LinkedIn sailed passed Wall Street’s expectations with second-quarter revenue jumping 59 per cent, as its efforts to become a highly trafficked website and popular mobile app paid off with robust membership growth.
The company’s shares surged 7 per cent to record levels after the bell. It also raised its full-year guidance, although it gave a lower-than-expected forecast for the third quarter.
The money-making outlook for social media companies has brightened considerably with inroads made by sponsored ads, and the mobile-friendly format of LinkedIn’s update stream, which includes sponsored ads, has begun to show serious promise as a new revenue source for the company.
Sponsored ads are social media posts that resemble organic, user-generated content but are in fact posts crafted by marketers, who pay for their distribution.
Underscoring that promise has been encouraging results from rivals. Earnings gains from sponsored newsfeed ads on mobile devices helped Facebook’s shares, which have languished for more than year, move past its IPO price this week. Twitter has reportedly also enjoyed swift revenue growth by selling sponsored tweets.
"When you look at how Facebook has been able to use sponsored content," said Ken Sena, an analyst at Evercore Partners. "LinkedIn will be able to do much of that as well."
LinkedIn, which currently makes much of its money by selling access to its members’ resumes to corporate recruiters, has managed to surpass expectations for nine consecutive quarters since going public at $45 a share in mid-2011. After the bell the stock was trading at $228.50.
In the second-quarter, it booked revenue of $363.7 million, above a consensus estimate of $353.8 million. Excluding certain items, it reported earnings of 38 cent per share for the quarter, handily beating expectations of 31 cents per share.
"We have seen significant gains on the mobile side when compared versus desktop and that's very consistent with what we're seeing and hearing industry-wide," chief executive Jeff Weiner told analysts. "Content marketing within mobile has proven to be an effective form of marketing."
As the social network approaches a saturation point among white-collar workers in the United States, the company has also pursued growth by introducing blog posts by luminaries like Bill Gates in an attempt to draw web traffic.
The San Francisco company projected sales of between $367 million and $373 million for the third quarter, below some analysts’ forecasts. But it raised its full-year revenue guidance to between $1.46 billion and $1.48 billion from an earlier estimate of $1.43 billion to $1.46 billion.
Membership grew at its fastest pace since late 2011. The site now has 238 million users, a 37 per cent increase from a year ago and a 9 per cent increase from the first quarter.
The rise in users, combined with the growing popularity of features such as a newsfeed similar to Facebook’s, effectively doubled visits to the LinkedIn homepage over the past year, company executives said.
Reuters
