Despite slowing growth in its ad business, LinkedIn on Thursday, August 1, 2013, reported a 59% gain in overall sales in the second quarter on the strength of its recruiting and subscriptions businesses.
Revenue for the professional networking site rose to $363.7 million from $228.2 million in the year-earlier period.
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The company’s adjusted net income for the quarter was $44.5 million, or 38 cents a share, compared with $18.1 million, or 16 cents a share, a year ago. Analysts, on average, had expected LinkedIn to report an adjusted profit of 31 cents a share on revenue of $353.8 million.
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LinkedIn’s user base globally reached 238 million in the quarter -- up 37% from a year ago, marking the largest gain since the third quarter of 2011.
LinkedIn CEO Jeff Weiner said in the company’s earnings release.
“Accelerated member growth and strong engagement drove record operating and financial results in the second quarter. We are continuing to invest in driving scale across the LinkedIn platform in order to fully realize our long-term potential."
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LinkedIn's revenues for Q2 2013 by product all saw significant increases from Q1 2013.
- Talent Solutions - Sales from LinkedIn’s recruiting services business, called Talent Solutions, increased 69% from a year ago to $205 million, accounting for 56% of total revenue.
- Marketing Solutions - Sales from LinkedIn's advertising division, called Marketing Solutions, rose 36% to $85.6 million, or 24% of overall revenue. That marks a steep drop, however, from 56% growth in the prior quarter, and 68% in the fourth quarter of 2012.
- Premium Subscriptions - Sales from LinkedIn’s premium subscriptions grew 68% to $73 million, or 20% of overall revenue.
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U.S. revenue totaled $224.3 million -- or 62% of first-quarter revenue -- while international markets contributed $139.4 million, or 38%.
Sample LinkedIn Sponsored Updates ad (Click Image To Enlarge)
LinkedIn in July formally launched Sponsored Updates, the news feed ad unit it had been testing with select advertisers for the previous six months. As LinkedIn transitions from its reliance on display ads and customized ad offerings to Sponsored Updates, analysts predict the shift would have a near-term impact on ad growth this year. stated JPMorgan analyst Doug Anmuth, in a research note on Wednesday previewing LinkedIn’s Q2 results.
JPMorgan analyst Doug Anmuth stated, in a research note on Wednesday previewing LinkedIn’s Q2 results.
“We believe home page feed ads on LinkedIn can work particularly well in a professional content environment. However, LinkedIn is likely to increase inventory slowly here and will also face some back-half expense pressures related to data centers and the Pulse acquisition.”
The Wall Street firm does not expect the new ad format to reach significant scale until late 2013 or early 2014. During the earnings conference call, LinkedIn executives affirmed that view, citing the moving away from larger, one-off ad deals to more “scalable” ad options including Sponsored Updates.
Weiner noted the new ad unit was opened up widely through its self-serve ad platform only two days ago, and added that creating a set of APIs (application programming interfaces) to help agencies create campaigns using Sponsored Updates was a “high priority.”
During the quarter, LinkedIn also continued to ramp up its content offerings, expanding its roster of “Influencer” bloggers, revamping its LinkedIn Today digital newspaper, and introducing new tech-oriented discussion groups with tech industry publisher IDG Communications. It also launched LinkedIn Contacts, a new resource to help users build and maintain professional relationships.
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LinkedIn user engagement metrics continued to see significant increases.
- Members - LinkedIn reported 238 million global members at the end of Q2 2013, up 9.17% from Q1 2013 and up 36.78% from the Q2 2012.
- Unique Visitors - LinkedIn drew 143 million unique visitors globally each month on average in the second quarter, up 34% from 106 million in the year-earlier period, according to comScore data.
- Page Views - LinkedIn Page Views were up 25% to 11.7 million, on average, from 9.3 million a year ago.
- Traffic - Its U.S. traffic as of June was 50.6 million.
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LinkedIn's outlook for the current quarter calls for revenue between $367 million and $373 million. Following its earnings announcement, the company’s stock price was up about 7% in after-hours trading to almost $229 a share after closing Thursday at $213 a share.
COMMENTARY: I am very impressed with LinkedIn's financial results for Q2 2013. With ads representing only 24% of total revenues, LinkedIn is gaining tremendous momentum in monitizing talent solutions (recruitment services). In fact, LinkedIn nosed out online recruiting giants Monster.com and CareerBuilder.com in recruitment revenues during Q2 2013. Things are looking good as employers increase payrolls in 2013, but if another recession hits, this could become a problem for LinkedIn.
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Sponsored Updates are more beneficial than LinkedIn’s current advertising system because the posts are integrated into your news feed rather than appearing in a sidebar. This makes it more likely that users will read and potentially interact with your promoted posts. These promoted posts are priced either by impressions or number of clicks (CPM or CPC). While Sponsored Updates were initially launched with availability for companies that have an account representative, this will be expanded very soon to anyone who has a Company Page.
Marketing data shows that newsfeed ads are getting higher engagement rates, and LinkedIn's Sponsored Updates ads in a users newsfeed could become a big seller. I have a feeling that video ads in the newsfeed, like those contemplated by Facebook, are not too far behind. This should significantly increase LinkedIn's marketing solutions (advertising) in the second half of 2013. LinkedIn's stock hit a new high of $235.58 on August 2, 2013, following its Q2 2013 results, and one has to wonder just how much higher its stock will increase before investors starting warning of a bubble.
For those of you would like to further your education regarding LinkedIn's financial results, below is LinkedIn's Q2 2013 Financial Results slideshow:
Courtesy of an article dated August 1, 2013 appearing in MediaPost Publications Online Media Daily and an article dated August 1, 2013 appearing in Ere.net
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