Why Would LinkedIn Buy Pulse?

by Trefis Team
-26.35%
Downside
222
Market
163
Trefis
LNKD
LinkedIn
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Although LinkedIn (NASDAQ:LNKD) hasn’t commented yet, there are reports that the company may be in talks with newsreader app Pulse, to purchase it for a price between $50 million and $100 million. [1] If the rumors are true, with Pulse’s over 20 million users, LinkedIn is looking to boost content offering on its website to increase user engagement and improve targeted search. [1]

Last year, Pulse partnered with The Wall Street Journal, to enhance its premium content and expand its reach amongst more affluent user base. [2] A lot of these professionals are likely to have premium accounts on LinkedIn and integrating a news service might be something that they will find useful. In addition to this, news reading habits of LinkedIn users can give insights about their interests, and this data can be used by recruiters and marketers to their advantage. Although LinkedIn is already doing well in terms of revenue growth, the market valuation suggests that the investors are expecting the company to sustain high growth for a long time, given that LinkedIn is trading at P/E (price to earnings ratio) of close to 930. Therefore, we can expect LinkedIn to do multiple experiments and try out a lot of features. Even if one of them becomes big, it might be just what the company needs to sustain its steep valuation.

See our complete analysis for LinkedIn

The value from Pulse may not just be limited to letting marketers and recruiters take advantage of the user data. LinkedIn will have an opportunity to integrate relevant job postings with the type of content that the users read on Pulse. Rather than requiring a manual search, relevant jobs can become ingrained as a natural part of LinkedIn’s content. A parallel can be drawn with Facebook (NASDAQ:FB), which is tying to smoothly integrate advertisements within the content sharing experience of its users.

Our price estimate for LinkedIn stands at $90, implying a 50% discount to the current market price.

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Notes:
  1. LinkedIn to Buy Pulse Newsreader for More Than $50M, All Things D, Mar 11 2013 [] []
  2. Pulse redefines mobile content subscriptions with launch of Premium Sources []
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