LinkedIn Q4’12 financial results: Cloud/SaaS are fads.

Congratulations to LinkedIn, once again, on delivering great fourth-quarter financial results.  These outstanding results continue to demonstrate the fact that the ever-growing disparate nature between “business cloud” and “consumer cloud” which we wrote about here previously.

While “Facebook fatigue” starts to set in for many users, LinkedIn’s membership continues to swell at an incredible pace.

Facebook Fatigue:  “About 27 percent of Facebook users – and 38 percent of those ages 18-29 – said they plan to spend less time on the social network this year, and 61 percent have at one time or another taken a “Facebook vacation” lasting several weeks or more.

Of course Facebook’s overall user base of over 1 billion and revenue in the $5 billion territory dwarf’s LinkedIn’s numbers in the same categories but the viability of each companies business model is what separates these two cloud ‘social’ companies.

linkedin logo

LinkedIn Q4 2012 financial results:

  • Revenue jumped 81 percent to $303.6 million
  • User base rose 8 percent to 202 million

Almost all of Facebook’s revenue is based on advertising, while LinkedIn is a nice blend of advertising and subscriptions.  Advertising only is not a viable long-term business strategy.  It’s just too simple for advertisers to switch from one marketing medium to another and they do it all the time.  Whatever is the ‘hot’ advertising deliver platform at a particular time is where the money will surely flow.

As LinkedIn continues to establish itself as the most popular site for job seekers, the company is selling more subscriptions to help recruiters find the right people. Revenue from talent solutions, Web-based software that recruiters and employers use to fill jobs, climbed 90 percent to $161 million, accounting for 53 percent of total sales.

Bait-and-switch?

I personally am a big fan of LinkedIn and absolutely love their services however it’s also best to be cautious not to rely on just one such service.  Why?  Because we’ve seen it thousands of times previously where a once great service starts to let pure greed take over the corporate culture from what it once was.  When a company starts to focus on pure profit and forgets about delivering a quality product or service then they are doomed. In the case of LinkedIn it might be starting with this:

Starting in the second quarter, the company will raise subscription prices for products targeting recruiters and promoting job openings.

Of course LinkedIn has every right in the world to charge whatever they wish for their services but they should be careful to avoid the ‘How Netflix Lost 800,000 Members, and Good Will‘ effect.  What Netflix did was a classic bait-and-switch.  They on-boarded millions of loyal, and mostly satisfied, users and then arrogantly raised prices on their services.

Subscribers revolted and many dropped the service. The plan further tarnished a once widely respected Internet service that had already been wounded by an unpopular price increase in the summer.

Netflix temporarily lost yours-truly as a customer.  On a side-note, I admire Netflix mostly for their outstanding corporate culture.  View this slideshow if you want to learn more about the Netflix Corporate Culture.

I’m certainly not saying that LinkedIn is in danger of losing users due to this price increase but it’s always wise not to bite the hand that feeds you.

Fads

Just for fun I took the 2 year stock chart from Yahoo Finance and added today’s projected closing price of nearly $150 per share to the far-right portion of the chart.  As you can clearly see LNKD investors are certainly pleased with that they didn’t listen to all the ‘Cloud Is A Fad’ nay-sayers.

linked stock price 02 08 13

In summary, and in the true #CloudIsAFad spirit, I guess I will close by sarcastically pointing out that LKND on pace for over $1 billion annual revenue (~$16B valuation), CRM on pace for over $3 billion annual revenue (~$24B valuation) and even FB with over $5 billion annual revenue (~$69B valuation) are all just Fads.  #SaaSIsAfad.

You can read the entire article on ‘LinkedIn Profit, Sales Beat Estimates After Membership Swells’ here:  http://www.bloomberg.com/news/2013-02-07/linkedin-xxx.html?cmpid=yhoo

 

Governance Gone! Wild!

