LinkedIn feels the heat – but does it matter?

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falling stock priceOn Friday, February 4th, LinkedIn shares fell by 43%, erasing about $11 billion (yes, billion) in market value. That is not chump change.

Why? In a nutshell, LinkedIn said they were going to grow more slowly than the analysts thought they would. We’re talking projected growth of $3.60-$3.65 billion, missing the average analyst estimate of $3.91 billion. And let me remind you that LinkedIn’s 4th quarter results for 2015 were up 34% over the previous year. In other words, what have you done for me lately?

So…does this matter to me and you, the average Joes and Janes of the job board industry?

Well, I don’t think so. But I’ll put a caveat on that – to be discussed further down. This is really more about LinkedIn and how investors perceive its market. The company continues to make most of its money from Talent Solutions – in other words, recruiting. That part of its business, while still growing, is slowing down a bit. I suspect some of the slowdown is due to saturation in its North American market, and some of it is due to a slight slowdown overseas.

But the other part of LinkedIn’s earning equation is its non-Talent Solutions products – and honestly, they aren’t doing anything mind blowing. Some of us think this might be due to the fact that LinkedIn wants to be the Facebook of the professional world, not quite realizing that perhaps the professional world is completely ok without such a service.

An additional twist is that LinkedIn is often viewed as a social media company, rather than a recruiting or human capital company. Sometimes this has helped them – but on Friday, it hurt them.

What’s the caveat? Well, don’t forget that LinkedIn bought a tiny little training company called Lynda last year for over $1 billion. The real financial – and growth – effects of that purchase are not clear, but I’m betting that it will be much more successful at driving revenue than LinkedIn’s Marketing Solutions and Subscriptions have been. After all, Lynda is a mature platform and should mesh well with the thousands of corporate clients that LinkedIn has been so successful in acquiring.

Bottom line: Friday was a bad day for Jeff Weiner (who saw his net worth drop by about a billion) and you – if you happen to own LI stock. But for the average job board operator – be you large or small? Not a big deal. LinkedIn is a huge company trying to grow past its original focus. Whether it does so or not won’t change the fact that hundreds of thousands of employers continue to turn to job boards to find their next hire.

But…in the meantime, it’s kind of fun to watch the ebb and flow of the big guys, eh?

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This Post Has One Comment

  1. Alan Whitford

    Hi Jeff
    Interesting happenings. I agree with your overall analysis. However, isn’t this really another example of the whacky way financial markets work? E.g. LinkedIn being punished because of analysts’ expectations, not their own business projections or accomplishments.

    If nothing else, this highlights one of the real dangers for job boards or any other business in our space actually taking the leap to public ownership. While the initial financial gains may be huge, the long term success or failure may be judged by other people, not by the real success of the company.

    OK, rant over,

    Cheers
    Alan

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