Here's How LinkedIn Is Targeting Future Growth

Learn how LinkedIn is taking action to grow as a social network, increasing its user base and engagement around the world.

Jul 19, 2014 at 9:00AM

Throughout the year, business-oriented social network LinkedIn (NYSE:LNKD) has been improving its services in order to increase user engagement and continue its worldwide expansion. With the mission of connecting the world's professionals to make them more productive and successful, the company has acquired several start-ups that leverage its features and differentiation. In that sense, as LinkedIn grows at a rapid pace, and improves its branding as a publishing and networking platform, it becomes a stronger contender for social network giant Facebook (NASDAQ:FB).

Acquisitions: Adding value to its social networking service
In February, LinkedIn bought Bright, a start-up that offers a job search engine platform, for $120 million. Recently, it acquired Newsle, an app that provides notifications when a user's contacts are mentioned in the news or articles on the Web. Moreover, through Connected, an overhaul of the company's Contacts app, users will now receive updates of their connections through a series of cards, which they can swipe through and interact with using "likes" or comments.

As a result, the company is building on its services and adopting new features that could increase user engagement. Through these changes, LinkedIn is shaping its social network into an environment where people can connect with each other and share ideas, while not losing the essence of finding talent and employers. In addition, LinkedIn is making progress in its goal to provide a publishing platform to users. LinkedIn plans to allow all of its 300 million users to publish articles or content to the site soon. This is a valuable tool to promote businesses or personal brands.  

Expansion to China
The company also plans to offer its services to the Chinese population, which includes 140 million professionals and students. Recently, LinkedIn launched a beta site in Simplified Chinese. LinkedIn CEO Jeff Weiner states that the company is taking significant steps forward in China and that it's still in a very early phase of introduction. The expansion into China is part of the organization's Economic Graph initiative, which aims to have every job available in LinkedIn. If it manages to successfully enter the Chinese market, the social network could significantly increase its user base in the long term.

Impact on financials
As LinkedIn increases its user base and engagement in the ways described above, it could grow its revenue and profits significantly in the mid and long term. In its most recent quarter, the company reported $473 million in revenue, up 46% year-over-year, with growth in its three product lines: Talent Solutions, Marketing Solutions, and Premium Subscriptions. 

LinkedinrevenueSource: LinkedIn Investor Relations

Additionally, LinkedIn increased its members by 36% year-over-year, unique visitors grew by 26%, and total page views increased 43%. Its member metrics show consistent growth, and these rates could be sustained through international expansion and the integration of new features.

A strong contender for social network giant
Facebook currently has over 1.2 billion users; reported revenue of $2.5 billion in Q1 2014; and keeps improving its delivery of ads while looking for user growth in remote parts of the world. The company plans to launch solar-powered drones that will enable people from remote areas of the world to access the Internet. This could increase its user base considerably, which in turn elevates its top-line. Moreover, Facebook plans to make video ads more accessible to agencies and publishers looking to promote their brands.

Even though it falls behind Facebook, LinkedIn can grow considerably in future years by providing its service to the remaining global workforce. The organization also has a more diversified product portfolio than Facebook, which relies mostly on ads to generate revenue. As LinkedIn grows in popularity, some businesses might prefer promoting their brands to the professional audience of this social network, which could potentially take a portion of Facebook's clients.

Final foolish takeaway
LinkedIn is taking firm steps to fulfill its ambitious vision of providing economic opportunities for members of the global workforce. It's acquiring start-ups and integrating their features into its social network, providing value that could increase user engagement. As LinkedIn expands to China, the company can grow its user base in the long term. Consequently, it might increase both top and bottom lines significantly. LinkedIn could pose a threat to Facebook as it gains more popularity and becomes a better publishing platform oriented toward businesses and professionals.

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Alvaro Campos has no position in any stocks mentioned. The Motley Fool recommends Facebook and LinkedIn. The Motley Fool owns shares of Facebook and LinkedIn. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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