Community websites as of late is considered to be one of the strongest marketing tools on web. With this belief, it has opened up various revenue segments for leading community websites like LinkedIn Corp (LNKD, Financial). LinkedIn now seems to be incredibly sustainable. Its business has utterly dominated the professional niche of the social media sector. Of all the social networks, LinkedIn easily has the best business with the strongest monetization strategy.
Some statistics that are quite revealing
One of the largest community network websites with a niche crowd of professionals, it has more than 313 million members spread globally in more than 200 countries. The signup rates for professionals is around 172,800 per day –Â which comes out to be 2 new professionals sign up every second –Â on LinkedIn. The website enlists over 39 million fresh graduates, the fastest-growing demographic for LinkedIn. Over 94 of the Fortune 500 companies use LinkedIn Talent Solutions and contribute to the revenue of the company; furthermore executives from all the Fortune 500 companies of 2013 are signed up on LinkedIn. Over 1.5 million publishers use RSS (Rich Site Summary) feeds of LinkedIn to send real time content on LinkedIn.
LinkedIn Corp. generates revenue across three product lines: Talent Solutions (56%), Marketing Solutions (24%) and Premium Subscriptions (20%). The company is now all focused to beef up revenue from the Marketing solutions which currently contributed 24% of the consolidated revenue of $1,528,545 in last fiscal year which ended on Dec. 31, 2013.
Strong quarter recording growth
The company recently released it second quarter results for fiscal 2014. Revenue was up by 47% to $534 million as contrasted with $364 million in the second quarter of 2013.
Summary of segment revenue with growth and contribution to total revenue for second quarter can be previewed in the following table. Talent solutions has been the major contributor to LinkedIn.
| Â | Segment | Revenue | Growth(YoY) | Contributions |
| Â | Talent Solutions | $322 million | 49% | 60% |
| Â | Marketing Solutions | $106 million | 44% | 20% |
| Â | Premium Subscriptions | $105 million | 44% | 20% |
| Â |
On a global scale, 60% of revenue was generated by U.S. alone to $318 million, while international market generated balance 40% to records $216 million. With LinkedIn popularity gaining in the international market, we can expect higher growth from the international market mainly from China. Since Facebook (F, Financial) and Twitter (TWTR, Financial) are banned in china, LinkedIn can expect higher revenue growth from China which is totally absent for its competitors.
Strategic moves to leverage growth
LinkedIn released the all-new Sales Navigator, empowering purchasers to construct associations with the most applicable sales experts through a SaaS-based product. The launch of professional publishing platforms enabled LinkedIn, to be more content rich and is now generating around 30,000 elaborated posts every week. This has also provided stimulus to traffic on LinkedIn, 100% growth, ever since it was launched in February this year.
To target traffic from various internet enabled handheld devices (smart phones and tablets), Linkedin enhanced its mobile-apps portfolio by launching several apps like job-search apps for IoS user and new SlideShare apps for android users. This further will leverage traffic from handheld devices where the users are continuously rising.
Journey ahead
Linkedin affirmed that it would obtain business-showcasing startup Bizo for about $175 million. With this acquisition, the prime center will be on creating B2B promotion platforms. Linkedin is attempting to make a $1 billion business out of its marketing solutions products by 2017, impelled by its acquisition of Bizo Inc. Bizo makes marketing tools to help advertisers pitch their potential clients.
Guidance
For the third quarter, the company anticipates revenue to range between $543 million and $547 million. Adjusted EBITDA is expected to range between $134 million and $136 million. Non-GAAP EPS is expected to be around $0.44
The fiscal 2014 revenue is expected to range between $2.14 billion and $2.15 billion. Adjusted EBITDA is expected to range between $545 and $550 million. Non-GAAP EPS is expected to be approximately $1.80.
Considering the three social media titan, LinkedIn can be the cheapest among the three based on some valuation metrics like price to sales
| Company | Price To Sales (TTM) | Sales Growth(TTM) |
| 14.6 | 48% | |
| 19.1 | 64% | |
| 28.3 | 1117% |
Source: Reuters. TTM = trailing-12-month.
Higher margins with cost saving
Beginning in 2013, Linkedin chose a server farm method that would include building three self-managed infrastructure as far and wide as possible over the compass of three years. By moving to self-managed facilities, Linkedin will in the end save around 50% on working costs for every server farm in the long haul. After the project closes one year from now, capital expenses will return again to more or less 10% of revenue. By then, Linkedin's capital needs will alleviate and speculators ought to delight in a pleasant margin tailwind.
Conclusion
None of this is to say that Linkedin will be liberated in the years to come. In the fabulous plan of things, the more extensive online networking segment is noticeably juvenile. Despite the fact that Linkedin is less expensive than its companions by a few measures, wait is over and now is the time to buy, particularly as the sector is valued growth. Based on its historical P/S ratio, LinkedIn Corp has a legitimate shot to hit Mark Mahaney's $250 price target and beyond.
