What Is Fueling LinkedIn’s Growth?

by Trefis Team
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LinkedIn‘s (NASDAQ:LNKD) shares jumped 10% as the company reported strong growth in the second quarter of 2013. International expansion, higher user engagement and increasing adoption of recruitment services drove the results. The company saw its membership base climb by 37% to 238 million during the quarter, which reflects slight acceleration in the growth compared to the first quarter of 2013. [1] We believe that the company will continue to see healthy growth in this figure as it expands in international markets including Europe, South America, Asia and the Middle East. The number of unique visitors on desktop (excluding SlideShare) increased by 34% whereas the total pages views grew by 25%. [1] Although this suggests that the average number of page view per user came down, it is not an indicator of declining user engagement. The new members are late technology adopters and are likely to demonstrate much less activity as compared to an average LinkedIn user. In reality, the engagement has increased as the company continues to launch a host of new features.

The stock market is pricing LinkedIn quite aggressively in our view, which may be stemming from the fact that the business opportunity is big and other competitors are lacking in terms of innovation, user base and brand. We have recently revised our estimates which you can read about here: Revising LinkedIn Estimates On Stronger Growth But Stock Still Looks Rich.

Below we look at some ways LinkedIn is feeding its impressive growth.

See our complete analysis for LinkedIn

New Features Attracting Users & Increasing Engagement

LinkedIn has made several product enhancements in recent quarters including endorsements, redesigned company pages, launching the website in local languages such as Danish and Norwegian, new profile features, notifications, and the ability to follow thought leaders, and sponsored jobs to help companies promote key positions to right people. The company has also been experimenting with a new feature, Sales Navigator, and the initial results have been promising. Sales Navigator can be a useful product for LinkedIn as it helps sales professionals in better targeting customers, building relationships and marketing their products.

LinkedIn is not restricted to just recruiting anymore; it is becoming a great platform for marketers to find potential customers for their products through LinkedIn’s tools. The company launched ‘LinkedIn Contacts’ feature in the second quarter, rolling it out to a limited user base of about 1 million members. [2] The results were promising and there was notable improvement in user engagement. In addition to this, the newly launched functionality of adding rich media content such as photos and videos is helping spur the user activity on the site. The ‘endorsements’ are growing, LinkedIn’s Influencer program has done well, and its newly introduced channels have been helpful in streamlining the content flow for users. LinkedIn’s users are now following over 10 million channels, which make it easier for them to find relevant professional content. [2]

The bigger picture is that as LinkedIn’s user base grows, the company will need to better organize the data resulting from this growth. There is a great value in targeted and relevant searches, and personalized information flow. They not only improve user experience, but also help marketers, recruiters and sales professionals in efficiently reaching out to potential customers and candidates.

Focus On Mobile & Integration With Third-Party Sites

Like everyone else, LinkedIn is making efforts to capture the growth in the mobile market. In the first quarter of 2013, mobile platform accounted for 30% of the total unique visitors versus 19% a year ago. This figure further increased in the second quarter which is evident from the fact that the number of page views including mobile grew by approximately 69%, compared to 31% growth for desktop. [2] To bolster its mobile offering, LinkedIn has also acquired the newsreader app Pulse, for $90 million in a transaction that included 90% stock and remaining cash. With Pulse’s more than 30 million users, LinkedIn can boost content offering on its app and website to increase user engagement and improve its targeted search.

Facebook took the opportunity of increasing its inbound traffic through third-party sites, through its feature called Facebook Connect. Through this feature, users of a third-party site can share links with their friends on Facebook. This is a win-win situation for both Facebook and third-party site as it helps increase the traffic for both parties. LinkedIn is also leveraging this opportunity by providing integration APIs for third-party sites. We expect this trend to see increasing adoption, which will help LinkedIn further increase the traffic on its site.

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Notes:
  1. LinkedIn Quarterly Filings [] []
  2. LinkedIn’s Q2 2013 Earnings Transcript [] [] []
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