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Yamato Kaneko

on 12 February 2016

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Transcript of LinkedIn

Aditya Chellaram
Karine Sarkisian
Jessica Tai
Yamato Kaneko
I. Business Model
II. Company Valuation
III. Reasons for Overvaluation
IV. Ideas for Improvement

1. Premium Account Subscriptions
2. Advertising
3. Recruitment Services & Job Posting
Business Model
1. Premium Account Subscriptions
1.5% of Users
: Any form subscription
: 2011 revenue
: 20%
: 30%
: 50%
1. On-line self service platform
2. Advertising
Any advertisers can create their ads by themselves.
Ads will be targeted based on user's profiles and behavior.
2. Field sales
Targeting big advertisers.
Display ads, sponsorships, recommendation ads etc.
$155M: 2011 revenue
LinkedIn Jobs
Career Page
Jobs You Might Be Interested
Talent Finder Account
3. Recruitment Services & Job Posting
: "Apply Using LinkedIn" button
: Career info with open positions
: Posting as suggestions
: Search filters, inMail, organizers
$260M: 2011 revenue
$93.08 / share × 103.30M shares = $9.61B
II. Company Valuation
Current Market Valuation
Our Cash-Flow Base Valuation
Present value of cash flows
24.9M + 44.4M + 89.2M + 139.4M + 155.6M = $453.59M
Terminal value
($274.3M × 1.05) / (12% - 5%) = $4.11B
Total value of LinkedIn
$453.59M + $4.11B = $4.57B
1. Price-to-earning ratio is too high compared to competitors.
2. Net income fell 22% from 2010 to 2011.
3. Users are increasing, but they don’t visit often.
III. Reasons for Overvaluation
1. P/E ratio is too high compared to Internet company industry
2. Net income fell 22% from 2010 to 2011.
3. Users are increasing, but they don’t visit often.
Passers By
Visit 0-1 / month
Visit 1-30 / month
Visit 30+ / month
1. Boost Up Revenue
2. Increase Page Views
3. Cut Costs
IV. Ideas for Improvement
Create a lower-rate premium account option for students.

Access to InMail for communication with recruiters.
More chances to be found by recruiters with better SEO.
Easier Application with "Resume Book" function.

Benefits for LinkedIn:
Revenue Increase
Students as potential future premium customers
1. Boost Up Revenue - Student Account
Create two new sections: LinkedIn Interview Q&A and Company Recommendations.

Users can access the info about interview questions asked, paper tests taken, or tips for preparation.
Users can access company reviews.

Benefits for LinkedIn:
Page view increase
New users, especially students and job seekers
2. Increase Page Views - New Features
Implement Open Source Translation Tool (OSTT) to cut cost

Allow users to translate site using easy-to-use OSTT

Benefits for LinkedIn:
Lowered costs of translation due to crowdsourcing.
3. Cut Costs - Open Source Translation Tool
Backup Slides
Total DCF
$9.95/month if student buys 3-5 months
$14.95/month without commitment

Total profits for LinkedIn over the recruiting period: $74.7 million

Must have a .edu email address
Cost of the Student Account
Our Stock Price

= Market Cap/Total Outstanding Shares
Main competitors in US: BranchOut, Monster, Biziliy and partnerup.com
BranchOut and Monster's Worldwide app BeKnown leverage Facebook user base
In June 2011, LikedIn cut API access to BranchOut and BeKnown
European competitors: Viadeo and Xing
Have 35M and 10M users respectively
Less features and cheaper price (6 euros/month)
Hiring Solutions
Wed, June 6
6.5 million passwords stolen
Weak security system in place
"Skycure Security said the the mobile app was sending unencrypted calendar entries to LinkedIn servers without users' knowledge".
This will negatively influence user confidence.
LinkedIn is Hacked!
1. "LinkedIn Passwords Leaked by Hackers." BBC.com. British Broadcasting Cooperation, 6 June 2012. Web. 6 June 2012. <http://www.bbc.com/news/technology-18338956>.
Net Income in the green for 2010 and 2011
Low income/earning doesn't justify exorbitant stock price
Now available in 16 languages as it expands to international markets
International expansion driving up SG&A cost leaving profit margins slim
Future providers of "Big Data" to macro experts like McKinsey and MGI
At current user base amount of data not substantial - need to become more social
58% user growth over last year
Expansion to low income/emerging markets - Lower revenue generation
Why people consider LinkedIn fairly valued?
4.57B / 103.30M = $44.21
Initially, there's a one-time $5 fee
becomes an "ad credit"
Pay-per-click (CPC)
You specify the maximum amount you're willing to pay for each click
Then, you can set a daily budget to identify the most that you're willing to spend each day.
The minimum daily budget is $10/day and $2.00/click.
Pay-per-1,000 impressions (CPM)
The minimum CPM bid is $2.00/thousand impressions.
LinkedIn Ad Costs for Customers
Full transcript