While to some the acronym, ‘GGW’ might conjure up beautiful visions of fancy tour buses traveling the country capturing everything in sight on video for the whole world to see (as long as you pay the $9.99 per DVD, or opt for the $19.99 for full-DVD collection, or get their online subscription for $9.95 per month — or whatever it costs), I have just witnessed a different version of ‘GGW’ that is anything but beautiful.  In fact, ‘Governance Gone! Wild!’ is down-right scary!

I just attended several days of the Dreamforce 2012 conference in San Francisco and, as always, I was impressed with the innovation, which is clearly evident at these events.  I was impressed with the creativity of all the Software as a Service (SaaS) applications available built upon the Force.comheroku and/or other Salesforce platform services.  There were apps for this, and apps for that, and apps that work with other apps, and integrated apps.  In fact I’m on “app-overload” right now and tonight, instead of sweet sugar plums dancing through my head, I will most likely have a nightmare about all the possible lack of governance issues that are not being addressed in this quickly-evolving ‘cloud’ environment.  It’s truly like the Wild West!

This is not to say that these SaaS application vendors have overlooked governance issues completely.  In fact I suspect many of them take these items seriously and have built their respective solutions accordingly.  However, I can tell you what is an obvious generalization is the main pitch-points in these solutions is (1) easy user experience with a simple, familiar web-interface and (2) ability for organizations to self-manage or re-configure solutions without the need for costly professional services or software development.  These are not bad pitch-points in the least but what I must say is that conversations seem to rarely dig too much deeper than the surface of some point-and-click functionality and a demonstration or two.  I admire these vendors for their passion to solve very specific needs for enterprise customers and I’m invigorated with their energy to quickly have their Killer SaaS app deployed and being utilized by their customers to improve operational efficiencies.

Yet, as I put myself in the shoes of the SaaS vendor the last thing I would want to do is possibly slow down the sales cycle by bringing up governance and organizational readiness topics such as policies, processes or people that wasn’t directly related to my particular technology.  These topics are somewhat related to the technology but it’s more about the organizational readiness by the customers themselves.  We must remember that these applications are promoting their solutions to enterprise organizations, not consumer.  Therefore, I would like to give one specific example of what caused my “Governance Gone!” nightmare.

 

Wild! 

As seen below in the photo below (not to the left), Salesforce.com introduced their new “marketing cloud”.  At the Dreamforce conference they setup an example of the ‘Dreamforce Social Media Command Center’.  They had a full-time agent at each of several work stations.  Each of these work stations was monitoring a different social media feed.  One each for Facebook, Chatter, Twitter, LinkedIn, YouTube and maybe even a few other social networks to provide an example of a Social Media Command Center and how this could be a reality within your particular organization.  As I saw this incredible activity of feeds, tweets, #hashtags, likes, posts and other real-time social interaction – this is where it really struck me about Governance (or lack thereof in this scenario).  It was Wild!

These are the types of things I was thinking to myself, not from a technology perspective itself, but rather ‘are these people considering the following types of items’ before going buck-wild to immediately implement this type of Command Center within their own organizations:

  • People:
    • Since these are mostly real-time conversations and, naturally, the business wants to represent themselves professionally, what type of special training will be required for this new type of social media command center operator?
  • Policy:
    • As we all know, social networks are filled with people that sometimes spew nasty, disgusting or plain hateful messages because they think they are completely anonymous to the world.  In these cases what is the organizations policy about any responses, deletion of messages or any other action?
  • Process:
    • With this gluttony of electronic information overload from such a wide ranging variety of sources, in different formats and with such a diverse contextually meaning, what is the process to accurately analyze the data?  After all, I would imagine that video-’gamers’ are quite active on these types of social networks and “rad”, “bad” or “bitchin’” don’t quite translate into the true meaning if you just consider the official dictionary definition of a word or phrase.

In summary, in our zeal to innovate and offer powerful, useful, as well as, truly remarkable technology, which is going to revolutionize the way we do business, we should not be in such a rush to not consider and overlook an organizations preparedness from a governance standpoint.  Great technology is not always good enough.  If your organization decides to not consider well-thought out governance plans then the “Governance Gone!  Wild!” bus may be paying you a visit sooner than expected!

