How big can LinkedIn (NASDAQ:LNKD) get in terms of job postings? Our analysis shows that the company has barely scratched the surface, and there is a huge opportunity if it continues to execute well. A market for 3 to 6 million monthly job openings exists worldwide currently and there is significant upside potential to our price estimate if LinkedIn can tap into even a quarter of this market opportunity. Perhaps the market is expecting such stellar performance for LinkedIn given that the market price is much higher than our current price estimate.
About half of LinkedIn’s value comes from recruitment services and job postings. This business includes premium membership for companies that gives them access to special screening tools as well as job postings which are similar to online job postings from players such as Monster (NASDQ:MWW). We estimate that LinkedIn will earn close to $240 million in revenues from job postings in 2012, with annual job postings amounting to ~1.6 million. That’s roughly 130,000 job postings per month (job postings on LinkedIn usually stay for a span of 30 days).
Here are few ways to look at the market opportunity for LinkedIn in job postings.
LinkedIn states in one of its investor presentations that the addressable market size for worldwide talent acquisition and staffing services is $27 billion. However, we believe that this includes job postings as well as revenues from recruitment agencies that use job portals as one of the mediums to recruit relevant professionals for their clients. We feel that revenues from job postings are a minor part of this market. Assuming its one-third of the total market, we estimate the global job postings market to be ~$9 billion. If LinkedIn captures 25% of this market, its annual revenues from job postings could reach more than $2 billion, resulting in 35-40% upside to our current price estimate.
Using Simply Hired as a Benchmark
Some of the biggest job sites such as Monster and Career Builder have more than 1 million job listings. Simply Hired, the world’s biggest job search engine, has more than 8 million job listings and 30 million monthly users globally.  It is fundamentally different from pure job listing sites as it partners with about 25,000 partner sites including LinkedIn and aggregates job postings across all of their partners. Given this, some of the jobs listed on Simply Hired are likely to be duplicates as recruiters tend to advertise the same job on multiple job boards. Also, jobs may be duplicates if multiple recruiting agencies advertise the same job.
While Simply Hired can be taken as a benchmark to determine LinkedIn’s opportunity in job postings, we need to eliminate some of the duplicates mentioned above. We need to primarily eliminate the duplicates that arise from a single recruiter posting same job opening on multiple sites.
We can assume a range of 20-50% for “percentage of job postings that are duplicates“. That gives us a potential market size of 4 million to 6.5 million global job postings at any given time (note that this is not an annualized market). We strip out another 10% due to the possibility of ‘stale’ jobs that may remain on a site even after being filled. This brings the global market size to 3 to 6 million job postings. These figures imply that at any point in time, 3 to 6 million jobs are advertised on online job portals. This is the addressable market for LinkedIn. If the company is able to grab 25% of this opportunity, it would imply 0.75 million to 1.5 million jobs advertised on LinkedIn at any given point in time. Using this figure as proxy for “monthly job postings”, LinkedIn’s annual job postings will range between 9 million and 18 million (A job is usually posted for 1 month on LinkedIn), implying 20%-50% upside to our current estimate.
Using Labor of Bureau Statistics Data to Estimate the Market
Bureau of Labor Statistics (BLS) reports monthly job openings in the U.S. at 3.6 million for 2012.  Given that this encompasses all industries, many of these jobs will not be advertised online. Using BLS’ break down by occupation, we eliminated the following from the total job openings:
- Farming, fishing, and forestry occupations
- Construction and extraction occupations
- Installation, maintenance, and repair occupations
- Production occupations
- Transportation and material moving occupations
This brings the total job openings that are likely to be advertised online down to 2.8 million. Using a third party source, we identified that only 19% of the total jobs get filled through job boards.  That leaves us with close to 2 million monthly job postings in the U.S. that LinkedIn can target.
We note that close to 100,000 jobs advertised on LinkedIn are in the U.S. out of total 160,000 jobs.  In the case of Simply Hired, we observe that close to 5.3 million job postings are in the U.S. out of 8+ million job postings worldwide.  These figures show that close to 60% of global online job postings are in the U.S. Using this figure, and our estimate of close to 2 million monthly U.S. job postings, we arrive at a global market estimate of close to 3.3 million monthly job postings. This is close to our low-end estimate using Simply Hired as benchmark. Again, if LinkedIn can capture 25% of this opportunity, there could be roughly 25% upside to our current price estimate.
LinkedIn has tremendous opportunity to expand in the job postings market. Our estimates are conservative as we believe that LinkedIn’s fast growth may be slowed down by potential competition from Facebook (NASDAQ:FB), Google (NASDAQ:GOOG) and others players.
Our price estimate for LinkedIn stands $60, implying a discount of about 50% to the market price.Notes:
- Simply Hired® Enables One-Click Job Application to 10,000 Employers from Mobile Devices and the Web with Simply Apply™, PR Newswire, June 25 2012 [↩]
- Bureau of Labor Statistics [↩]
- Bersin & Associates’ New U.S. Research Finds Dramatic Shift in Recruitment Spending Towards Professional and Social Networks and Away from Agencies and Job Boards, Bersin Press Release [↩]
- Linkedin.com [↩]
- Simplyhired.com [↩]