Why Was LinkedIn’s IPO So Successful (When Those Other Social IPOs Stunk)?
It seems people in the US are easily confused; maybe it’s the media’s fault. As a nation and a press, we’re more preoccupied with a fried chicken hut’s crusade against gays than we were with the Supreme Court decision that decided the fate of every American’s healthcare. We’re more concerned with Mitt Romney’s taxes—a horse very much out of the barn—than with his actual tax policies (which may still determine some very important things in our future), were he to become president.
So, it isn’t that shocking to see slack-jawed pundits doing forehead slaps on cable news networks saying: ‘I just don’t get it—why is LinkedIn outperforming all these other social media IPOs?’
It is pretty simple, actually: LinkedIn is about as far as a company gets from social media, and its second quarter numbers only confirm that it is making the transition from mere profiles and connections to in-house monetization. Its social media aspect is a front to consumers, who operate neat little profiles and have increasingly been sucked into verticals like premium subscriptions, advertising and LinkedIn’s hiring offerings.
LinkedIn’s subscription revenues have steadily risen. You can barely squeeze a nickel out of the average Facebook, Twitter or Pinterest user for the mere privilege of being on the site. The company is making good money on advertising, but that’s not LinkedIn’s only source of revenue—nor the most important.
Breaking it down: comparing the first quarter of 2009 to the second quarter of 2012, revenue derived from premium accounts leapt four-fold, to more than $40 million; revenue coming from marketing jumped ten-fold, to more than $60 million and—the one that matters most—revenue coming from LinkedIn’s hiring portion of the site grew twenty-fold, to more than $120 million.
In fact, LinkedIn’s greatest revenue driver for its shareholders is perhaps the furthest thing from a social network. Put another way: consider the ratio of jobs gained to jobs lost thanks to Facebook posts. LinkedIn isn’t even facing the same set of challenges so many other social networks must fight. Unlike every social media company scrambling to find relevance on a smartphone, LinkedIn’s numbers and plans have little to do with getting onto user handsets. For LinkedIn, it doesn’t seem to matter where its users access them, and because many of them will be working from a desktop when they use the website (one can’t send a resume, CV and a portfolio of work very easily from a smartphone quite yet), a mobile strategy is practically irrelevant for the company at this point in its development.
Find another social media company that can make this claim: in not only its aforementioned quarterly numbers breakdown, but also in its earnings release, LinkedIn didn’t even use the word ‘mobile.’
Gauging LinkedIn’s success as a job board, consider another company that is not a social network: Monster Worldwide. The company’s share price has plummeted more than 40% in 2012, providing a neat trajectory that is practically the mirror opposite of LinkedIn’s stock (actually, LinkedIn’s stock is up more than 60%, and Friday afternoon shot past the $100-per-share mark).
The value of the business that LinkedIn has siphoned off Monster Worldwide—so clearly deliberate but obviously done without infringing on even the smallest portion of a patent—is highlighted by the stats it keeps to chart its three cash cows. In early 2009, LinkedIn’s premium subscriptions accounted for nearly half of its revenue, but by the second quarter of this year, more than half of the company’s revenue was derived from its hiring vertical.
Nobody ever confused Monster for a social media company, in part because the Web 1.0 enterprise debuted so long before the concepts of ‘Likes’ and Tweets were even on entrepreneurs’ minds. No one will confuse it for a challenger to LinkedIn, either. But as long as investors continue to confuse the public market performance of LinkedIn for that of a social media company, ‘market conditions,’ and not ‘common sense’ will be the only reason offered for an IPO being pulled this year.
