Total Pageviews

Thursday, August 1, 2013

LinkedIn’s Profits Soar as User Growth Accelerates

You receive one of those e-mails from LinkedIn with a request from someone asking to connect with you. Why not, you say, and click “accept.”

To individuals and businesses, reaching out to those ever-expanding networks is immensely appealing, and that helped drive LinkedIn’s strong second-quarter financial performance, which blew past Wall Street’s expectations on revenue, profit and cash flow.

Revenue was up 59 percent compared with the same quarter a year ago, coming in at $363.7 million. Net income was $3.7 million, compared with $2.8 million a year ago. But after stripping out stock compensation expenses and other one-time items, profit was $44.5 million, or 38 cents a share, compared with $18.1 million, or 16 cents a share, a year earlier. (Analysts had expected 31 cents a share, according to Thomson Reuters.)

Investors were certainly eager to connect with that kind of growth, sending shares of the company up more than 7 percent in after-hours trading, to around $228 a share. (And that was after a 4.5 percent gain during regular trading.)

A striking number in the earnings report, though, was the subscriber growth.

LinkedIn ended the quarter with 238 million members, up 37 percent from the second quarter of 2012 and 9 percent from the first quarter. About two-thirds of those members were outside the United States.

More precisely, in just three months, LinkedIn added 20 million new users globally. To put that in context, Facebook, which is five times LinkedIn’s size and appeals to a much wider audience, managed to add only about 40 million new users in that same time.

In a conference call with analysts, LinkedIn’s chief executive, Jeff Weiner, said that the subscriber growth rate had accelerated for the first time since 2011 as business professionals in developing countries like India and Brazil signed up. “We continue to see strength” in the third quarter, he said.

Over the longer term, the company’s target market is the 600 million knowledge workers in the world, he said. (Unlike Facebook and Twitter, two rival social networks, LinkedIn isn’t blocked in China, which is a vibrant market for the service.)

LinkedIn, which built much of its business around paid services for recruiters and job hunters, is just beginning to introduce other products aimed at helping sales people reach new prospects and helping companies build their brands. For example, sponsored articles, which allow companies to put custom content in front of LinkedIn users, have just become widely available to advertisers.

And the company has yet to fully make the transition to mobile devices. Mobile use is up, but the company’s apps lack much of the functionality of the desktop site. “It’s still very early days,” Mr. Weiner said.