LinkedIn (NASDAQ:LNKD) is increasingly becoming a preferred destination for job seekers, headhunters and companies that are looking to hire talented professionals. While reaching out to individuals and professionals via LinkedIn’s social network is one way, the website is also becoming a popular avenue for regular job postings.
We estimate that average annual number of job postings on LinkedIn increased from about 38,000 in 2008 to about 1.73 million in 2012. The steep rise is attributable to a growing supply of available jobs, significant growth in LinkedIn’s registered user base that draws more recruiters and changes to the website that facilitated more job posts. We believe that the figure will continue to see substantial growth.
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. We estimate that job postings constitute roughly 20% to the company’s value.
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Growing User Base And Monster’s Declining Business
LinkedIn has seen tremendous growth in its user base in recent years, and going forward, we expect this growth to continue albeit at a moderated pace. When jobs are posted on LinkedIn’s website, the automated system gives multiple matches for the jobs posted. As the number of registered users grows, the system will generate more matches that are a better a fit. A user can also forward jobs to candidates they think could be a good fit leading to more referrals as well. Additionally, Monster.com’s share of job postings has been declining, and as a result, the company’s stock has fallen by 75% over the course of last 2.5 years. This implies that recruiters are favoring other mediums, and we believe LinkedIn has been a big beneficiary.
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 other major job boards 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 assume a range of 20-50% for the “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, which we can use as 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 could range between 9 million and 18 million several years down the line. That would be mean an upside of more than 20% to our current price estimate.
Using Labor of Bureau Statistics Data to Estimate the Market
The 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. We note that close to 150,000 jobs advertised on LinkedIn are in the U.S. out of total 235,000 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 2.8 million monthly U.S. job postings, we arrive at a global market estimate of close to 4.6 million monthly job postings. This within our estimated range using Simply Hired as benchmark. Again, if LinkedIn can capture 25% of this opportunity, there could be an upside of more than 20% to our current price estimate.
Our price estimate for LinkedIn stands $90, 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 [↩]
- Linkedin.com [↩]
- Simplyhired.com [↩]