Yesterday, at the Intellect Regent Conference, I sat next to Ariel Eckstein, MD for LinkedIn EMEA. Although he was as tight-lipped as only regional heads of US quoted companies can be, he was pretty bullish about how LinkedIn was starting to maximimise its revenue opportunities.
Later, LinkedIn announced Q4 results showing revenues doubled yoy to £167.7m – way ahead of analyst expectations. Net income for Q4 was $6.92m – 4x last year. LinkedIn increased its revenue guidance for the current year to c$840m with EBITDA of $165m. Membership is now 145m. LinkedIn’s share price was up as much as 10% in after hours trading. At $83 they are getting on for twice their $45 IPO price.
LinkedIn is a conundrum to me. At one level they are a ‘must have’ for every recruitment agency and head hunter. Every professional feels a need for a LinkedIn profile whether or not they are currently looking for a job. Around 70% of revenues come from 'hiring tools' and premium subscriptions sold to those recruitment agencies which enable them to access all the data. Another example where you, dear LinkedIn member, are actually the product! The remaining revenues come from advertising. I think that ‘focus on being the best professional CV database’ is absolutely right and now has great value.
The ‘problem’ is that everytime you talk to LinkedIn people, they seem to want to turn it into something much bigger. Indeed into a kind of Facebook for professionals. I just don’t see that. I get absolutely no ‘social intercourse’ from LinkedIn. I only check in when I want to find a profile. Indeed, the average LinkedIn user checks in once a month. The average Facebook user once per day! So I see great potential in hiring tools and premium subscriptions – less potential in advertising because those professionals just don’t engage in the same way or as often as other social networking sites.
But, all in all, LinkedIn is a great example of a well-focussed, fast growing, profitable 'social' service where IPO investors have actually made some money. They don’t come rarer than that!