in Business

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Two weeks ago we wrote about LinkedIn’s security breach and the ways that Payza and its users can prevent the same thing from happening to us. Now I’d like to take a look at what LinkedIn is doing right, and at the bigger picture of what it can teach us about the role of social media in business and of business in social media.

Facebook, LinkedIn, etc…

In May, social media platforms took what was possibly the final step in legitimizing themselves as an industry. Facebook, LinkedIn, Groupon, Pandora, and several other major social media players went public on the stock market. In the first month of trading, LinkedIn has not only vastly outperformed all others, but has been the only one showing any significant growth.

As the chart above records, most stocks have plummeted in value, including Facebook, which shrunk by 27.16%. Yelp, the only stock showing growth other than LinkedIn, has grown by a mere 4.6%. LinkedIn, on the other hand, has more than doubled in value, a growth of 103.3%.

Remarkably, when LinkedIn announced that it had been hacked and 6.5 million passwords had been revealed, this did not hurt their stock performance. Despite a backlash from some users, including a class-action suit launched by an Illinois-based LinkedIn user, investors seemed to consider the breach a minor issue and have not lost their faith in the company.

LinkedIn responded to the breach quickly – in fact they broke the news of the breach themselves and urged all members to play it safe by changing their passwords immediately. They continued to reveal the details of the breach as they learned them, an act of transparency which certainly played a part in keeping the loyalty of their investors.

What It Means

The marketplace is betting that the future of social media lies in its application to business. LinkedIn, a professional networking site, is the clear poster boy for how social media and business benefit each other. The site allows businesses to actively seek out prospective employees, and vice versa. User profiles are basically interactive resumes, and users can connect with colleagues and groups with whom they have a professional relationship.

The only other social media stock that showed growth in its first month was Yelp, a networking site which allows users to search for businesses in their local area and to submit reviews.

Both of these sites apply social media strategies to business, and both have seen their stocks grow. Meanwhile Facebook and Pandora, which market primarily to individuals, have shrunk in value.

The Implication

As much as Facebook is highly profitable, and works for its bottom line like any corporation, investors are still putting their money with the tools that feed back into the business community, rather than just feeding back into their profits.

Let’s face it, Facebook is here to stay – but its profitability benefits only itself. LinkedIn, on the other hand, has a mutually beneficial relationship with the business world – it is only successful if it is actually helping the careers of its users.

Businesses are now embracing social media as the powerful, game-changing tool it is. An American survey shows that LinkedIn is the preferred tool of 39% of hiring managers. As people are adopting social media more and more for professional use, the industry has nowhere to go but up, and the tools that feed back into the business world will come out on top.

Image Credit: Chris O’Brien, http://www.siliconbeat.com/2012/06/01/social-media-stock-performance-since-their-ipos/