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What’s Driving Microsoft’s LinkedIn Users?

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Aug. 31 2018, Updated 12:30 p.m. ET

Performance evaluation

On December 8, 2016, Microsoft (MSFT) completed the acquisition of LinkedIn for $27.0 billion. This acquisition looks to be a good move after Microsoft’s acquisition of Nokia (NOK) phone business was unsuccessful. LinkedIn continues to generate strong member growth after the acquisition with improvement in usage time. It also witnessed revenue growth over the last five consecutive quarters.

At the time of the acquisition, LinkedIn had more than 430.0 million users and nearly 100.0 million visitors every month. At the end of the fiscal fourth quarter, LinkedIn had 574.0 million members. It added around 144.0 million subscribers, which equals an average of 72.0 million per year. In its latest reported quarter, LinkedIn’s revenues rose 37.0% YoY (year-over-year), while its sessions growth increased 41.0% YoY.

In the graph above, we can see LinkedIn’s revenue growth in the last five quarters. In the last three quarters, its revenue shows an upside trend buoyed by innovation and increased membership. During this period, its revenues grew at a CAGR (compound annual growth rate) of 8.2%.

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Key catalysts

LinkedIn’s strategy to engage users through improvements in its video, messaging, and mobile usage has led to its improvement in sessions. The strong US job market is driven by record levels of job openings—around 6.6 million job postings—which also contributed to LinkedIn’s business.

Growth strategy

Microsoft (MSFT) continues to invest in the LinkedIn business. It also plans to provide an integrated platform for its members, which may include Office 365, ERP (enterprise resource planning), and CRM (customer relationship management) solutions in one place. 

This move is expected to boost LinkedIn’s performance going forward. Microsoft expects LinkedIn’s revenue growth to remain high in the fiscal first quarter of 2019, compared with the fiscal first quarter.

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