Recruiting Profits: Profile of LinkedIN and comparison to Monster Worldwide

by royalarse13

LinkedIN is a fascinating business.  The Facebook for professionals interested in networking with those who can enhanced and grow businesses at all stages.  LinkedIN is a social network that serves as a digital resume, crystallizing your accomplishments in a single public webpage.  Its bait for head hunters, a stealthy self-promotional platform that provides fertile ground for B2B promiscuity.

LNKD Chart

LNKD data by YCharts

There are many ways LNKD can make money, their May 3rd Q1 results break them out as follows:

  • Hiring Solutions: Revenue from Hiring Solutions products totaled $102.6 million, an increase of 121% compared to the first quarter of 2011. Hiring Solutions revenue represented 54% of total revenue in the first quarter of 2012, compared to 49% in the first quarter of 2011.
  • Marketing Solutions: Revenue from Marketing Solutions products totalled $48.0 million, an increase of 73% compared to the first quarter of 2011. Marketing Solutions revenue represented 26% of total revenue in the first quarter of 2012, compared to 30% in the first quarter of 2011.
  • Premium Subscriptions: Revenue from Premium Subscriptions products totaled $37.9 million, an increase of 91% compared to the first quarter of 2011. Premium Subscriptions represented 20% of total revenue in the first quarter of 2012, compared to 21% of revenue in the first quarter of 2011. 

Which can be translated into:

  • social network model: “We sell ads”
  • job search website: Simplified recruiting services “We sell access to critical information to head hunters”
  • Freemium: a subscription business model. “We offer an enhanced version of our free product for a subscription fee.”

Social networking elements to LinkedIN are obvious to anyone who has visited their own homepage.  The interface is similar in design and concept to that of your Facebook homepage.  They will sell targeted ads in the same fashion as FB, with a notable exception.

Where Facebook dominates in total users, there is little doubt LinkedIN will trounce their value per user due to distinct demographic configurations.  LinkedIN is loaded with professionals, people who make money and household-buying decisions.  Whence the advertisers get word of this they’ll be throwing money at LinkedIN to target their captive audience.

The hidden value of LinkedIN is embedded in the demographics of their user base: average consumers with busy lifestyle and lots of free cash flow.  While Facebook has every high school student in the free world using their service, they aren’t particularly apt to click-thru from display ads and buy stuff.  They probably don’t have a credit card.

Well the LNKD users have black cards.  Their appetite for social media is expanding faster than any other demographics: GenX’s and Boomers are slowly becoming tech savvy (aka iPads make everything online easy) and more  will look FIRST to LinkedIN over Facebook.

Geographically, LinkedIN business as of Q1 breaks down:

  • Revenue from the U.S. totalled $120.8 million, and represented 64% of total revenue in the first quarter of 2012. Revenue from international markets totaled $67.6 million, and represented 36% of total revenue in the first quarter of 2012.

Suggesting that plenty of expansion is possible given the low barrier to entry for their service (free) and scalability (online; low COGS).  Tons of room to expand abroad and at home, as shown by nearly 300% Adjusted EBITDA YoY growth ($38.1 million Q12012, 20% total revenue; v. $13.3 million Q12011, or 14% of revenue).

Some food for thought on their recent success might be a comparison, say with Monster World Wide:

Image

MWW Free Cash Flow Chart

MWW Free Cash Flow data by YCharts

The Struggles of one due to the success of LinkedIN? Maybe, but its a noteworthy comparison to show the diversity of LinkedIN Cash flows and potential to grow those over time.

On particular concern with LinkedIN is the following company projection: 2012 revenue forecast of $210-$215Mil, adj. EBITDA to $40-$42 million, stock-based comp: $18-$19Mil.  I’m questioning whether this ratio is high?  I am now investigating further the tech-industry standard for the rate at which employees take equity out of the company. With the management at $LNKD is 10:1 (revenue:stock comp) excessive or merited?  TBD.

Advertisements