Recently, LinkedIn (NASDAQ:LNKD) announced that it is expanding LinkedIn Pro Finder — its marketplace which connects businesses and freelancers nationwide in the U.S. The company began piloting this platform in October last year and, as the freelance economy witnesses tremendous growth, LinkedIn is now looking to expand this platform. According to a study, by 2020 more than 40% of the American workforce will be independent workers such as freelancers, contractors and temporary employees. LinkedIn’s own data reveals that freelance talent is on the rise and the company is looking to play an important role in driving and supporting the gig economy. We believe that, as the work force undergoes changes, an increasing number of people opt out of the regular workforce to become freelancers. LinkedIn’s initiatives in this direction can diversify its business by opening a freelance contracts commission as a new revenue stream for the company.
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Opening A New Revenue Stream
While LinkedIn ‘s ProFinder service is currently free and requires users to sign up for a premium account to submit more than five proposals, the company can covert this platform into a direct revenue model. According to a study by UpWork, as of 2014 freelancers contributed an estimated $715 billion in earnings to the U.S. economy. If LinkedIn’s revenue model for this business is a percentage of freelancing fees, the company has a huge revenue potential from this stream. While competition in this space is stiff, LinkedIn has the advantage of providing high quality professionals, given that they have to pay to submit regular proposals. Further, people looking to hire freelancers via LinkedIn can check their LinkedIn profiles and identify talent within their network or in a particular location. With its huge database and data science capabilities, LinkedIn can enable intelligent searches and provide high quality freelancers.
According to our estimates, Premium Account subscribers account for nearly 15% of LinkedIn’s valuation and growth subscription revenue per registered member can drive its valuation higher.
While ProFinder can drive subscriptions for LinkedIn’s premium memberships, since freelancers would need a subscription to respond to opportunities, we believe this platform can drive revenues for the company if it adopts a direct revenue model for this segment. As Microsoft looks to derive value from LinkedIn, post-acquisition, there can be alternate monetization models for ProFinder. We believe expanding this platform should allow LinkedIn to tap into the changing trend of the employment landscape and drive revenue growth in future.
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