LinkedIn (NYSE: LNKD) enjoys a leadership position in large addressable market of talent acquisition (~27 billion) and online advertising. With strong barriers to entry due to professional focus and business networking effects, we believe that LinkedIn is somewhat immune to competitive threats when compared to its internet peers like Facebook (NASDAQ:FB) and Zynga (NASDAQ:ZNGA), where a new innovative product could spell doom for the whole business (Remember what happened to Myspace and Orkut). As LinkedIn works towards broadening its platform and improving user experience, we believe that LinkedIn will continue to bring smiles to the investor’s face and hence we maintain our buy rating.
Continued Website improvements to drive incremental revenues:
In an effort to improve user’s experience and time spent per user, LinkedIn launched a new Homepage and LinkedIn-Today. Social features such as commenting and liking posts were also added which will help enhance user activity and conversations related to professional subjects. We believe that the recent changes will enhance navigation through the entire site with enhanced menus while the high level of content filtering could significantly boost the relevance of the updates feed. As the new solutions look to transform LinkedIn into a conversational professional platform we are positive that they could help drive incremental user adds and hence high revenues. We believe that it will also help the Brands and businesses currently on LinkedIn which can now share information with their users and allow people to ‘follow’ them as well.
Hiring Solutions growth to continue the Growth story for LinkedIn
The Hiring Solutions increased 107.4% YoY and 18% QoQ in Q2 and generated a major chunk of the revenues as per our expectations (See: LinkedIn: A Good Growth Story). LinkedIn has mainly benefitted by capitalizing on the cross selling opportunities as LinkedIn’s flagship Recruiter product drove demand for products such as Job Slots and recruitment media. We are increasingly positive on LinkedIn’s cross sell benefits and believe that as the product portfolio broadens with the continuous innovation, LinkedIn could generate high incremental revenues. Furthermore we were pleasantly surprised with the renewed strength in marketing solutions mainly driven by acceleration in growth of field sales and better customer engagement. We believe that there could be further upside to Marketing Solutions from increased user engagement as LinkedIn executes on new products.
Strong Membership and engagement metrics
LinkedIn engagement metrics continue to be strong as Unique Visitors (UVs) for LinkedIn Standalone properties grew 30% YoY and 3% QoQ to $106.1 million. Internal page views also reflected strength as they grew up 60% YoY due to the upgrade to People You May Know (PYMK) and the launch of the tablet app. We believe that mobile is the key area of strength for LinkedIn as it can help increase the frequency of visits and the average time spent per user. In that light, the growing acceleration in mobile was another positive for LinkedIn as it saw 27% of UVs coming from mobile devices in 2Q. We believe it can be largely attributed to LinkedIn’s optimized registration flow on mobile devices which resulted in over 15% of new member registrations now originating on mobile, compared to 10% in 1Q. LinkedIn also began a mobile pilot program which enables blue chip brands to display ads within the LinkedIn iPad app. We believe that mobile monetization will scale considerably with the increased usage and popularity of the mobile apps in the future.
LinkedIn offers value to its users as a platform for professional relationship where teenagers don’t discuss Farmville strategies as is the case with its peers. In a time when Zynga and Facebook are going through hard times with mobile monetization strategies, LinkedIn has performed well above expectations and doesn’t have any significant competition except may be a distant one from the rather old Monster (NASDAQ:MWW). We believe that LinkedIn with its compelling product portfolio and services has the potential to continue its growth story and hence we remain bullish on this stock.
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