✶Explainer14:30
Why LinkedIn Never Needed Facebook-Level Engagement
LinkedIn's economics depended less on frequent member visits than on maintaining a comprehensive professional dataset. Recruiters paid heavily to search and contact that network, making relatively inactive profiles commercially valuable.
- Most revenue did not come from advertising
- Recruiters paid for access to professional data
- Monthly engagement was weak by social-network standards
- Accurate profiles retained value even when users visited infrequently
“you can't really judge this company in the same way that you judge Facebook or Twitter because it's not how they monetize.”
“they don't make money when you visit the website, they make money from having your data, uh up-to-date professional data about you on the system…”
#business model#recruiting#engagement#professional data
✶Explainer16:30
The Three Businesses Behind LinkedIn's Revenue
LinkedIn operated three principal revenue lines: Talent Solutions for recruiters, Marketing Solutions for advertisers, and premium subscriptions for members. Talent Solutions dominated because LinkedIn Recruiter had become essential infrastructure for professional hiring.
- Talent Solutions generated about 60% of revenue
- Recruiter seats could cost roughly $900 per month
- Marketing Solutions primarily sold advertising
- Premium subscriptions served sales, business-development, and other users
“if you are a recruiter operating in the HR world today, you need to have you know LinkedIn recruiter.”
“they've created this just incredible expectation in the market that that is a tables table stakes tool to have.”
#revenue#talent solutions#subscriptions#advertising
✶Explainer22:00
The Guidance Miss That Erased $10 Billion in One Day
LinkedIn beat fourth-quarter earnings expectations but issued 2016 guidance below Wall Street's expectations. Its shares fell 43.6% in one day, triggering a broader selloff across publicly traded software companies and sharply reducing LinkedIn's acquisition price.
- The core quarterly result beat expectations
- Forward guidance signaled slower growth
- LinkedIn lost $10 billion of market capitalization
- The selloff spread across the SaaS sector
“They actually beat expectations on earnings for the fourth quarter of 2015. But they announced lower than well than guidance that was lower than Wall…”
“It was down forty three point six percent in a single day. Uh $10 billion of market cap just wiped out of LinkedIn.”
#earnings#stock market#saas#valuation
✶Explainer33:00
LinkedIn Could Extend Microsoft Identity Beyond One Employer
Microsoft's Active Directory represented an employee inside a particular company, while LinkedIn represented that person's career across companies. Combining them could let Microsoft carry skills, reputation, and professional relationships through increasingly frequent job changes.
- Active Directory anchors identity inside an enterprise
- Modern careers span multiple employers
- LinkedIn provides a persistent professional identity
- Office and Dynamics could use career-wide context
“The company doesn't own your identity anymore. You own your identity and you lend your skills and reputation to the company while you're there.”
“And this is the realization of BYOD when it comes to identity.”
#identity#active directory#office 365#future of work
✶Explainer36:00
Why LinkedIn Data Could Transform Dynamics CRM
LinkedIn's user-maintained professional graph could give Microsoft Dynamics a reliable view of each buyer's complete work history. The hosts argue that LinkedIn Sales Navigator had struggled because sales work centers on the CRM, whereas Microsoft could integrate the data directly into Dynamics, Office, and email.
- Professional history improves sales context
- Users are incentivized to keep LinkedIn data accurate
- Sales Navigator lacked ownership of the primary CRM workflow
- Microsoft could combine LinkedIn with Dynamics and Office
“it's hugely valuable to know an entire person's work history when you are trying to sell something to them.”
“The the crux of the whole thing is can Microsoft leverage the network asset that link that LinkedIn has created better than they themselves have.”
#crm#dynamics#sales navigator#sales
✶Explainer43:30
Why Microsoft Borrowed to Buy LinkedIn
Although LinkedIn shareholders received cash, Microsoft financed a substantial portion of the transaction with debt. Most of Microsoft's cash was overseas, and repatriating it would have incurred a large US tax charge under the rules then in force.
- The acquisition paid LinkedIn shareholders in cash
- Microsoft raised debt to finance the transaction
- Most Microsoft cash was held overseas
- Repatriation taxes made domestic borrowing attractive
“Microsoft took out debt to finance the transaction.”
“94% of their assets are held overseas. I'm sorry, their cash is held overseas.”
#deal financing#debt#tax#microsoft
✶Explainer49:00
LinkedIn's Stock Compensation Had Become a Leaky Sieve
LinkedIn's quarterly stock-based compensation rose from $13 million in 2012 to $222 million in early 2016. Because issuing more equity diluted existing holders, the hosts saw this growth as a serious standalone challenge that an acquisition would absorb.
- Stock compensation grew dramatically
- The expense diluted existing shareholders
- Non-cash metrics could obscure the economic impact
- The acquisition removed LinkedIn's need to solve it independently
“stock based compet at LinkedIn went from 13 million a quarter in 2012 to 222 million per quarter uh in the first quarter of 2016.”
“the LinkedIn stock had become this sort of like leaky sieve”
#stock compensation#dilution#linkedin#finance