4. Mobile monetization prospects
Just like numerous other businesses, LinkedIn has been generating a lot of user traffic on mobile devices. The company now gets more than 30% of unique visitors on its mobile apps, which is a sizable increase from the 19% the company generated from the year-ago period. However, the real problem lies in monetization. The company’s mobile monetization playbook hasn’t particularly materialized as expected, largely due to the small screen nature of tablets and smartphones.
LinkedIn Corp (NYSE:LNKD) did acquire Pulse, which is a content and news distribution application to enhance user engagement levels on mobile. However, it would be largely surprising to see hoards of mobile users utilizing LinkedIn for networking, building recruiting relationships, looking for jobs etc. The secular consumer trend towards mobile-based devices might hurt LinkedIn Corp (NYSE:LNKD)’s user engagement, and subsequently, the amount of revenue the company generates.
5. Advertising revenues
Linkedin’s advertising business has been a laggard for the company. It has been earning only 23% of its total revenues from its marketing solutions business, which is very small for a consumer-centric Internet business. Other leading Internet names like Facebook Inc (NASDAQ:FB) generate more than 85% of total revenue from advertising both on desktop and on mobile. And the king of online advertising, Google Inc (NASDAQ:GOOG), makes up more than 92% of its own revenues from display and search based advertising.
While full-fledged focus on advertising is not a good thing for a company, the sheer size and the rapid growth of the online advertising space makes it a very lucrative one for any Internet business. The online advertising marketplace is a much bigger and more competitive one than LinkedIn’s core recruiting solutions business. The company is trying to address its marketing solutions business by allowing companies to provide sponsored updates (just like Facebook), but that is unlikely to move the needle much.
The Takeaway
There are some legitimate concerns regarding the company’s future growth potential with regards to signing up newer users, as well as roping in more recruiters and advertisers on its platform. The company has taken steps to stimulate users on its platform by introducing newer products like Influencers, but the impact of that is not likely to be prolonged. LinkedIn Corp (NYSE:LNKD) should try to introduce newer products to drive incremental usage and user traffic on its platforms in order to justify its current valuations.
Ishfaque Faruk has no position in any stocks mentioned. The Motley Fool recommends Facebook, Google, and LinkedIn. The Motley Fool owns shares of Facebook Inc (NASDAQ:FB), Google Inc (NASDAQ:GOOG), and LinkedIn Corp (NYSE:LNKD).
The article LinkedIn: 5 Reasons to Sell originally appeared on Fool.com.
Ishfaque 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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