How LinkedIn Makes Money

How LinkedIn Makes Money

Even though the success of this company was initially anticipated, LinkedIn has surprised everyone with its sustained growth since its inception. How it actually works and how it makes money remain the two most common questions people ask. In this BusinessZeal article, we'll not only tell you how it makes profits, but also the exact numbers.
BusinessZeal Staff
Some Success!
In September 2010, LinkedIn was ranked No. 10 in The Digital 100: The World's Most Valuable Startups list by the Business Insider.
Launched as a social networking site for professionals in 2003, LinkedIn started becoming a part of daily news right from its early days. The concept where socially connecting with people over a website was also going to help people professionally was novel and seemed rather beneficial. In 2006, it made profits for the first time. Almost 8 years after its inception, the company filed for an IPO (initial public offering); in approximately 4 months, it had already traded its first shares. A year before it was founded, it received an investment of USD 103 million. In the year 2011, LinkedIn earned USD 154.6 million counting just its advertising revenue; here, it surpassed Twitter, which made USD 139.5 million.
Now, we'll see why LinkedIn holds so much financial value. The first shares were traded under NYSE, with the symbol 'LNKD, the price of each share standing at USD 45. In its first day of trade, LinkedIn's shares rose 171% and closed at USD 94.25, 109% more than the IPO price. With such news coming out quickly and consistently, people wanted to invest immediately in what they saw as an opportunity. It is here that they wondered how LinkedIn makes money.
*All the figures mentioned in this article from here onwards are as per the Third Quarter 2013 Financial Results announced by LinkedIn
TALENT SOLUTIONS
The best change to recruiting that I've seen in my career.

Matthew Caldwell
Director, Talent Acquisition at Mozilla

Under the Talent Solutions header, recruiters and corporations pay for a range of services that help them to establish a profile, advertise, and explore the database of LinkedIn users and resumes. Basically, if a company pays for Talent Solutions, it can:
  • Establish its corporate page on LinkedIn.
  • Publish advertisements (pay per click) targeted to LinkedIn users who match required job profiles.
  • Get immediate access to LinkedIn's database of users and their resumes/portfolios.
Revenue: USD 224.7 million
Increase from Q3, 2012: 62%

MARKETING SOLUTIONS
Increased member growth and engagement helped drive strong financial results in the third quarter. ... We continue to deliver value to professionals through investment in core products and strategic initiatives such as mobile, students, and the professional publishing platform.

Jeffrey "Jeff" Weiner, CEO, LinkedIn

Marketing Solutions are basically advertising platforms offered to clients on the website. In this section, advertisers pay LinkedIn to host their advertisements in order to promote their goods/services. The payment depends on the pay per click-through rate. All advertisements target a specific client/user base.

Revenue: USD 88.5 million
Increase from Q3, 2012: 38%
PREMIUM SUBSCRIPTIONS
When a user opts for a premium subscription, he pays for the best services on LinkedIn. These include a better search beyond personal connections, with all its powerful filters. Users can also see who viewed their profile. The JobSeeker for unemployed users is also included in these subscriptions. An unemployed user can move up the ladder as a 'featured applicant', can send personalized InMails** to recruiters, and view extensive, detailed salary information. Sales professionals are provided tools like LinkedIn sales navigators. Of course, there are types of premium subscriptions.

Revenue: USD 79.8 million
Increase from Q3, 2012: 61%
**InMails enable you to directly communicate with prospective clients and managers who handle recruitment.
So basically, LinkedIn makes money from these three primary avenues. Depending on how many people pay and how much they pay for these services, we can determine how much money LinkedIn makes every year. As of now, it's making a lot. We'll leave you with a small note from the CFO and Senior Vice President of LinkedIn, Mr. Steve J. Sordello:
Strong execution in the third quarter across engineering, product, and monetization platforms yielded solid growth and record levels of adjusted EBITDA and operating cash flow. ... We continue to invest aggressively in our member experience and diverse revenue streams in order to realize the long-term potential of our vision.