Deceleration in Talent Solutions business
In the earlier part of the series, we mentioned that LinkedIn’s (LNKD) business segments have their own challenges. LinkedIn generates a major portion of its revenue from the Talent Solutions segment, which accounted for 65% of the total revenue in 1Q16. The other two business segments include Marketing solutions and Premium Subscriptions.
Though LinkedIn is often compared to social networking companies such as Facebook (FB) and Twitter (TWTR), it has a different business model. Facebook and Twitter generate almost all of their revenues from digital ads and primarily compete with Google (GOOG) in this space. In comparison, LinkedIn generates a major portion of its revenues from fees paid by employers and recruiters. The Talent Solutions business, which includes the Hiring and Learning & Development subsegments, have witnessed rapid growth in the prior years. However, more recently, growth in this segment has decelerated, especially in the international market as can be seen in the chart below.
In 1Q16, the Talent Solutions revenue rose 41% YoY (year-over-year) to $558 million. However, management noted that it’s witnessing slow economic growth in the international market, which includes Europe (EFA), the Middle East, Africa, and Asia-Pacific. Continued weakness in EMEA and APAC geographic segments coupled with signs of a slowdown in the US job market poses near-term challenges for the company’s largest business segment, which in turn could hamper overall growth.
Citing continued pressure in EMEA and APAC, LinkedIn earlier stated that within its Talent Solutions business, the core field sales business is expected to grow in the mid-20% range in 2016, down from the ~30% growth it witnessed in 2015.
It’s not all doom and gloom
As discussed above, LinkedIn is witnessing macro headwinds at its Talent Solutions division. However, it’s not all doom and gloom for the company. In 1Q16, LinkedIn’s new customer growth in this segment remained strong as the company continued to add new accounts with a modest acceleration in large enterprise customer additions.
LinkedIn continues to invest and launch new functionality to improve its Talent Solutions offerings. The company announced the expansion of Talent Solutions by introducing its Referrals and Recruiter features. Both products are focused on leveraging the existing data available on its portal to narrow the focus in its talent search, rather than mining the entire Internet.