Thursday, February 28, 2013

LinkedIn Amid User Growth Optimism

(Bloomberg ) While LinkedIn has characteristics of a consumer Web company -- offering a free service and selling ads -- it also has an expanding paid subscription business for corporate customers and premium users.

"The company's Recruiter product and broader Talent Solutions platform have become extremely valuable for recruiters," Harper wrote in a report today. "We view LinkedIn with a very large competitive moat around its platform given strong network effects, a highly visible revenue stream and the ability to rapidly innovate with new products."

Paid Subscribers

With its paid subscribers, LinkedIn's growth more closely resembles so-called software-as-service providers like like Inc. (CRM), Workday Inc. (WDAY) and ServiceNow Inc., Sena said.

Salesforce, which provides web-based customer relationship management software, traded at 12 times sales one year after its 2004 IPO, Sena wrote. LinkedIn trades at 10 times sales this year and seven times revenue for 2014, higher than consumer Internet companies, according to his analysis.

"While LinkedIn has a large consumer-facing audience component, its businesses are increasingly akin to software enterprise providers," Sena wrote. Those companies have "sticky subscription revenue streams, vast addressable markets" and high margins, he said.

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