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LinkedIn Eyeing China for Growth

Posted on Friday, Feb 14th 2014

The slowing growth rate for the projected quarters has been bogging down most social media stocks. Recently, the stock market took unfavorably to the newly public social networking giant Twitter, which projected a weaker outlook on account of slowing user growth. Professional network LinkedIn fared no better when they announced a similar trend for their projections.

LinkedIn’s Financials

LinkedIn’s fourth quarter revenues grew 47% over the year to $447.2 million, ahead of the market’s expectations of $439 million. Adjusted EPS of $0.39 was also ahead of the Street’s target of $0.38.

By segment, revenues from Talent Solutions grew 53% to $245.6 million and revenues from Marketing Solutions grew 36% to $113.5 million. Overall, Premium Subscriptions are also growing and they reported an increase of 48% to $88.1 million.

During the quarter, LinkedIn’s user base grew 37% over the year to 277 million members. International markets account for 66% of their professionals user base. According to comScore, LinkedIn and SlideShare together accounted for 187 million unique visitors during the quarter.

They ended the year with revenues of $1.53 billion compared with $0.97 billion reported a year ago. EPS also grew from $0.19 a year ago to $0.23.

For the current quarter, LinkedIn projected revenues of $455 million-$460 million, falling short of the market’s projected revenues of $471 million. They expect to end the year with revenues of $2.02 billion-$2.05 billion, missing the Street’s projections of $2.17 billion.

LinkedIn Acquires Bright

Last week, LinkedIn also announced their biggest acquisition so far. They bought Bright, a company focused on leveraging data insights to connect prospects and employers, for an estimated $120 million. Bright is best-known for their ability to match potential employees with employers based on data-driven matching technology and machine-learning algorithms. LinkedIn plans to leverage the acquisition to strengthen their talent acquisition business segment.

LinkedIn’s Chinese Growth 

To revive slowing growth, LinkedIn is looking at international markets and are especially focused on China. They are even looking at creating a joint venture in the country to help establish leadership in the market. Currently, LinkedIn has nearly 4 million members in the country, but that is a very small number given China’s massive 1.35 billion population. As part of these efforts, they recently appointed their first president in the region. LinkedIn recently integrated their service with Chinese chat application WeChat that lets users link their LinkedIn accounts with WeChat accounts. WeChat has an estimated base of over 500 million users in China. Breaking into China may be the panacea for LinkedIn’s slowing growth. The online job market in China is highly fragmented with no big name to boast of. Success in the region will open up a market four times the size of the U.S.

Their stock is trading at $192.34 with a market capitalization of $23.5 billion. It touched a high of $257.56 in September last year.


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