Is LinkedIn Counting Its Chickens Before They Hatch?
LinkedIn’s earnings per share crashed more than 26 percent after its first-quarter results fell short of investors expectations, its revenue decreased by $5 million over last quarter.
Analysts at investment company Raymond James expected a revenue of $642 million, while the professional social network reported revenue of $638 million for the first quarter.
The California-based company holds 15.1 percent of the market shares in the social media industry, trailing behind Facebook, which owns 65 percent, and Twitter, which owns 16.2 percent.
Premium subscriptions earned LinkedIn $122 million in revenue, up 28 percent year over year, but still fell short of analysts’ predictions of $126 million.
The lack of growth may be due to the decline in marketing solutions, where the company derives a sizable amount of its revenue, usually around 20 percent.
Marketing solutions faced considerable headwinds during the first quarter as LinkedIn had to train its sales forces on the business-to-business marketing startup Bizo it acquired last year for $175 million. Once the sales force is trained, analysts believe Bizo could become a high-earner for LinkedIn.
LinkedIn CFO Steve Sordello said in his planned remarks that Bizo has positioned the company to be the most effective marketing solution for reaching professionals.
In recent years, LinkedIn has bought several smaller companies like Bizo to provide more professional services to its users, seeking new technologies and higher revenue. The company’s main source of revenue is the products and subscriptions it offers, unlike fellow social network Facebook, which relies heavily on advertisements. Ads only accounted for a little over 20 percent of LinkedIn’s revenue last year.
The social network’s average user is between 45 and 64, and is likely to have disposable income to spend on the company’s products, according to a February 2015 IBISWorld industry report.
One of LinkedIn’s more intriguing acquisitions in the works is lynda.com, announced this April. Users will be able to subscribe to lynda.com and take business, technology, and creative courses offered in English, French, Spanish, Japanese, or German.
“The ability to easily acquire skills through LinkedIn has implications across everything we do,” said CEO Jeff Weiner, during his earnings call webcast on April 30.
The company estimates the market opportunity for lynda.com to be $30 billion. Weiner mentioned plans to incorporate SlideShare, an earlier acquisition, which allows users to share presentations and videos, into lynda.com.
In April, LinkedIn also unveiled Elevate, a mobile app where employers and employees can curate and share high-quality content, and then measure the impact.
“All of these investments are expected to increase revenue and profit, and further allow the LinkedIn to operate in an increasingly competitive environment,” the IBISWorld report states.
LinkedIn went public in 2011, selling over 6 million shares and earning $426.5 million in cash. LinkedIn said it planned to use the cash to develop products, upgrade technology, improve network infrastructure and increase the company’s global sales force.