Thanks to Facebook’s faltering stock prices since its IPO, many in the business world wonder if social media companies like Twitter and Pinterest will ever become business models worth investing in. It would seem that monetizing social activity is the current holy grail of business. After the posting of last quarter’s earnings, LinkedIn is proving it possesses the grail.
This is the gist of the 4th Quarter LinkedIn earning statement according to the New York Times:
LinkedIn’s stock has tripled from its I.P.O. price of $45. After LinkedIn reported its fourth-quarter results, its shares surged $11.36, or 9.15 percent, to $135.45 in after-hours trading.
Besides a 66 percent increase in earnings from the previous year, the latest quarter was highlighted by an influx of 15 million accounts to propel LinkedIn’s total membership beyond 200 million. Visitors to LinkedIn’s Web site also viewed 67 percent more pages than the previous year, an indication that the company’s efforts to add more business news and career tips from top business executives are paying off.
LinkedIn earned $11.5 million, or 10 cents a share, during the final three months of last year. That compared to $6.9 million, or 6 cents a share, a year earlier.
The success of the business networking site has inspired much discussion of what happens next in the industry. Jim Cramer, host of CNBC’s Mad Money, set the blogosphere abuzz by suggesting that Facebook should buy LinkedIn. “The thing that is amazing from the conference call is that the company is in Portuguese now, they’re taking over Brazil, they’re in German,” Cramer said. “Recruiters want them in their countries. They have an ad business that’s up by 60 percent? This is a company that, at $20 billion, Facebook should buy.” ”This is too valuable a property,” Cramer continued, “This is a company that has figured out mobile, it has figured out global, it is indispensable in a whole bunch of countries.”
That would certainly be typical of what Facebook has done in the past, buy companies that would add to Facebook’s talent pool. But rather than simply scooping up LinkedIn, why not take the lessons of success and run with them? LinkedIn has an advertising model that is generating serious revenue for the company. They have also created a paid premium account system for business users that has seen steady and reliable growth in usage. They are making in-roads on the international front, like in China, where Facebook cannot seem to get more than a toe-hold. Finally, LinkedIn has created tools for a specialized niche, and recruiters love them for it.
What do you think? Should Facebook buy or simply take a few pages from the LinkedIn playbook for revenue success?