“Business” cloud and “Consumer” cloud. LinkedIn reports great Q2 earnings and revenue growth

Reading the news of LinkedIn’s great Q2 earnings report (http://finance.yahoo.com/news/linkedin-2q-net-income-falls-203904846.html) got me thinking about how seriously segregated the “business” market is becoming from the “consumer” market in regards to to cloud computing.

It’s becoming clear that investors, in the stock market and venture capital industries are only going to put their money with companies that offer serious business value instead of just relying on advertising as a revenue business model.  Some example of winners and losers as of this blog post (8/24/12) are as follows:

Winners

  1. LinkedIn  (+41.75% stock price over 1 year period)
  2. Salesforce  (+27.59%)
  3. Amazon  (+26.85%)

Losers

  1. Facebook  (-49.23%)
  2. Groupon  (-83.00%)
  3. Zynga  (-65.58%)

While the current stock prices, or the funding these companies are receiving, will certainly not dictate future results, the fact of the matter is that these types of indicators typically can accurately predict possible outcomes.

It’s clear to me that a business model such as LinkedIn where a good portion of their revenue comes from valuable ‘business’ services, as opposed to just advertising, is a winning formula:  “LinkedIn gets more than two-thirds of its revenue from fees it charges companies, recruiting services and other people who want broader access to the profiles and other data on its site. The rest comes from advertising.”

Congratulations to the LinkedIn folks on creating a great cloud service that people seem to sincerely enjoy, myself included.  Below are cliff notes from LinkedIn’s Q2/2012 quarterly earnings report:

  • LinkedIn Q2 Adjusted Earnings: $18.1 million (Q2/2012) versus $10.8 million (Q2/2011)
  • Revenue increased 89 percent to $228 million, from $121 million
  • The company raised its forecast for the year

They did, however, invest a lot of money in the future:

  • “Marketing, development and other expenses increased 93 percent to $215 million, from $111 million.”
  • “LinkedIn expects revenue of $235 million to $240 million for the current quarter.”

Here are the one year stock charts for the companies mentioned above for your viewing pleasure:

Winners:

LinkedIn

Salesforce

Amazon

Losers:

Facebook

Groupon

Zynga

Advice for the cloud vendors is to be a ‘business-class’ cloud services provider in order to grow a prosperous company.

#SalesforceIsAFad. Are you kidding me? Absolutely not!

A cliff notes version on some of the highlights:

– Quarterly Revenue of $732 Million, up 34% Year-Over-Year
– Quarterly Operating Cash Flow of $136 Million, up 64% Year-Over-Year
– Deferred Revenue of $1.34 Billion, up 43% Year-Over-Year
– Unbilled Deferred Revenue Increases to Approximately $2.8 Billion
– Raises FY13 Revenue Guidance to $3.025 – $3.035 Billion

  • “Our second quarter revenue growth was outstanding at 34% in dollars and 37% in constant currency,” said Marc Benioff, Chairman and CEO, salesforce.com. “Salesforce.com’s social enterprise strategy is enabling companies to connect with customers, partners, and employees in completely new ways – and it’s creating new opportunities for their growth and ours.”
  • Full Year FY13 Guidance: Revenue for the company’s full fiscal year 2013 is projected to be in the range of $3.025 billion to $3.035 billion, an increase of 33% to 34% year-over-year.

Web link to the full article is here:  http://finance.yahoo.com/news/salesforce-com-announces-fiscal-2013-200500409.html

 

This web site was founded on the premise that many folks dismissed the cloud as “a fad”, or not viable for “real” business.  This really irks me, seriously!

