LinkedIn announced their Q4 results last week which showed a 47% increase in revenue from the same period last year. I'm sure most of us would be delighted to deliver such growth (profit is less impressive as you can see in their earnings announcement) but for LinkedIn this represented another drop in sales growth, a trend which was the flavour of 2013 and one they are finding hard to reverse.
I can recall an ex boss of mine once explaining to me that actual figures (of anything) are much less relevant than the direction in which they are going. In business you are either going forwards or backwards and these figures prove that (despite year on year growth) LinkedIn's growth is going backwards.
A closer look at the figures shows that the guilty party is advertising sales (marketing solutions). Premium upgrades have remained stable and talent solutions (the darling of LinkedIn sales) has increased its percentage of the overall sales volume but advertising has dropped from 27% to 25% of sales from the same period last year.
I must admit that I am surprised by this, I really thought that advertising would begin to increase its share of sales but the opposite is true. Maybe advertising on LinkedIn is just not proving to be a great ROI for marketers. I must admit I haven't met too many that swear by it (if your experience is different please get in touch, I would love to hear from you).
So it seems that LinkedIn's CEO Jeff Weiner has some serious challenges ahead and I am fascinated to see how he reacts to this - Wall Street was clearly not impressed with shares dropping by 10% on the announcement and whilst they rallied towards the end of the week, they still showed a drop of over 6%.
One early indication of their reaction has been the announcement that they will now be rationalizing their products/services, initially by dropping Slidecast and more notably LinkedIn Intro. Intro was a controversial mobile email service that was introduced in October last year and hit immediate issues with concerns over security. I can't say this is a massive surprise, after my initial excitement over the launch I reduced my use of the app and over time found I was very rarely using it. I assume this proved to be the case for many and so LinkedIn have decided that the effort involved in running it is not worth the return. I have to applaud them for this, like a football manager who buys a player who turns out to be a 'dud' it is better to cut your losses quickly rather than waste more time for the sake of pride! It will be interesting to see what happens to Rahul Vohra who was the architect of Intro (and Rapportive) - A bright, innovative and bold tech entrepreneur who is beginning to look a bit like a 'fish out of water' in the increasingly Wall Street driven 'corporate' world of The LinkedIn Corporation.
One thing seems certain, the LinkedIn Axeman will be working overtime looking at every initiative and product at LinkedIn and asking the difficult questions that are inevitable in a publicly owned company;
- How does this increase our sales?
- How quickly will we see a return?
- How much resources will this require?
One thing I am quite sure about is that the real losers in this are likely to be us - the normal LinkedIn user (or member as LinkedIn like to call us). We have already seen some great features disappear with no explanation (Signal and updates on profiles to name a couple). What is going to be next?
I suspect that the much wielded phrase 'Members first' is going to be harder and harder to justify for LinkedIn as their shareholders demand to have their short-term objectives placed as a higher priority!
Interesting times are ahead.