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Overseas, Mobile, and Content Key Focus for LinkedIn

Posted on Monday, Nov 2nd 2015

According to a Cowen and Company survey of time spent on social networks, LinkedIn figured at the bottom of the list with just 9.8 minutes. User engagement is a key focus for LinkedIn right now and it is looking at mobile apps and relevant content to rev it up. The Lynda.com acquisition and its subscription fee business model have helped it, but it should look at more such options. The Influencer program is a good initiative for driving up user engagement, and as you know, I am a top-ranked member of the LinkedIn Influencer network.

LinkedIn (NYSE: LNKD) had invested heavily this year on its overseas offerings, its mobile app, and improving value for its members. These investments are finally paying off. Third quarter revenue grew 37% to $780 million from $568.3 million a year ago. Non GAAP EPS was $0.78, far ahead of the $0.46 analyst estimate on revenue of $755.8 million.

By segment, revenue from its Talent Solutions segment grew 46% to $502 million or 64% of its total revenue. Included in this segment is Lynda.com’s Learning & Development section that contributed $41 million in revenue. Revenue from Marketing Solutions grew 28% to $140 million and Premium Subscriptions revenue increased 21% to $138 million.

By region, revenue generated outside the US represented 38% of overall revenue versus 40% last year. LinkedIn said EMEA performed well while APAC showed some improvement. It had launched a local language version for the Chinese market in early 2014 and that investment is now paying off. It is also seeing strong traction for its professional networking app Chitu, which is designed for the Chinese market. It now has more than 13 million members in China, up from 10 million in July and 4 million in February. It might follow a similar tailored approach for the Indian market as well, although everyone I know in India is already on LinkedIn, so I don’t see why that would be necessary. India is an English speaking country, China is not.

Apart from the overseas markets, LinkedIn is also investing in a new mobile app. This new app called Project Voyager was developed mobile first, is faster, simpler, and more personalized. It’s structured around five key pillars—the Feed, Profile, My Network, Messaging, and Search—and will launch next month. In 2016, Linked said they will also be the foundation for the ongoing evolution of the desktop site. LinkedIn’s execution of site improvements has so far been riddled with bugs, so fingers crossed on this one.

Another strategic priority for LinkedIn is creating member value by connecting its members to relevant news, knowledge, and skills, and its publishing platform is central to this strategy. In Q3, the number of long-form posts published per week reached more than 150,000. It also recently added the ability to post long-form content in more languages, including Portuguese, French, and German.

LinkedIn’s cumulative members grew 20% to 396 million in the third quarter and reached 400 million last week. Unique visiting members grew 11% to 100 million per month while overall member page views grew 33%. Compare this to the previous quarter numbers when cumulative members were 390 million and monthly unique users were at 97 million, and growth is slow sequentially. Mobile continues to show strong growth and accounted for 55% of overall traffic to their site.

LinkedIn also announced a strategic alliance with advisory firm EY to help other companies strengthen their customer relationships through social analytics.

For the fourth quarter, LinkedIn expects revenue between $845 million-$850 million with an EPS of $0.74, ahead of the Street estimate of $0.67.

LinkedIn has also raised its guidance for the full year. It now expects to end the year with revenue of $2.975 to $2.98 billion and EPS of $2.63, up from its prior forecast of $2.94 billion revenue and EPS of $2.19.

The market is pleased with the positive outlook, which is in sharp contrast to the previous two quarters, when it had lowered guidance due to currency fluctuations and higher spending. The stock is trading at $240.87 with a market cap of $31.4 billion.

Although user growth has somewhat slowed down sequentially, LinkedIn, with the help of the Lynda.com acquisition, has entered the business of educational content with a subscription fee business model and this move seems to be paying off. LinkedIn can add to this business by acquiring other types of educational content. Would Quora be a good option?  Quora, does not have any revenue but its attraction lies in engaging its users with relevant content— an area that LinkedIn wants to improve upon. LinkedIn used to have its own LinkedIn Answers section, which it wound down. Perhaps it is time it revived it.

Another area that LinkedIn should focus on is improving is its Marketing Solutions, which also has immense potential, but hasn’t been adequately leveraged yet. 400 million users is a very large user base, but a very small portion of that is monetized at this point.

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