Here’s Why We Expect LinkedIn’s Engagement Levels To Keep Rising

-5.48%
Downside
196
Market
185
Trefis
LNKD: LinkedIn logo
LNKD
LinkedIn

LinkedIn‘s (NASDAQ:LNKD)’s ads and marketing business accounts for around 20% of our valuation for the company’s stock. An increase in engagement levels is a key factor that influences growth in this business segment. We estimate LinkedIn’s engagement levels, as measured by growth in annual page views on LinkedIn’s platform, will rise at over a 14% CAGR over our forecast horizon. We have based these estimates on the company’s growth strategies of expanding its publishing platform, increasing its job listings, strengthening its mobile apps, and adding international members. In the event these annual page views rise faster at 20% annually over our forecast horizon, it would represent 10% upside to our $192 price estimate for LinkedIn’ stock.

See our complete analysis for LinkedIn

In our valuation model, we have estimated LinkedIn’s engagement levels to keep rising at a healthy pace over the foreseeable future. The number of average monthly unique visitors is estimated to increase from 87.2 million in 2014 to 174.7 million by the end of our forecast horizon. Simultaneously, the number of monthly page views per unique visitor has been forecast to rise from 104.2 in 2014 to about 150. Consequently, we expect the total ads and marketing revenues for LinkedIn to rise from $455 million in 2014 to over $1.5 billion by 2022. These estimates are based on the following factors:

  1. Publishing Platform Is Gaining Traction: LinkedIn’s efforts to expand its publishing network are gaining traction.. This is largely due to its push to localize the service in various languages, and to gain to more “influencers” from various fields. Recently, more than one million unique publishing members, along with over 130,000 weekly long-form posts, were recorded on the LinkedIn platform. The publishing network bolsters value for members as it helps them gain access to relevant news and knowledge. We expect the ongoing growth of the publishing platform to be a key factor that will drive up usage among LinkedIn members in the coming future.
  2. Expanding Lob Listings Will Make The Platform More Attractive For Active Job Seekers: LinkedIn has dramatically raised the number of active job listings on its platform from just a million in the prior year to over four million recently. We believe this step makes the platform much more attractive to job seekers who are actively looking out employment.  And it has the benefit of raising their engagement levels, as well. We believe such members will continue to derive higher value from LinkedIn, owing to its rising popularity with recruiters across various geographies.
  3. International Expansion and Demographic Changes Will Enhance Growth: International expansion represents a key growth strategy for LinkedIn, as it is seeing strong growth from countries such as China and India. China is positioned as the second largest market for the company (in terms of new signups). Recently, LinkedIn reached a milestone of 10 million members from the country. The company is also building strategic partnerships with other key Chinese Internet players and platforms including WeChat, QQMail and Alibaba to bolster its growth within the market. Additionally, LinkedIn recently launched a new beta app “Chitu” to target the local audience in China. We note that other global Internet companies such as Facebook and Google have found it hard to make inroads into the Chinese market. Still, if LinkedIn is able to gain large-scale success in this area, it could significantly boost the overall engagement levels for LinkedIn. Beyond international growth, LinkedIn is also eyeing the student demographic to enhance its growth, by introducing new tools to help them choose universities, colleges and courses.
  4. Mobile Expansion Will Help Drive Engagement: Another area that has strengthened engagement levels for LinkedIn is its successful transition to the mobile platform.  Mobile usage is currently growing at twice the rate of overall member activity, and accounts for over 52% of all traffic on LinkedIn. LinkedIn’s push to launch a host of different mobile apps — such as Pulse, Jobs, Connected, SlideShare, etc. — is also contributing to increase in engagement levels among members.
  5. Integration of Lynda Will Further Open More Opportunities: The integration of Lynda will further propel growth for LinkedIn in the coming years, in our view.  Its portfolio of around 7,000 courses and 280,000 videos — combined with LinkedIn’s scale and marketing  — could enhance the use cases for members on the LinkedIn platform. We believe students and certain job seekers will find this value proposition highly attractive as it will connect them to requisite skills needed for specific job opportunities.

Our $192 price estimate for LinkedIn’ stock, is broadly in line with the current market price. In the event, ads and marketing becomes a $2.5 billion business for LinkedIn by 2022 (as compared to our current estimate of $1.5 billion), it would represent 10% upside to our current price estimate.

Relevant Articles
  1. Can LinkedIn’s New Salary Benchmark Tool Drive Premium Memberships?
  2. LinkedIn Reports Solid Q3 Earnings; Microsoft Merger On Track
  3. What To Expect From LinkedIn’s Q3 Earnings
  4. LinkedIn’s Next Move To Increase Its User Base In India
  5. Why Is LinkedIn Focusing On India?
  6. Here’s How LinkedIn Can Benefit From Expanding Pro-Finder?

View Interactive Institutional Research (Powered by Trefis):

Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap
More Trefis Research