The social networking company, LinkedIn (LNKD, Financial), reported its third quarter results towards end of last week and it was around the same time when Twitter (TWTR, Financial) and Facebook (FB, Financial), its chief rivals, reported their earnings. While Twitter reported slowing user growth which set the stock on a downward trajectory the following day and Facebook shares opened lower by 6.6% after the results were announced as the company told investors that costs would rise in the upcoming quarter, LinkedIn stock was up more than 13% to around $228.34 after the earnings release from the company’s corner. This reflects that the company was able to deliver better results than expected that set the stock moving higher. Let’s peek in to find out what were the key takeaways from this third quarter of LinkedIn.
The quarter numbers
Revenue rose 45% year-over-year to $568.3 million for the Mountain View, California-based company clearly beating analysts’ estimates of $557.7 million. Profit excluding certain costs came to $0.52 per share while the analyst consensus stood at $0.47 a share.
In fact, CEO Jeff Weiner has been building out new products to grow the revenue stream, such as new business with sponsored updates and tools to aid salesmen looking for clients, to make up for slower growth in recruiting when the markets are entering the saturation phase.
According to an analyst at BMO Capital Markets, who has the equivalent of a buy rating on the stock, these emerging businesses are serving as the near-term catalysts for LinkedIn. He added –“They’re moving from this very narrow view that this is a tool for recruiters and HR managers and people looking for jobs, to being one that is driven by products built for salespeople, products built for chief marketing officers…”
Another factor which has majorly contributed to the rise in revenue has been the opening up of LinkedIn to the Chinese population which has enhanced its consumer viewing pattern and improved its customer base. However, due to rising costs linked to opening up new businesses, LinkedIn booked a net loss of $4.26 million, compared to a net loss of $3.4 million a year earlier.
Rise in membership was phenomenal
There has been a rapid rise in the membership count this quarter which increased to 332 million, up 6.1% from 313 million in the past quarter. For boosting the amount of time spent by per individual visiting the website, LinkedIn is out to study users’ activities and intentions with the goal of making it easier for them to find resources.
The talent solutions business still remains the chief revenue contributor for the company which grew by a whopping 45% to $344.6 million, compared with 49% growth witnessed in the past quarter and 62% growth in last year’s third quarter.
The advertising business called marketing solutions also did comparatively well and rose 45% to $109.2 million, compared to last year’s similar quarter. Sales from premium subscriptions were also seen rising 43% to $114.5 million this quarter. Gross margins were held steady at 86.8%.
Mobile traffic has improved
According to company sources, 47% of its traffic during the quarter came from mobile, since the company has built its own suite of applications that is tailored to handheld devices. This was a remarkable increase compared to 45% in the previous quarter and 33% in the same quarter last year.
Mobile unique visiting members were at 42 million for the quarter, up 10.5% from 38 million in the last quarter and up 44.8% from 29 million in the similar quarter a year ago.
China is creating the winning edge
The company has started a version of its website in China this year with the aim to take advantage of one of the world’s largest economies. In fact, China has provided “particular strength” in the quarter when 75% of the new members added during the quarter came from outside the U.S.
LinkedIn CEO quoted – “China has quickly emerged as a large contributor to network growth in recent months.”
While China remains a nightmare for several social networking U.S. companies which have failed to expand their base in the Nation, LinkedIn has clearly emerged as a winner in China. As the company gains traction in China, the sheer size of the market plus China’s robust economic growth could create a bullish case for LinkedIn in the long term.
Final touch
Weiner has signalled rapid progress in LinkedIn’s efforts to better its top and bottom line. The company is also taking measures to become a global hub for job ads. In lieu of this perspective, LinkedIn acquired Bright.com, a job-search start-up in May this year. As the company devises new strategies to build its visitors count and also to increase its listings from around the world, it can be concluded that the company would continue to grow and prosper and the indications are prominent in the third quarter results. So it’s best to stay tuned.
