Here's How LinkedIn Can Keep Growing
The world's largest professional network, LinkedIn , had a great 2013. The company delivered big quarterly beats, and as a result, shares are up more than 90% since early January. LinkedIn's huge collection of professional profiles is a cash-generating machine. The company excels at monetizing its user base and has several robust revenue sources, from sales of recruiting tools to advertisement. And, unlike Facebook or Twitter , LinkedIn also sells premium subscriptions.
However, the company will need to continue delivering amazing growth for many more quarters, as shares are trading at more than 700 times earnings. Considering LinkedIn already has more than 250 million user profiles in over 200 countries, how does the company plan to keep growing?
Source: LinkedIn Investors Relations
The quest for growth
To continue delivering growth, LinkedIn is constantly adding new features to its social network to keep users as active and engaged as possible. The logic is simple: more user engagement implies more monetization opportunities, which translates into more revenue.
New features should create value for both members and customers. For example, last year, the company introduced a fast skill endorsement feature. With this feature, LinkedIn gave users the opportunity to endorse other users with one simple click. At the same time, the company provided online marketers with a way to evaluate the credibility of a given user's skill set.
The results of this win-win situation were outstanding. In the third quarter of 2013, LinkedIn surpassed three billion total endorsements on the platform. Now that the company has achieved critical mass, it can introduce new algorithms and models to optimize the relevance of endorsements. In this way, LinkedIn is constantly improving the quality and quantity of information it provides to customers, most of whom are in the recruiting business.
It's all about analytics
According to LinkedIn executive Dan Shapiro, a pending product will rely on special algorithms to uncover important patterns in hiring activity to spot valuable candidates.
There are also plans to create a global dynamic map of companies. According to Financial Times, this map would track when people move jobs, where they go, and what skills they have. This feature would allow users to see where the employees of a given company were hired next, and into what positions.
These features would strengthen LinkedIn's Talent Solution business unit, which accounted for 57% of the company's third-quarter revenue.
LinkedIn is using its 250 million curricula vitae and analytics know-how to search for growth opportunities in different spaces. For example, the company recently launched a service called "university pages," which are college-specific profiles. Using this service, potential students are able to track alumni from various universities to get a better idea of potential future career paths.
In the first two months, more than 1,500 universities in over 60 countries signed up. The idea is to start selling useful data to educational institutions and provide a channel to stay connected with alumni.
Unlike Facebook, which obtained more than 89% of its total revenue from advertising, LinkedIn's exposure to the advertising industry is moderate. In the third quarter, only 23% of LinkedIn's total revenue came from ads.
Moreover, LinkedIn also sells premium subscriptions. With more than 230 million users, Twitter could borrow this idea to improve profitability. Celebrities and corporations may be very interested in having a rich control panel inside their Twitter accounts to monitor the effect of their tweets, or access detailed analytics about their followers.
LinkedIn may not have as many users as Facebook, but the company excels at finding new ways to monetize its user base of 250 million. By constantly adding new features, the company is able to keep users engaged, and at the same time, improve the quality and quantity of information it sells to recruiters. Its expansion into new spaces such as education, combined with the periodic release of new features, should help the company to continue delivering fast growth.
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The article Here's How LinkedIn Can Keep Growing originally appeared on Fool.com.Adrian Campos has no position in any stocks mentioned. The Motley Fool recommends Facebook, LinkedIn, and Twitter. The Motley Fool owns shares of Facebook and LinkedIn. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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