LinkedIn’s Valuation: How Are LinkedIn’s Users Valued Relative To Facebook?

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LNKD: LinkedIn logo
LNKD
LinkedIn

LinkedIn (NYSE:LNKD) and Facebook (NASDAQ:FB) are often compared to one another, despite different business models and user bases. This comparison makes sense, though, considering both companies went public within two years of each other (2011-2012), both compete for user attention, and both had similar blockbuster initial growth trajectories. Below we compare the companies in terms of valuation, user growth, profitability and cash flow generation.

In terms of per-subscriber valuations, the market values LinkedIn’s users at around 79% the value of a Facebook user. LinkedIn’s active user base (105 million) barely 6% the size of Facebook’s base of 1.65 billion, while its market cap is around 5% that of Facebook.

While LinkedIn’s monthly active user base (reported as unique visiting members) is just 6% of Facebook’s, its total revenue in 2015 was 17% of the social networking giant. Accordingly, LinkedIn’s revenue per active user of $28.30 is significantly higher than Facebook’s $10.80. However, owing to LinkedIn’s lower user growth, user engagement and significantly lower cash flow generation, it is valued at 158x of its user base compared to Facebook’s 201x (Twitter is valued at just 33x).lnkd-28

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The major factors driving this lower valuation are LinkedIn’s slower user growth, significantly lower EBITDA margins and lower free cash flow generation compared to Facebook.

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Have more questions about LinkedIn? See the links below.

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for LinkedIn
3) Please provide your valuable feedback at content@trefis.com.

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