Yesterday, LinkedIn reported Q4 2011 earnings, beating the street with $167.7 million in revenue (analysts expected $159.72 million in revenue) an increase of 105% compared to Q4 2010 revenue of $81.7 million. Net income for the fourth quarter was $6.9 million, compared to net income of $5.3 million for the fourth quarter of 2010.
That’s not too shabby.
However, lately, I have been wondering how much of LinkedIn’s success will depend upon the economic times. Granted, I understand that can be said for business in general, but LinkedIn has a somewhat unique position.
A percentage of LinkedIn’s revenue is earned through advertising dollars being spent on the site. Another percentage of LinkedIn’s revenue is derived from user subscriptions to the social network’s premium features and also from its employer job listing services.
In bad economic times, more users would (maybe) use the site in an attempt to find a job. But let’s not forget, there are other sites that allow people to find jobs (e.g. Monster, Dice, etc) so it’s not a guarantee that the site would see more active users, but for argument’s sake, let’s just say ad revenue will probably be unaffected (relative to overall industry ad spending).
When it comes to job listings, in a poor economy, less companies are hiring, meaning job listings are going to be down on the site. When it comes to LinkedIn’s premium user subscriptions in bad economic times, I don’t think it is as easy to predict. Some people may be willing to pay the monthly subscription, some may not and just opt to use the free features of the site but I think most people would probably invest in a subscription if they felt it provided a better opportunity to land a full-time job.
Ad revenue unaffected or potentially up, more paying user subscriptions, and job listings down still paints a pretty picture for LinkedIn. In fact, it seems it could benefit LinkedIn if the economy isn’t doing too well.
If the economy is booming and everyone is doing well, companies are probably looking to expand which means hiring, so for LinkedIn job listings would be up but less people may be spending time on the site which could hurt ad revenue and also paying user subscription numbers.
I don’t know know of any data that has been compiled (yet) that really puts my thoughts to the test here, but it would be interesting to keep an eye on as the economy improves. One of the major differences between Facebook, Twitter, and LinkedIn is that people will go on Facebook and Twitter regardless of their employment situation, the same I’m not sure can be said for LinkedIn.
What do you think of LinkedIn as a long-term investment?