3 Key Businesses That Drive LinkedIn’s Valuation
LinkedIn (NYSE: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 (NYSE:MWW) in the recruitment services market and with social networking portals like Facebook and Twitter as well as Google (NASDAQ:GOOG) and Yahoo (NASDAQ:YHOO) in the online advertising market.
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We currently have a $30 price estimate for LinkedIn stock, which is well below the current market price. We discussed this in our recent note LinkedIn’s Valuation as Facebook of Recruiting Hard to Justify. Below we discuss company’s three key businesses which determine LinkedIn’s valuation.
The 3 Key business for LinkedIn
1) Recruitment Services – 48% of the company’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 LinkedIn’s 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.
2) LinkedIn Ads & Marketing – 28%
LinkedIn provides advertising solutions to online marketers on LinkedIn.com. These online marketers pay LinkedIn to develop these products in-house and publish these advertisements on LinkedIn.com. LinkedIn also provide a self-service advertising solution that allows marketers to directly create and place ads on prominent pages on LinkedIn’s website. With the increase in the registered user base, 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.
3) Premium Account Subscriptions – 15%
The Premium account users can search and contact people outside their LinkedIn network. A Premium account holder can send messages to people outside his network without being introduced to them. The account also lets users organize their contact into folders. With the increased registered user base, the number of premium subscribers have also increased although the % subscriber number has declined.
See the top forecasts for Premium Account Subscriptions division.