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LinkedIn shows Facebook how it's done, earnings-wise

Shares of professional networking site up in after-hours on 89% jump in revenue, raised sales forecast.

LinkedIn corporate headquarters.

Updated: 2:30 p.m. PT

It's the flip side of the Facebook story: A (relatively) newly-public Internet company with a story that Wall Street actually likes.

So it was that shares of LinkedIn rose about seven percent in after-hours trading after the company earned $2.8 million on $228.2 million in revenue during the second quarter. Revenue was up 89 percent over the same period a year ago.

Not accounting for special charges, the professional networking site earned 16 cents a share, in line with the consensus Wall Street estimate gathered by FactSet Research. Analysts had expected $215.8 million in sales, compared to $121 in revenue during the same quarter a year earlier when LinkedIn posted net income of $4.5 million.

"Just look at LinkedIn's business model. They're in an absolute power vertical niche with an incredibly rich audience -- exactly the demographics you want to advertise to," said Jed Williams, a senior analyst with BIA Kelsey, a research firm focused on interactive media. "Even better, they have have 3 revenue streams -- display, subscription and jobs board."

LinkedIn said that 65 percent of its revenue, slightly more than $147 million, came from the U.S. while revenue from international markets totaled $81.0 million, or 35 percent of total sales during the second quarter of 2012.

The company's strong results followed what Wall Street interpreted as a relatively underwhelming performance by Facebook in the same quarter. While LinkedIn and Facebook are both Internet companies, the comparison is inexact. LinkedIn is more business-focused and derives revenue from its subscriptions for premium services, while Facebook relies largely on advertising.

"They're not reliant on the volatility of the ad market," Williams said of LinkedIn vis-a-vis Facebook.

During the earnings call, LinkedIn CEO Jeff Weiner noted that some 15 percent of new LinkedIn members originated on mobile, up from 10 percent. Also, he said that about 27 percent of visits now come from mobile visits. Like every other Internet company worth its salt, LinkedIn is trying to cash in on the potential of the accelerating user shift to mobile. It's a challenge that remains daunting but Weiner said that the company's early testing of "mobile monetization" was promising. He did not say when any of those programs might be ready for prime time.

  • Revenue from Hiring Solutions products was $121.6 million, up 107 percent compared to the second quarter of 2011. That number represented 53% of total revenue in the quarter, compared to 48 percent in the year-earlier quarter.
  • Revenue from Marketing Solutions products of $63.1 million, up 64 percent compared to the second quarter of 2011. That represented 28 percent of total revenue in the quarter compared to 32 percent in the second quarter of 2011.
  • Premium Subscriptions revenue totaled $43.5 million, up 82 percent compared to the second quarter of 2011. That amounted to 19 percent of total revenue in the second quarter of 2012, compared to 20 percent of revenue in the year-earlier period.
LinkedIn also offered a pleasant surprise by upwardly revising its full-year revenue forecast to a range of $915 million to $925 million. Investors responded by sending shares of LinkedIn up more than five percent after the earnings hit the wire. The stock later retreated but was still up sharply from its Thursday close of $93.51.