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

 

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