Here's How LinkedIn Can Boost Its User Base Significantly Higher

LinkedIn Corp  was one of the first big social media networks to enter public markets; but despite its success, many have expressed concern during the last year that it's fundamental upside may be limited. Specifically, LinkedIn appeals to a certain niche market of job seekers and professionals who network; it doesn't appeal to all worldwide Internet users in the same way Facebook does.

With year-over-year revenue growth expected to slow to 33% in 2015 from 57% growth in 2013, LinkedIn can accelerate user growth, thereby increasing revenue, in the years ahead. Here's how.

What's the growth engine?
In discussing LinkedIn's niche market, the company's platform is certainly the most popular with older generations. According to data from Statista, 85% of LinkedIn users are older than age 25. The most popular age group is between 45 and 54 -- at nearly 21%. The least popular, excluding young children, are teenagers aged 13 to 17 and young adults from 18 to 24, who account for a combined 13% of total LinkedIn users as of December 2013.

Why are these age groups uncommon on LinkedIn? It likely lies in the fact that teenagers are mostly not seeking a career, while many young adults are either in college or preparing to enter college. In this fact lies LinkedIn's next growth driver -- a college ranking system, and products aimed specifically at those who may be exploring their continued education, which is a younger age group.

How will this help LinkedIn?
According to the National Center For Education Statistics, 14.7 million people were in grades nine through 12 in the Fall 2014 semester, with an additional 5 million in private schools. In Fall 2013, more than 65% of high school seniors enrolled in college according to the Bureau of Labor Statistics. In total, nearly 20 million students were enrolled in college during 2013.

From these statistics, investors can conclude that more than 65% of high school students may be interested in LinkedIn's new college-related services, and that the 20 million plus already enrolled might also find social information regarding specific courses, degrees, and institutions to be helpful in their pursuit of degrees. In order to take advantage of this untapped market, LinkedIn has three new products -- Decision Board, University Outcome Ranking, and University Finder -- to suit the needs of this wide and large 13-24 age group.

University Finder might be good for all high school students as a first stage of research to find schools based on location, degrees offered, etc. For high-school seniors, Decision Board will be helpful. With this service, students can narrow their school choices by reaching out to current students and graduates, and also gain more information about specific degrees.

Finally, for those already in college and who know their degree paths, University Outcome Ranking serves as a useful tool to see which schools nationally rank the highest, and in which order, based on hiring, salary, etc. for a specific job title and degree. For example, a student with aspirations of working in finance can see which school ranks best, perhaps leading to a school transfer. Meanwhile, a recent college graduate, who wishes to become a plastic surgeon, can learn the best medical school for that particular field.

LinkedIn would have never been able to create such detailed products and services if not for the many years of focus on careers, which thereby led to the accumulation of data related to salaries and education. LinkedIn boasts an impressive member base in excess of 300 million; but analysts estimate that only 100 million are found in the U.S. Theoretically, the addition of services aimed at the 13-24 year age group could increase LinkedIn's U.S. user base by nearly 35% with a 100% penetration rate.

While LinkedIn is unlikely to gain all potential members between the ages of 13 and 24, investors can see that the implications of the company's new services could be large, both domestically and internationally. A younger user base also means new advertisers. If LinkedIn can grow its presence of users under the age of 24, the company might become more attractive to fashion, gaming, software and other advertisers aimed at a younger population. Meanwhile, LinkedIn might also gain advertising interest from universities wishing to boast their high rankings for certain career paths and degrees.

The bottom line is that more users equals higher revenues for social media companies. Therefore, LinkedIn's decision to branch out into the education space is very bullish for shareholders.

Foolish Thoughts
Unfortunately, there is no way to put a fundamental number on what a younger demographic could mean for LinkedIn. But, as a company that creates the majority of revenue from premium job search services and advertising, it seems likely that these tools could be useful in the form of premium school search services, and in gaining new advertisers.

Regardless of the fundamental impact, or if LinkedIn can grow its user base 30% higher from new services, the company has now shown an ability and willingness to grow beyond jobs. For investors concerned about the limitations of LinkedIn's niche market, university-related services act as proof that the company has significant opportunities ahead to grow larger.

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Brian Nichols has no position in any stocks mentioned. The Motley Fool recommends Facebook and LinkedIn. 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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