LinkedIn Skyrockets as Job Losses Mount

Posted on 02 March 2009

Diverse Revenue Streams Help Site Flourish Even With Help-Wanted Ads in Short Supply

Published: March 02, 2009

NEW YORK (AdAge.com) — There are two places most of today's laid-off executives are heading: to job-search sites to see what other opportunities are out there and to networking sites in hopes they can reconnect with — and milk leads from — former colleagues and business contacts. One site, LinkedIn, offers both of those things in one place.

So it should come as no surprise that the site's traffic is up in the recession. It hit 36 million members last Monday and is adding them at a rate of about one member per second. According to ComScore, it's gone from about 3.6 million unique monthly visitors a year ago to 7.7 million today, which would make it even with Yahoo HotJobs, the third-largest online job site.

The question is, however, whether LinkedIn — a site closely tied not only to job seekers but also employers — can thrive when unemployment is expected to reach 9% and few are hiring. After all, what's a bunch of online supply if there's not sufficient demand for it?

To understand the online supply-and-demand problem, look at Monster Worldwide. While traffic was up 76% year-over-year in January as the unemployed flocked to job boards, its first-quarter revenue is expected to be down 30% over the prior year's period, thanks to softening in the help-wanted ad market. And it could be unprofitable for the next three quarters, management warned.

LinkedIn, however, is painting a different picture, in part because it's betting on some different revenue streams, all of which, the company said, are growing. The firm is profitable and has plenty of cash still in the bank — about 80% of the $100 million it has raised, CEO Reid Hoffman told TechCrunch's Michael Arrington recently.

Well-positioned
Josh Bernoff, VP and principal analyst at Forrester, said he buys LinkedIn's countercyclical argument. "Any company that benefits from people out of a job and isn't dependent on advertising for its revenue is going to be doing great right now," he said. "And not a lot of companies can say that."

Ads account for about 25% of the site's revenue, about even with its other revenue streams: job postings, corporate accounts and individual subscriptions. A newer, smaller revenue stream is research. To be sure, it's not all hunky-dory; in November, LinkedIn laid off 10% of its then 370-person staff, a move meant to help it maintain profitability. But Mr. Hoffman claims the company could go public whenever it wants.

According to LinkedIn's Director-Advertising Sales Steve Patrizi, advertising revenue has grown during the recession, but because there are fewer ads hawking jobs, he's got a pitch to get non-endemic advertisers to buy the site: LinkedIn is full of employed professionals, too, and those folks want to make the smart decisions that move their careers forward (or at least ensure a pink slip isn't in the future). So why not reach them at a time when they need to make those decisions?

He suggested that people want to make the right bet on which computers to buy so they don't get canned for choosing wrongly. So Dell is advertising to them. LinkedIn's ad business is "growing much faster" than the market in first quarter, he said in an e-mail to Ad Age, although that statement should be tempered by noting that most projections suggest display ads will be down in the mid-single digits.

LinkedIn's corporate enterprise business has 900 members which pay for services based on "seats" in a Bloomberg-style business model. And the site has been introducing new features to keep that number from falling off like hiring has. Companies not doing active recruiting, for example, can pay for custom company profiles, all in the name of good branding.

Subscriptions up
And, finally, it also makes money off subscribers — users who pay to introduce themselves and send mail to people outside of their networks. Explained Mr. Patrizi, via e-mail: "Subscriptions are growing since members are seeking to grow and expand their networks in the current economy."

LinkedIn's not the only job site reaping the rewards of a down economy. TheLadders, a site for execs looking for $100,000-plus-salary jobs, is also doing well, thanks to its reverse-revenue model in which users pay to be on the site.

One analyst who covers th
e space said the site should be "on fire" right now — and its CEO told Ad Age that he expects to grow the business by 60% during the next year. "Employer demand for employees is cyclical," said Marc Cenedella. "Employee demand for jobs is not."

Yadong, PhD
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