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LinkedIn Shows a Plan for Long-Term Growth

LinkedIn’s revenue is not driven by advertising but by sales of premium subscriptions and sales to employment recruiters. LinkedIn posted a first quarter 35% increase in sales which exceeded estimates. But recently they took a tumble in the market of about 25% after the company's forecasted second quarter sales did not meet Wall Street's expectations. So how can LinkedIn experience revenue growth without using advertising as a revenue stream?

In keeping with the theme of past blogs that touch upon the Synergies in the Tech Acquisition Market, LinkedIn is joining the ranks of tech companies who are acquiring businesses with “complimentary” services. LinkedIn recently announced the acquisition of Lynda.com for $1.5 Billion. Lynda.com is an online training resource that teaches business, technology, and creative skills. As a subscription-based service, they also serve corporate, government, and educational organizations. In the press release, LinkedIn’s CEO commented, “The mission of LinkedIn and the mission of lynda.com are highly aligned. Both companies seek to help professionals be better at what they do.” The deal is expected to take place during the second quarter.

Even though LinkedIn still has advertising as an optional revenue stream, LinkedIn’s “synergistic” acquisition could affect their longevity and long-term profitability in a more palatable way to LinkedIn users.   

Marc Fogarty, Audit Partner and a member of EisnerAmper's Public Companies, Cleantech and International Services Groups. Marc is experienced in public accounting, serving public and private organizations and has presented on IFRS to professional groups.

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