How Does LinkedIn Make Money?

Reviewed by Margaret JamesReviewed by Margaret James

What Is LinkedIn?

LinkedIn proudly boasts as the “world’s largest professional network” with more than 1 billion users and 18,500 employees worldwide and a goal to “connect the world’s professionals to make them more productive and successful.” Beginning in 2002 in the living room of co-founder Reid Hoffman, LinkedIn officially launched in 2003. Its headquarters is located in Silicon Valley but has offices across the globe.

On December 8, 2016, technology giant Microsoft (MSFT) acquired LinkedIn Corporation for $26.2 billion.

Key Takeaways

  • LinkedIn is a global professional networking site, offering a suite of professional services for job seekers, professionals, recruiters, and employers.
  • Microsoft Corporation acquired LinkedIn for $27 billion in December 2016.
  • Most of LinkedIn’s revenue is generated from three of its major services: Talent Solutions, Marketing Solutions, and Premium Subscriptions.
  • Since its acquisition, LinkedIn’s financials have been consolidated with Microsoft’s.
  • In 2018, it contributed $5.3 billion in revenue.

How Does LinkedIn Make Money?

According to LinkedIn’s quarterly SEC filings, the professional networking site makes money through its talent solutions, marketing solutions, and premium subscriptions—in other words, by selling advertising, recruitment services, and membership privileges.

Although not a primary revenue driver, its learning division, Learning Solutions, is also worth noting. Users can learn different skills and gain knowledge about different topics of interest. The Learning Solutions division is comprised of—a subsidiary acquired in 2015—and LinkedIn Learning.

Talent Solutions

Before its acquisition In 2016, 65% of third-quarter revenue, totaling $960 million, came from recruitment services, known as Talent Solutions, sold to professional recruiters and employers. Talent Solutions exists in two parts: Hiring, and Learning and Development (L&D). Hiring helps recruiters attract, recruit, and hire talent, whereas Learning and Development offers learning content, such as online courses, to enterprise clients and individuals.

Marketing Solutions

Marketing Solutions provides a platform for companies to advertise to LinkedIn users. In 2016, it accounted for 18% of total revenue, or $109 million, from a combination of advertising sold to online marketers and the sale of “sponsored updates” posted to a target audience of members in the LinkedIn feed.

Premium Subscriptions

The remaining 17% of revenue, or $162 million, was generated through premium subscriptions. Premium subscriptions allow members to increase their search results significantly, send messages on LinkedIn’s email system (rather than just receive them), contact members outside of their networks, and see information about people who have viewed their profiles.

Included in Premium Subscriptions is Sales Solutions, which helps salespersons generate quality leads and increase sales through social networking. Since basic membership is free, LinkedIn makes a good portion of its revenue from a minority of its users: Only 21% of total users had premium subscriptions as of March 2016.

As of the third quarter of 2016, US revenue accounted for 61% of LinkedIn’s total revenue, while revenue from international markets made up the remaining 39%. After its acquisition, LinkedIn’s financials are included in Microsoft’s consolidated results of operation. In 2018, it contributed $5.3 billion in revenue, an increase of $2.3 from 2017.

Read the original article on Investopedia.