Advertising rises to drive 22% of LinkedIn's revenue

Advertising rises to drive 22% of LinkedIn's revenue

Professional networking platform LinkedIn has been hit with a first-quarter loss of $US13.4m due to rising costs.

B&T Magazine
Posted by B&T Magazine

The loss hit LinkedIn’s stocks with a drop of 3.6% experienced in the hours after the numbers came out as investor’s frown-lines deepen over the higher costs and slowing revenue growth.

However, LinkedIn did generate $473m in the quarter, an increase of 46% compared to the first quarter of 2013.

Advertising is one of LinkedIn’s smallest revenue buckets, with marketing services accounting for 22%. Premium subscriptions account for 20% while recruitment is the largest driver, accounting for 58%.

Sponsored Updates accounted for 20% of the total ad sales, up from 13% in the fourth quarter.

LinkedIn’s membership grew 36% year-on-year and now stands at 300 million.

Warwick Business School Professor of Practice Mark Skilton said LinkedIn seems to be “treating the mobile trend as just another channel”.

"Its product development strategy is to continue to diversify from its social network base with the launch of a professional publishing platform and further data analytics to drive member behaviour,” Skilton said.

"Comparing this to the successes of Facebook, Snapchat and YouTube, who have paid specific attention to a strong mobile user interface design linked to their business monetization model, LinkedIn seems to be seeking to be a business repository of knowledge to retain its membership, but it’s not clear yet how this could leverage its community groups and career development to build further potential revenue.

"But LinkedIn has surpassed 300 million members, and its unique online social network with employment market services has created a high-margin business not reliant on advertising revenue means it is still a highly profitable stock option for investors long-term."