(By Michael Vodicka) LinkedIn Corp. (NYSE: LNKD" title="LNKD : Stock Quote, News and Research" class="showrtquote">LNKD) was launched without much fuss in 2003. Early on, Chairman Reid Hoffman and his four friends managed to rope in 6,000 members but they were mostly friends, family, and acquaintances. Ten years later, LinkedIn's membership has grown to 225 million, it has been a listed company for two years while rallying more than 85% in the last year alone. Take a look at the big gain below.
LinkedIn's phenomenal growth has been driven by a number of factors. For starters, the company has almost no competition in the professional networking industry, except a few smaller companies in the global market, such as Xing in Germany and Viadeo in France.
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Also, unlike social media platforms like Facebook (NASDAQ: FB" title="FB : Stock Quote, News and Research" class="showrtquote">FB), which earns the majority of its revenue through advertisements, LinkedIn operates in three separate segments that diversifies its revenue stream: Talent Solutions, Marketing Solutions, and Premium Subscriptions.
Talent Solutions, used by corporate recruiters and executive headhunters to find potential employees, is the company's fastest growing and most profitable business, contributing 53% of total revenue. In the Q1 report released in May, Talent Solutions saw explosive growth, generating revenues of $184.3 million, up 80% from the year-ago quarter. Marketing Solutions, on the other hand, which deals with advertisements posted on the LinkedIn site, comprised 27% of revenue. This segment's earnings were $75 million in Q1, up 56% from last year. The third business segment, which deals with online sales of the company's subscription products, contributes 20% of revenues. Earnings from this division stood at $65.6 million, up 73%.
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But in spite of LinkedIn's leading position, it is still searching aggressively for new ways to grow sales and its subscriber base.
In an effort to grow engagement, the company launched a new, updated version of its Recruiter platform in April. It also recently revamped its mobile app to make it faster, more user-friendly, and compact to keep members engaged. In the first quarter, 30% of customers visited through the company's mobile app, up from 19% a year earlier. Also in April, the company paid $90 million for the news-reading application, Pulse, to add to its services.
The company also recently launched the Influencer program, which features guest blogs from influential members posted on the website. This program's impressive guest list already includes Bill Gates, Barack Obama, Richard Branson, and the Prime Minister of Japan, Shinzo Abe. LinkedIn pays no compensation for these posts but the program has served its purpose of keeping members on the site longer. In fact, according to the Q1 report, visitors viewed 63% more pages in the quarter than they did a year earlier.
These enhanced services give the company more opportunities to attract more members and keep them engaged, sell advertisements and should eventually allow it to charge more for subscriptions. Also, in 2013, LinkedIn is planning to increase its product release rate in its Talent Solution and Networking segments, which is expected to support revenue growth from the company's members.
Looking forward, analysts are expecting big things from LinkedIn. Analysts expect earnings to grow 50% in 2013 and 180% in 2014. In the next five years, LinkedIn's earnings are expected to grow 50% compared to the industry average of 19%. LinkedIn has recorded an average surprise of 350% in the last four reported quarters.
The numbers speak volumes about LinkedIn's growth story. Its stock has seen steady gains and continues charging higher. The company is adding more features to its portfolio every day and although LinkedIn's membership base is only a fraction of Facebook's, the professional social media site's stock is trading close to its all-time highs of $199 while the latter's stock languishes at around $27. For now, LinkedIn's success story looks set to continue.
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