So, therefore, I created some materials and entitled the series of graphics “Crossing the Chasm — Reinventing your business in the clouds”.  I have been personally extremely impressed how Amazon and Salesforce have, and again are in the mist of reinventing their businesses.  Both AMZN and CRM are not leaving their leadership positions in their respective markets but they truly have a vision of continuing to grow their organizations and mobile, social, platform and especially, cloud, are all key components to this strategy.

To me breaking down the strategies shows that there are quite similar steps in innovation that enables these companies to address new markets.

What are your thoughts?  Is my head in the clouds or is this logical?  I value any and all feedback on this or any other topic.

$4.3 billion for Ariba and reportedly $300 million for Vitrue (#CloudIsAFAD continues)

SAP Buys Ariba to Combat Oracle, Cloud Vendors

http://blogs.wsj.com/cio/2012/05/22/sap-buys-ariba-to-combat-oracle-cloud-vendors/?mod=yahoo_hs

Oracle Answers SAP Cloud Acquisition With its Own Deal

http://blogs.wsj.com/deals/2012/05/23/oracle-answers-sap-cloud-acquisition-with-its-own-deal/?mod=yahoo_hs

Oracle Is Starting To Look A Lot Like Salesforce.com

http://finance.yahoo.com/news/oracle-starting-look-lot-salesforce-160026902.html

Google Is A Fad

No one will ever trust Google with their information, no one *sarcasm*

  • 100 million active Google+ users
  • 350 million people now use web-based email app GMail
  • Web browser Chrome is “growing fast” with over 200 million users to date
  • YouTube has over 800 million monthly users
  • Twitter revealed it has 140 million active users in April
  • Facebook said it reached 845 million monthly active users in December 2011

http://news.yahoo.com/google-numbers-100-million-active-google-users-350-110834825.html

Development Platform

Boy was that easy, simple and effective!

What is you you ask?  You are reading it right now.  Creating this web site with a highly-effective blog from WordPress , then adding a Content Management system from Joomla , then adding a testing/education application from moodle , and then adding a social portal from elgg  took me maybe a grand total of one hour time.  This is not to brag but rather to demonstrate the fact how far we have come regarding the great progress of offering simple, yet highly-effective point-and-click tools to make powerful applications.

This web site is an example of just this.  It cost me a grand total of the domain fee of ~$10/year plus one year of hosting at ~$60/year.  ~$70 total!  All the software is open source and free to use for non commercial usage.  A great deal, in my opinion.

Anyhow, I remember all that not long ago how I would have had to manually install databases and configure connectors and mashup applications.  It was doable but time-consuming and frustrating.  This ease of use allowed me to jump right into settings up this web site exactly how I want it to be from a functionality standpoint instead of dealing with all the technical details of getting everything working correctly.

I think this type of dynamic is what is going to be changing in the Information Technology world.  Traditional IT folks will need to become more agile on enhancing business processes or become more focused on creating useful tools instead of the details of software installation, patching updates and/or upgrades.  In other words, I can have my applications hosted in ‘the cloud’ where a service provider does all the low-level technical things that still need to be done, but I can channel my energy to more productive activities.

The idea of a Development Platform being so easy to use, yet powerful enough to be deployed for enterprise applications is here to stay.  It’s a way to easily jump start your path to efficiency!

What do you think?

CloudIsAFad.com is born

Whelp folks – Welcome to Cloud Is A Fad.com!

This web site is born out of the idea that a few of my friends share regarding “cloud computing”.  Often times we hear from non-believers, naysayers and doubters that “cloud computing” is just a passing ‘fad’ and will go away.  “No one will ever trust their sensitive information in ‘the cloud'” or “It’s just for personal use and it will never be embraced by enterprise organizations” is what they say.

“Ohhh realllllyyyyy???” is my typical response.  Ever use Gmail?  Ever use Facebook?  Google Docs?  All cloud.  Online Banking?  “No one will ever trust their financial information online”.  Ever buy something from Amazon.com?  Cloud.

So, long story short, this web site is created with an ironic spin to the notion that “Cloud Is A Fad”.  We invite your participation.