The Three Key Ways LinkedIn Makes Money

LinkedIn's Three Key Profit Centers
LinkedIn's Three Key Profit Centers

LinkedIn (LNKD) is a business-oriented social networking site where professionals can connect with each other to explore job and career opportunities. The company makes money primarily in three ways:

  1. Selling recruitment services to employers

  2. Selling premium advertising, and

  3. Selling premium subscriptions to employers and users.

LinkedIn competes with Monster (MWW) in the recruitment services market, and with social networking portals like Facebook and Twitter as well as Google (GOOG) and Yahoo (YHOO) in the online advertising market.

We currently have a $30 price estimate for LinkedIn stock, which is well below the market price. We discussed this disparity in our recent note, LinkedIn's Valuation as Facebook of Recruiting Hard to Justify. Below, we examine the three key businesses which determine LinkedIn's valuation.

Recruitment Services – 48% of LinkedIn's stock value

The services offered within this division correspond to LinkedIn's reported Hiring Solutions segment, which is designed primarily to help companies and recruiters find talented candidates via its network of professional profiles. This is done through job posts and premium screening tools to search the LinkedIn network.

In addition, premium services for job seekers are available. Some of the advanced custom services offered include LinkedIn Corporate Solutions/Recruiter, LinkedIn Referral Engine, LinkedIn Recruitment Media and LinkedIn Career Pages.

See the top forecasts for Recruitment Services & Job Postings division.

LinkedIn Ads & Marketing – 28%

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LinkedIn provides advertising solutions to online marketers, who pay the company to develop these products in-house and publish these advertisements on LinkedIn also provides a self-service advertising solution that allows marketers to directly create and place ads on prominent pages within LinkedIn. As its registered user base has grown, LinkedIn has seen its number of unique visitors and page views go up over the last few years.

See the top forecasts for LinkedIn Ads & Marketing division.

Premium Account Subscriptions – 15%

Premium account users can search and contact people outside their LinkedIn networks, and can send messages to people outside his network without being introduced to them. The premium account also lets users organize their contacts into folders. As its registered user base has increased, the number of premium subscribers has also grown, although the percentage of overall subscribers who use the premium services has declined.

See the top forecasts for Premium Account Subscriptions division.

See our complete analysis for LinkedIn

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