“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.