Linkedin (LNKD) was one of the first global social networks founded one year ahead of Facebook in 2003 and
three years ahead of Twitter. Globally LNKD has 259 million members and signs up more than two new members every second, while its not the largest social network LNKD has produced the best returns for shareholders. It has also flown under the radar news wise compared to Twitter and Facebook with no movie or books produced about the founding of the company or any controversial privacy and political issues.
Its not just advertising
As a company LNKD is quite different from
its social media peers in that advertising only drives 23% of revenues. The
majority of revenue comes from its talent solution products which are
subscription fees charged to recruiters to access their database of
professionals. The other major revenue stream is LNKD's premium subscriptions which unlock greater functionality to
users to better see connections and the ability to contact users (important for marketers).
Its all about the passives
LNKD estimates that around 10-15% of the
workforce are looking for work at a point in time. Obviously if you were to
focus on just that pool companies would be missing out on a lot of potential
candidates, historically this was where recruiters added value with their contacts of passive
candidates. However LNKD's better mousetrap has enabled companies to search and
target the 85% pool directly who are not actively looking for a job.
According to the CFO LNKD has three
competitors for its products, personal referrals, internal hires and LNKD's own
basic products for which users do not have to pay. Its a big statement LNKD is effectively
saying that there is no comparable product out there. In his words "what
we do is so unique right now, particularly since the biggest piece of the
business is related to passive recruiting, the ability to find people who are
perhaps in jobs and to be able to do it vis-à-vis very powerful search and the
ability to see how you're connected to that person, has a very high ROI. That,
I think, only we can do."
While there are many recruiters using the
service there are still over 250,000 companies around the world with over 100
employees that could probably justify using the talent solution recruiting tools.
This is a big market compared to the 22,000 users in the September quarter.
More marketers than recruiters
Large sales team are another market for
LNKD database. LNKD's network of connections enables sales teams to better target and close
sales. For example if before making a call a salesperson knew a colleague went
to school with a lead then he could provide an introduction instead of making a
cold call improving the chances of success. This new product called Sales Navigator costs $50 a month. LNKD is
moving slowly with the product as they need to balance the privacy of users.
LNKD has put in a number of constraints like amount of emails sent per month so
that the service does not become annoying to users. LNKD believes that better
targeting will reduce the amount of spam around the world and actually be useful to users.
Not banned in China
What is most interesting about LNKD is
that it is not banned in China like the other social networks like Facebook and
Twitter. LNKD has no corporate presence in China and no Mandarin language
support for its services yet it has still signed up 3 million users in English.
It seems even the Chinese government will tolerate the risk of a social network
if the focus is to recruit and find jobs for candidates. This is obviously a big
opportunity for LNKD as more than 6 million university students graduate in China each year.
What about Australia?
LNKD has announced that as of October 2013
its membership
base in Australia has surpassed 5 million up from 540,000 five years ago.
According to the press release the top 5
companies by employee members in Australia are basically the top 4 banks.
Top companies by members in Australia
1. Telstra
2. National Australia Bank
3. Commonwealth Bank
4. ANZ
5. Westpac
Out of the top 5 industries
represented no. 1 is IT but surprisingly construction is no.2
Top industries
1.
Information Technology and Services
2.
Construction
3.
Financial Services
4.
Education Management
5.
Hospital & Health Care
The majority of titles are management related
Top Titles
1.
Owner
2.
Director
3.
Manager
4.
Managing director
5.
Teacher
With its three revenue streams of marketing, advertising, recruiting and the potential of China, LNKD provides its customers with more value than the other social networks. LNKD is much more than a Facebook/Myspace with Ties!
Jason
Disclosure: Decisive has no long position in Linkedin (LNKD) stock
The material in this article is for informational purposes only and in no way constitutes a solicitation of business or investment advice. The material has been prepared without regard to any client's or other person's investment objectives. Before making an investment decision you should consider the assistance of a financial adviser and whether any investment or service is appropriate in light of your particular investment needs.
