LinkedIn Business Model Analysis

I used the opportunity of LinkedIn’s IPO to read through the company’s SEC Form S-1 Registration Statement.

LinkedIn makes money by combining 3 business models:

1. Hiring / job placement services
2. Advertising
3. SaaS (freemium style)

Here are some rough metrics deduced from SEC filing and published prices:

1. Avg. hiring services rev. / customer = $87MM (est. 2010 rev) / 3,900 customers (declared) ~= $22,500
2. Advertising rev. / user = $70MM (est. 2010 rev. from “marketing services”) / 90 mil users ~= $0.77 / user [there were 33,000 advertising customers (declared in filing)]
3. % users subscribers to premium services = $60MM (est. 2010 rev. from “premium”) / $45 (est. avg. monthly subscription revenue / 90 mil user * 100 ~= 1.5%

To learn more details about LinkedIn’s product portfolio, revenue, and cost structure I extracted 14 pages of content from the 140 page SEC filing which are more relevant to understanding the business model.

Here’s also a good infographic originally published here.

Enjoy!