Having bought Lynda.com last year in a deal valued at about $1.5 billion, LinkedIn's (LNKD.DL) acquisition of the online learning company, which teaches business, technology, and creative skills through online videos, clearly signified an area management wants to prioritize. Considering LinkedIn only had about $3.5 billion in cash on its balance sheet at the time, $1.5 billion was no small sum. With this in mind, it's worth occasionally checking in on how well the acquisition is playing out. Fortunately, it's looking pretty good so far.
Here's what there is to know about LinkedIn's ongoing integration of LinkedIn.
It's time to integrate technology
In LinkedIn's first-quarter quarterly press release, management said that it is essentially done with focusing on integrating the Lynda.com team, and now it is turning its attention to "integrating their technology and content."
Two examples are the launch of LinkedIn Learning Paths, aggregating relevant content from across LinkedIn relating to a specific topic or course, and testing deeper integration into relevant LinkedIn subscription packages. On the enterprise side, we continue to build out the comprehensiveness of our content library to meet the growing demand from our corporate customers.
Revenue is growing
Revenue from Lynda.com, which LinkedIn classifies as learning and development and files as a sub segment in talent solutions, was $55 million in Q1 -- up from $49 million in Q4. Revenue from Lynda.com, therefore, now represents about 10% of talent solutions revenue and 6.4% of total revenue.
This revenue is about in line with initial expectations laid out by management. When LinkedIn first acquired Lynda.com, the company said the online learning company's total revenue in 2014 was $150 million. And management also said revenue was growing in the mid 20% range. Extrapolating from these figures, LinkedIn.com's revenue was on pace to contribute about $225 million to LinkedIn's top line during 2016. With $55 million already on record for 2016, it's looking like Lynda.com's 2016 top-line contribution to LinkedIn will actually surpass $225 million.
Longer-term, LinkedIn management has said it believes the total addressable market for learning and development is about $30 billion. With its total identified addressable market -- including learning and development -- pegged by management at about $115 billion, learning and development could theoretically grow to represent around a quarter of LinkedIn's revenue, assuming LinkedIn proportionally penetrates each of its addressable markets it is targeting at similar levels. So, investors should look for this segment to continue to grow as a portion of LinkedIn's total revenue. With learning and development only representing 6.4% of total revenue today, there should be plenty of growth ahead if management is right about the size of LinkedIn's addressable markets.
What management didn't say
One area management didn't talk about when LinkedIn reported first-quarter results was an interesting potential revenue source for Lynda.com, which management brought up when it reported third-quarter results last year: the idea of LinkedIn as an internal enterprise platform for storing and viewing in-house training videos.
LinkedIn CEO Jeff Weiner explained this possible catalyst for learning and development during the third-quarter earnings call last year:
Another potential scenario is to start to think about Lynda more as a platform, where enterprises that have already created their own courses, their own knowledge base, would be able to leverage our infrastructure and our assets to improve the way that their employees are learning and developing.
Is management still considering this option? Or did the idea get shelved for now? Maybe we'll hear about it when LinkedIn reports second-quarter results.
Overall, Lynda.com's integration into LinkedIn is looking good. Further, it continues to look like a catalyst for growth over the long haul.