LinkedIn Stock Races Ahead 11%; Every New Idea Is Working

by George Anders

Tech CEOs like LinkedIn boss Jeff Weiner operate almost like venture capitalists. They pump money into a host of internal growth ideas, periodically pruning their portfolio by burying the losers and hoping that the occasional big winners will make it all worthwhile. Hard stuff, but with LinkedIn stock up 11% Friday on the strength of its latest earnings report, Weiner right now is batting 1.000.

Just about everything on LinkedIn’s new-project list these days is working — and a lot of it is off to an explosive start. A push into China has yielded a doubling of members there, to 8 million, in the past year. A campaign to attract job advertisements has taken LinkedIn from a puny start to about three million listings, with more growth likely. When LinkedIn announced its fourth quarter earnings late Thursday, it ticked off wins in a half-dozen new or emerging areas.

Investors, naturally, are giddy with delight. Partway through today’s trading, LinkedIn shares leapt 14%, or $33 apiece, to a record high of $271, before finishing the day at $263.40, up 11%. Not only did the fourth quarter results top expectations; LinkedIn also laid out full year projections for 2015 that were noticeably above what Wall Street’s consensus had been.

Jeff Weiner

The impact of LinkedIn’s new initiatives is so striking that it’s changing the overall significance of LinkedIn’s biggest line of business, Talent Solutions. (That’s the part of LinkedIn that specializes in selling ultra-high-end tools to corporate recruiters, so they can comb through LinkedIn’s member databases and find exactly the sorts of people they might want to hire.) Ever since LinkedIn went public in 2011, Talent Solutions has been both the biggest and the fastest growing part of the company. It is the division that has functioned as the proverbial earnings locomotive.

Not anymore. Even though Talent Solutions’s revenue grew 41% in the latest quarter, it couldn’t keep pace with the company’s overall revenue growth rate of 44%. That’s because Marketing Solutions — the advertising-heavy business unit where some of LinkedIn’s fastest-growing new initiatives reside, grew 56%. The result: Talent Solutions is now a slightly smaller part of LinkedIn’s overall revenue mix than it was a year ago. The new kids are elbowing their way in.

In a conference call with investors late Thursday, Weiner highlighted a variety of growth initiatives in Marketing Solutions. Among them: rapid growth in “sponsored updates,” in which companies pay extra to show news, analysis or other content to likely job candidates. He said such material now accounts for about one-third of Marketing Solutions revenue. He also said that LinkedIn’s $170 million acquisition of Bizo last year now gives the company the tools needed to provide marketers with a more sophisticated and fully integrated way of reaching customers

LinkedIn chief financial officer Steve Sardello also drew attention to Sales Navigator, a relatively new LinkedIn product that aims to let salespeople comb through the site’s databases to search for potential customers — in much the same way that corporate recruiters already do. Sardello said that Sales Navigator now accounts for about 30% of all premium subscriptions, up from about 25% a quarter earlier. Weiner said he foresees a time when Sales Navigator will become its own separate business unit, giving LinkedIn four main sources of revenue, instead of the current three.