LinkedIn hit by share fall – but breaking China could be just the job
Published 08/02/2014 | 02:30
SHARES in LinkedIn fell by as much as 9.6pc yesterday as it delivered revenue forecasts that fell short of Wall Street's expectations.
The world's largest professional networking site boasted 277 million members around the world by the end of last year, up more than one-third over 12 months.
But its figures for the future deflated hopes that LinkedIn can sustain its growth streak.
It forecast sales of between $2.02bn (€1.48bn) and $2.05bn this year, compared with the average analyst expectation of $2.16bn.
For the first quarter, the company's sales outlook of $455m to $460m also came in below the $470m expected by analysts.
LinkedIn says plans to expand its revenue base include reaching more workers overseas, adding mobile features and making acquisitions.
"LinkedIn is continuing to grow, but that growth is slowing because of a scaling up of the business," said Steve Weinstein, an analyst at ITG Investment Research.
"As you get bigger, it gets harder and harder to find a lever that can be material to growing your business."
The internet giant, which has its headquarters for Europe, the Middle East and Africa in Dublin, was founded in 2003 and in recent years has attracted a million new members join every week – more than one member per second.
A recent study found 72pc of business leaders in Ireland are present on LinkedIn, compared with 23pc of the general public. Mobile phone users account for 41pc of its members worldwide.
But the scale of its growth has slowed with chief executive Jess Weiner admitting that tapping in to China would be a key piece of LinkedIn's future plans.
He said the company could establish a joint venture in China, which had a population of 1.35 billion, as a way to crack the market given the challenges that US internet services have had there.
"China is where today we already have four million members, but where nearly one in five of the world's knowledge workers and students live," he said.
The social network is also gearing towards connecting professionals with prospective employers by announcing it would pay $120m in cash and stock to buy online job search service Bright Media, which it said should help improve online matches while broadening its user base.
Overall, sales figures show a 47pc to $447.2m in the last quarter of last year, up 47pc from $303.6m from a year earlier.
But profit in the quarter dropped to $3.8m or 3 cents a share – down from $11.5m, or 10 cents from the end of December 2012.
Broken down, sales in talent solutions, LinkedIn's main business, rose 53pc to $245.6m, compared with growth of 90pc in the same period last year.
Revenue growth in LinkedIn's advertising business, called marketing solutions, slowed to 36pc from 68pc a year earlier, while the premium subscriptions unit increased revenue by 48pc, down from 79pc in the same period last year.
The results come at the end of a mixed quarter for the other top social-networking services.
News from Twitter that its user growth was slowing pushed shares of the microblogging service down 24pc and Facebook last week reported revenue that topped analysts' estimates, with more than half of ad sales coming from mobile devices.
The stock soared 14pc after the announcement.