LinkedIn allows its users to establish an online presence centred on building and extending professional relationships. Many employers use LinkedIn as a recruiting tool to get a better picture of their potential candidates. The tool has been doing extremely well, increasing its member base by 38% over last year to a whopping 259 million users.
The growth LinkedIn has shown in its member base is also reflected in the company’s earnings. Right now, the company has a little over $1 billion in revenue earned by the third quarter and is projected to earn about $1.4 billion at year-end. Analysts are valuing LinkedIn at 158 times forward earning (a measure forecast analysts use to represent how well they think a company will do).
Surprisingly, though, 90% of the users pay absolutely nothing. LinkedIn makes its money through the 10% who are corporate recruiters and corporations looking to improve their brand image.
Recruiters pay a premium for advanced search options that better target people with appropriate experiences and improves their talent acquisition. Free users can also pay a fee to gain access to this service. LinkedIn also uses sponsored advertisements.
Despite the company’s success, CEO Jeff Weiner, is sending signals that the rapid growth of its member base will eventually cool off. Currently, the executives are doing everything in their power to find new revenue streams. LinkedIn recently announced the use of sponsored ads for its mobile app, and it recently acquired the popular newsreader app Pulse.