Finance- LinkedIn Corporation
Reid Hoffman launched the LinkedIn Corporation in May 2003 in Mountain View California and four other co-founders as a website involved in the management of careers and professional networking activities. The company gained fame with over 4500 members joining within the first month, thus earning its revenue through the incorporation of advertising services and job listings and the sale of premium subscriptions as per 2005. This was followed closely by significant growth where the company had about 10 million members by the time they announced their profitability. Additionally, investors saw the potential of the company as the Sequoia Capital funded the company with $ 4.7 million and Greylock Partner who founded the company with $ 10 million coupled with $ 12.8 million from Bessemer Partners in 2007. There were more funds raised by the company worth over $ 75.7 million obtained from several funders who included Bain Capital, Goldman Sachs, and Bessemer Venture Partners.
The LinkedIn Corporation added in more services as well capabilities with the aim of attracting and retaining its existing members. This was coupled with the introduction of Intelligent Application Platform, which enabled web content developers to create professional-focused applications. These applications would facilitate the LinkedIn applications to become embedded onto their sites and business partners. Similarly, the company-introduced applications that enabled members to access its services through mobile devices that included iPhone, and Blackberry. The company offers services through social networking website where members aimed at building their professional networks in order to advance their careers. In these sites, they created their own profiles where they posted personal information, which they wanted to share with other members.
The LinkedIn Corporation obtained its revenue from three segments that entail, hiring solutions, marketing solutions and premium solutions. In the hiring solutions, the company enabled recruiters to search for job opportunities through the profiles of members who were either looking for jobs or willing to consider jobs regardless of whether they were actively pursuing a new position. This facility enabled recruiters to search through a variety of categories including industry, job function, geography, experience, and education. Recruiters also got the opportunity of posting job listings on the LinkedIn website for $ 195 per posting or $1,250 for 10 job postings. This entailed a fleet of sales people who sold their services to recruiters and companies. Alternatively, companies would buy through the website for a subscription period during which the purchaser could access LinkedIn data.
On the other hand, the marketing solutions entailed selling advertising space on the company’s web pages thus enabling advertisers to target ads to members using similar categories of hiring solutions. Premium solutions provided the members with basic level services free of charge and advanced capabilities on a subscription basis. The members who subscribed to premium services entailed people with profiles or business representatives. The advanced capabilities included enhanced search tools and results, the ability to communicate with recruiters or be connected with individuals who work at a company of interest and improved customer support. The members willing to access these services were required to pay between $ 19.95 and $99.95 in order to access the three levels of premium subscriptions.
For the competitive aspect, the LinkedIn Corporation developed popular sites such as MySpace, Face book and Twitter. However, these sites have been challenged by other sites in the market across the world offering similar services and thus competition. Some of these sites entail the Viadeo founded in Paris in 2004 and ranked the second largest social networking site for professional worldwide. The second social networking site entailed the XING AG founded in Germany and ranked third among the largest social networking site for professionals with about 10.8 million members across the world in 2011. The company also boosted to have revenue of 54.3 million Euros and 306 employees. LinkedIn Corporation seems quite similar to XING as they both focus on the creation of a platform that allows working with professionals in terms of networking woth other professionals. They both earn revenue from subscriptions, advertising and job postings. However, there are various differences between the two companies in that the LinkedIn Corporation has a large number of members than XING, which meant rapid growth in terms of their compound annual rate at 76 percent as opposed to 22 percent for XING. Additionally, the LinkedIn Corporation ensured diversification of their members as it had 50 percent of its members outside the United States and earned about 73 percent of its revenues. On the other hand, XING had a similar ratio of members within its home country region. However, it only managed to earn 97 percent revenue.
Consequently, LinkedIn Corporation entails the first social media company to list its stock publicly in the United States. On the other side, other social media networks engaged in trading on private secondary markets such as SecondMarket and SharesPost. The only challenge in this case included the fact that most of the members trading on these private secondary markets lacked the necessarily information on the companies they were buying and selling. This gave the LinkedIn Corporation an upper hand over the other social media networks as they acquired more revenue.
The growth and development of the LinkedIn Corporation brought about several advantages where its membership count, larger than that of its competitors, gave it significant market power through network effects. This gave the members large network coverage and enabled them to remain within a market leader where potential members would join. The second advantage entailed possible translation into additional resources for the growth of its members and improved customer service and expansion technical capabilities. Additionally, the demographics within the company members bring in other advantages in terms of higher levels of education and income. However, despite these advantages the LinkedIn Corporation faces various threats in that the growing membership could prove challenging in the future as its expansion into the European market could mean competition from other social media websites such as Viadeo and XING who have established a wide clientele in the European market. This would imply limited revenue as the members would be distributed among the three social media websites. This is prevalent through the 31 percent of their total revenue obtain from more than half of their members from international markets. Additionally, venturing into international markets required increased costs in both technological infrastructure and the features and languages that needed to be customized to serve a variety of local markets. Another threat entailed potential failure for attempting to add new members faster that the organization could upgrade service capabilities. This would occur through members using the site less as service levels would start declining thus pushing members to access other sites. Similarly, the company faces the threat of sharing a similar platform with other social media sites such as Face book, which implies that if face book decided to become professional they would also enjoy a similar advantage of attracting more members and more revenue. This implies that they face the threat of new entrants.
The key drivers behind the LinkedIn value the strong position they hold within the market that occurred as a result of its ability create an attractive and useful platform where professionals across the world would interact. The second aspect that leads to the growth and development of the company entails a large membership base that brought about cooperation between individuals and corporate on social forums. Additionally, the hiring, marketing and premium solutions provide the company with tools and results and the ability to communicate with recruiters. They also enable members to be connected with individuals who work at companies of interest and improved customer support.
In the financial analysis sector, the company reflects its IPO performance through stock prices sold to potential equity holders who may wish to take part in the activities in the company. The IPO performance is reflected through the investors’ shares and those who offer funds to the company for its operations. In addition, the forecasting analysis brings about the market evaluation of $9 billion where participants in the market compare the company’s performance with other publicly traded peer companies. The financial statements indicate a growth in the company in terms of assets over the years, which implies that the company has significantly developed in terms of stock and equity. Additionally, there has also been an increase in losses over the years indicating that the company engages in many liabilities that deprive the company off their necessary profits and revenue. Secondly, these participants look beyond other publicly traded companies that could offer insight into the company’s value. The assumptions in this case indicate that the funds obtained from the various organizations have helped the LinkedIn Corporation to check on the failures and threats related to the company. In this case, the comparable social network websites would be used as benchmarks to value LinkedIn’s stock, as they would allow for PEST analysis thus keeping the company in check for the services and operations they take part in.
The $9 billion market valuation for the LinkedIn’s company entails a boost in the activities in terms of capital and investor shares for the potential of the company’s growth. The company had potential investors who realized the growth of the company and wanted to be involved in the growth. These aspects make the intrinsic value for the company to be about $ 10 billion as it is the actual value of the company in terms of its assets based on the underlying perception of its true value including all aspects of the business both in intangible and tangible factors. Additionally, when buying the LinkedIn’s stock I would not be willing to pay more than the value it is worth as there are unexpected occurrences that may bring about a decline in the market value of the stock. Therefore, if the prices increase, my investment would also increase. However, the market valuation within the company may be brought about by factors such as dual class of shares issued to members and potential investors.