LinkedIn are about to prove if there’s money in social networks
LinkedIn created a huge stir when they launched on the stock market at $45 per share. In doing so, they were the first real major social network to IPO and be publicly traded. Now they are set to release their public earnings for the first time, later next week and the expectation on the company is huge. As the first social networking site to release such detailed information following public trading, they will go a large way in proving the strength of the social media market as a viable business industry, or whether we’re in fact in a bubble, as many predict. LinkedIn’s stock has more than doubled since it went public in May – now sitting at $101.03, but do the figures back this up, or has it been massively over-hyped?
Expected loss
According to the Biz Journal, LinkedIn is expected to report a loss in its first earnings released, of 4 cents a share, while revenue is expected to rise to $104.45 million , compared to $93.9 million for the previous quarter that ended in March. Amidst warnings that the expectations on the company are far too high, likely due to the excitement of the first major social network to launch on the stock market, their stock has now been downgraded from’buy’ to ‘neutral’. While the increase in revenue is positive, it’s evident that LinkedIn has a long way to go, and a lot of investment to make, to position itself to meet the expectations set on the company. Being an exciting social network is one thing, but being a serious money-making social network is quite another. It seems the excitement is starting to wear off a bit for LinkedIn, at least for analysts, who see that it has a long way to go to become a truly viable investment.
Ramping up sales
LinkedIn has a big job on its hands now, to prove that a huge userbase can easily translate into revenue. While they are better positioned than many other social networks to do this, as they have an additional revenue stream in premium subscriptions, clearly this isn’t enough to meet the expectations and demands being put on the company. Since they launched on the stock market, we’ve seen them launch a major product that is clearly focused on the valuable recruitment market. Their ‘apply with LinkedIn’ button launched last week and could radically shake up the entire recruitment industry. Right now this is a free product, but there is such a clear route to monetisation there, that it’s highly likely LinkedIn have launched this for free to gain the reach and make it an invaluable product for companies, before turning on the payment.
They’re keeping busy on the products side of the business, also building out the offering within corporate accounts, to incentivise more people to switch over to the paid option. They recently announced the launch of ‘similar profiles’, which is an option clearly aimed at employers, that allows you to view up to 99 profiles that are similar, whether in experience, work history etc.. For recruiters this is a goldmine, as it allows you to easily source potential candidates, with LinkedIn doing a lot of the hard work for you. And it is yet another feature on premium accounts, significantly building out the value here and enticing people to sign up. They are clearly also ramping up their efforts to bring people to the site, as latest figures from Compete (which aren’t completely accurate but a good indication) show the significant increase in unique visitors to the site over the last three months :
It has been a busy few months for LinkedIn on traffic and products side and it’s likely to get even busier, as they set their sights on proving their ability to turn users into money. All eyes are on them at the moment, particularly with the expected IPO of Facebook next year, and the next few months will be crucial in showing that there is real money to be made in social networks.
