Impressive second quarter growth
In the second quarter, Facebook Inc (NASDAQ:FB) has managed to increase its revenue by as much as 53%, from $1.18 billion last year to $1.81 billion this year. The advertising revenue came in at $1.6 billion, accounting for around 88% of its total revenue. The net income was $333 million, or $0.13 per share, a big improvement compared to a loss of $(157) million, or a $(0.08) per share in the same quarter last year. Facebook Inc (NASDAQ:FB) has reached 1.15 billion monthly active users (MAUs) as of June 2013, a year-over-year growth of 21%. The mobile MAUs experienced a much higher year-over-year growth of 51% to 819 million.
LinkedIn Corp (NYSE:LNKD) is for professional networking
Facebook is considered the most popular global social networking site in the world. It owns a lot of private users’ data, including pictures, profiles, comments and updates. Another famous social networking site is LinkedIn Corp (NYSE:LNKD). However, LinkedIn focuses on professional social networking, giving people the chance to network based on the career and professional basis. In the first quarter 2013, LinkedIn managed to grow its member base to 218 million. LinkedIn Corp (NYSE:LNKD) is trading at $204.50 per share, with a total market cap of around $22.5 billion.
LinkedIn Corp (NYSE:LNKD) members could feel comfortable to pay to be upgraded to the premium level for better professional networking and have more valuable contact access, while it will be much harder for Facebook to charge its members. Consequently, Facebook Inc (NASDAQ:FB)’s main revenue source is advertisements. Interestingly, LinkedIn Corp (NYSE:LNKD)’s main revenue stream was Talent Solutions, which generated around $184.3 million in the first quarter of 2013, whereas the Marketing Solutions and Premium Subscriptions segments contributed only $74.8 million and $65.6 million, respectively, in sales.
Yelp Inc (NYSE:YELP) – connecting people to local businesses
In terms of valuation, LinkedIn Corp (NYSE:LNKD) has a much higher price-to-sales valuation at 19.7, while Facebook Inc (NASDAQ:FB) is valued at only nearly at 11.7 times its price-to-sales. Another much smaller social networking site, Yelp Inc (NYSE:YELP), is also valued at a higher valuation that Facebook at 16.45. Yelp is trading at $41.50 per share, with total market cap of around $2.6 billion. The market values Yelp at 16.4 times its price-to-sales. Yelp Inc (NYSE:YELP) concentrates its business on a different niche, connecting people with local businesses. When you go somewhere, you want to know about different types of restaurants, plumbers or salons to choose from, which is why people use Yelp. Yelp Inc (NYSE:YELP) provides reviews that help users share different opinions and experiences about local businesses. The company reported that there were around 102 million unique investors visiting the websites, with around 39 cumulative reviews.
Facebook, LinkedIn and Yelp do not directly compete with each other. LinkedIn and Yelp Inc (NYSE:YELP) have been quite successful with its social networking niche markets. I personally think that all of those three businesses will grow rapidly in the future. Importantly, with the rising trend of mobile usage, all three sites need to increase the number and the stickiness level of mobile users.
My Foolish take
Facebook Inc (NASDAQ:FB), LinkedIn Corp (NYSE:LNKD) and Yelp Inc (NYSE:YELP) could fit well in the technology portfolio of long-term investors. However, with the high valuation and the fast changing nature of the technology industry, all three stocks are expected to be extremely volatile. Thus, investors should diversify their technology portfolio with a lot of other large well-established tech companies.
The article Three Successful Social Networking Sites originally appeared on Fool.com and is written by Anh Hoang.
Anh HOANG has no position in any stocks mentioned. The Motley Fool recommends Facebook and LinkedIn. The Motley Fool owns shares of Facebook and LinkedIn. Anh is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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