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All Guns Blazing at LinkedIn

Posted on Tuesday, Aug 5th 2014

Professional networking site LinkedIn (NYSE: LNKD) reported a stellar quarter recently. They are seeing strong growth driven by investments in international and mobile operations. Here is a quick peek into what is driving the company’s growth engine.

LinkedIn’s Financials
LinkedIn’s second quarter revenues grew 47% over the year to $534 million, ahead of the market’s expectations of $510.5 million. EPS of $0.51 was also significantly ahead of the Street’s estimated earnings of $0.39 per share.

By segment, revenues from Talent Solutions grew 49% to $322 million and revenues from premium subscriptions improved 44% to $105 million. Among other metrics, total membership grew 32% over the year and 6% over the quarter to 313.4 million. Their international expansion efforts are delivering strong results with two thirds of their member base situated outside the US. The recent Chinese expansion has also been strong with membership in the region growing 80% since they launched their simplified Chinese site in February this year. China has become one of their fastest growing markets.

Mobile usage is also improving and now accounts for 45% of the site’s traffic compared with 43% a quarter ago and 34% a year ago.

For the current quarter, LinkedIn projected revenues of $543-$547 million and an EPS of $0.44, compared with the market’s projections of revenues of $540.3 million and an EPS of $0.40. For the year, LinkedIn expects to earn $1.80 per share on revenues of $2.14 billion, ahead of the Street’s projections of earnings of $1.65 per share and revenues of $2.13 billion.

LinkedIn’s Mobile Initiatives
LinkedIn remains committed to improving their mobile offerings and recently released an updated profiles offering on their mobile app. The new profile page for mobile apps is targeted to help improve the user’s networking capabilities. It provides a greater emphasis on the user’s current job, expertise, and professional network to act as “ice breakers” for users when they connect with each other for the first time. They also upgraded their Contact app and replaced it with the Connected App that uses smart algorithms to look at a user’s calendar and suggest other events that may be useful to them based on their interests and time availability. The app also features the ability to look at the profiles that the user recently viewed and highlight common interests between them to facilitate conversation.

Finally, to help their professionals to search for jobs, they also released a standalone app called Job Search. The app, as the name suggests, helps users search for jobs by including useful filters such as designation, industry, and location along with a notification and a recommendation capability. The activity on this app will not be shared with other LinkedIn users to help keep the job search activity confidential.

LinkedIn’s Acquisitions
During the recent quarter, LinkedIn has been focused on driving growth through acquisitions. Earlier last month, they announced the acquisition of San Francisco-based news alert startup Newsle for an undisclosed sum. Newsle is a social news alert service that uses machine learning technology to send news updates to their users if the social connections of these users are mentioned in news networks. The company has a user base of more than 2 million subscribers. The news alert service operates on a real-time basis and analysts believe that LinkedIn will use their capabilities to enhance their content by placing news articles about contacts in the news feed. Content is now a very big part of LinkedIn’s strategy, and the company is well on its way to becoming a major media company with 100% user-generated content a la Huffington Post, but focused on business/professional topics.

More recently, they acquired marketing firm Bizo for an estimated $175 million. San Francisco-based Bizo was founded in 2008 to help marketers source and track new leads. Essentially, Bizo’s technology helps marketers in target advertising by placing ads for professionals that the advertisers wish to address. The company’s solutions also help measure effectiveness of the ad campaigns.

Their stock is trading at $202.50 with a market capitalization of $24.89 billion. It touched a 52-week high of $257.56 in September last year.

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