Source: Bizo.

On Tuesday, LinkedIn (NYSE:LNKD) announced a hefty $175 million acquisition of Bizo, a leading company that specializes in business-to-business, or B2B, marketing. The deal consists of 90% cash and 10% stock, and is expected to close during this quarter. Shares of LinkedIn are enjoying gains of 3% Wednesday on the news, so investors are clearly excited about the acquisition's potential to grow the business. Here's why.

Despite Facebook's (NASDAQ:FB) attempts to crack professional social networking, such as the 2011 acquisition of Pursuit, the social juggernaut has had limited success and appears to be content focusing on personal connections. Facebook's ad business is faring extremely well right now, with most of this success coming from mobile.

That's not to say that Facebook has given up on B2B marketing. In fact, Facebook revamped its Ads API program in January, allowing marketers to target users based on employer and job title. It was a move clearly intended to appeal to B2B marketers, but at the same time it's likely a relatively low priority for Mark Zuckerberg in relation to growing the mobile ad business.

LinkedIn's acquisition of Bizo just further strengthened its position in the B2B market, giving it an even larger lead over Facebook. Bizo integrates with numerous marketing platforms and has copious amounts of data for B2B targeting.

Building A Robust B2B Marketing Platform Through Bizo Acquisition from LinkedIn

The deal will be highly complementary to LinkedIn's current Sponsored Content business, which was launched almost exactly a year ago. Bizo will help Sponsored Content reach the right users more effectively, and as a result it will boost LinkedIn's small but growing ad business.


Revenue (MRQ)

% of Total (MRQ)

Talent solutions

$275.9 million


Marketing solutions

$101.8 million


Premium subscriptions

$95.5 million


Source: 10-Q. MRQ = most recent quarter.

Marketing solutions grew 36% last quarter, and LinkedIn primarily attributed this growth to the launch of Sponsored Updates, and Sponsored Content is now 19% of marketing solutions sales. The company expects this figure to continue rising as it focuses on content marketing.

That's why the Bizo deal is so promising. In dollar terms, Sponsored Content revenue was just $19.3 million last quarter. This is a small business that has nowhere to go but up, which is all incremental upside to the core talent solutions business.

The price tag is also quite reasonable given the potential, and LinkedIn can easily afford it with $2.3 billion in cash and marketable securities on the books at the end of March. The deal may take a bite out of that total, but operating cash flow is healthy ($129 million last quarter).

Facebook may want a piece of the B2B market, but it has bigger mobile fish to fry right now and LinkedIn will take full advantage of that opportunity.

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Evan Niu, CFA owns shares of Apple, Facebook, and LinkedIn. Evan Niu, CFA has the following options: long January 2016 $150 calls on LinkedIn, short January 2016 $200 calls on LinkedIn, long January 2016 $125 puts on LinkedIn, short January 2016 $140 puts on LinkedIn, short January 2015 $60 puts on Facebook, and long January 2015 $35 puts on Facebook. The Motley Fool recommends Apple, Facebook, and LinkedIn. The Motley Fool owns shares of Apple, 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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