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LinkedIn Corporation (NYSE:LNKD)

Q2 2013 Earnings Conference Call

July 30, 2013 5:00 p.m. ET

Executives

Jeffrey Weiner – Chief Executive Officer & Director

Steven J. Sordello – Chief Financial Officer & Senior Vice President

Matt Sonefeldt – Head of Investor Relations

Analysts

Scott Devitt – Morgan Stanley

Mark Marcon - Robert W. Baird

Mark Mahaney - RBC Capital Markets

Heath Terry – Goldman Sachs

Mark May – Citi Investment Research

Robert Peck - SunTrust Robinson Humphrey

Brian Nowak - Susquehanna

Douglas Anmuth - JPMorgan

Ken Sena – Evercore Partners

Kerry Rice – Needham & Co.

Justin Post – Bank of America Merrill Lynch

Operator

Good day, ladies and gentlemen, and welcome to LinkedIn Second Quarter 2013 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we'll conduct a question-and-answer session and instructions will be given at that time. (Operator instructions). As a reminder, this conference call is being recorded.

I would now like to turn the conference over to Matt Sonefeldt, Head of Investor Relations. Sir, you may begin.

Matt Sonefeldt

Good afternoon. Welcome to LinkedIn's second quarter 2013 earnings call. Joining me today to discuss our results are CEO, Jeff Weiner and CFO, Steve Sordello.

Before we begin, I would like to remind you that during the course of this conference call, management will make forward-looking statements which are subject to various risks and uncertainties. These include statements relating to expected member growth and engagement, our product offerings including mobile and our product deployment process; results of our R&D efforts; revenue, including revenue growth rates of our three product lines; Talent Solutions, Marketing Solutions, and Premium Subscriptions; adjusted EBITDA; depreciation and amortization; stock-based compensation; share dilution; taxes; the product mix between online and field sales; churn rate; and expenses.

Actual results may differ materially from the results predicted, and reported results should not be considered as an indication of future performance. A discussion of risks and uncertainties related to our business is contained in our filings with the Securities and Exchange Commission, in particular the section entitled Risk Factors in our quarterly and annual reports, and we refer you to these filings.

Also, I would like to remind you that during the course of this conference call we may discuss some non-GAAP measures in talking about the company's performance. Reconciliations to the most directly comparable GAAP financial measures are provided in the tables in the press release. This conference call is also being broadcast on the internet and is available through the Investor Relations section of our LinkedIn website.

With that, I’ll turn the call over to our CEO, Jeff Weiner.

Jeffrey Weiner

Thank you, Matt, and welcome to today's conference call. I will start by summarizing the operating results for the second quarter of 2013 and I will recap some of the highlights and key milestones since our last call. I will then turn it over to Steve for a more detailed look at the numbers and outlook.

Q2 was a strong quarter for LinkedIn. We introduced several new products and saw many of our existing products reach significant new levels of scale. We existed the second quarter with member engagement and financial results at record levels. For Q2, overall revenues grew 59% to a record $364 million. We delivered adjusted EBITDA of $89 million, translating to non-GAAP EPS of $0.38. At the end of Q2, cumulative membership grew 37% year-over-year to more than 238 million in numbers, the first quarter-over-quarter acceleration since the period following our IPO in 2011.

This strong membership growth is due in large part to new growth optimization efforts. Professionals outside the United States now make up more than 65% of LinkedIn. With regard to engagement as measured by comScore, which excludes mobile, LinkedIn and SlideShare combined for an average $189 million unique visitors in Q2. When excluding SlideShare, we averaged $143 million monthly unique visitors during Q2, growing 34% year-over-year, an acceleration over Q1's growth rate. We also saw page view growth accelerate to 25% year-over-year versus the first quarter.

Our internal engagement metrics which include mobile, also showed accelerating growth. Unique visiting members grew approximately 45% year-over-year. Member page views grew approximately 69% in Q2, an indication of the values that our new and revamped products bring to our members is increasing. In the second quarter, we introduced products aligned with our Team member value propositions, enabling professionals to build their identities in professional networks, providing them the insights and knowledge they need to be more successful in their roles, and working everywhere they work.

In April, we launched LinkedIn Contacts, a professional address book in the cloud that works on the desktop and as a standalone mobile app, allowing members to track relevant conversions and be alerted to opportunities to stay in touch with their network. Contacts has been introduced selectively thus far to under a million members as part of the initial role out, and the early results are encouraging. Those who opted into the new experience grew Q2, are viewing 2.5 times more pages and contacts on a weekly basis.

In May, we launched the ability for members to add rich media content to their LinkedIn profiles, transforming them from resumes to portfolios. In the first three months, LinkedIn members have floated millions of images, presentations and videos to their profiles, enhancing their professional brands. More broadly, LinkedIn numbers continue to add content to their profiles and view others profiles at significant rates. In Q2, members editing their profile increased 70% year-over-year and an average of 45 million profiles are viewed each day on LinkedIn.

Meanwhile, products such as endorsements, which we introduced last year, continue to show accelerating engagement. Since our last call, we reached the 2 billion endorsement milestone, having only hit 1 billion in February of this year. Endorsements validate and reflect the members strongest skills and are part of the foundation of a growing professional reputation management system. Some endorsement carry more weight than others. So we are working to leverage our data to differentiate the value of an endorsement based on a number of factors.

The insights gleaned from endorsements can be used to powered numerous features, from delivering relevant content to helping recruiters find the best [positive] candidates. We are also giving members more ways to access relevant professional knowledge from their networks. In Q2, we made steady progress towards our goal of becoming a definitive professional publishing platform where professionals come to consumer relevant content and publishers come to share it.

Since our last call, the LinkedIn Influencer program added several notable professional luminaries, including Japan's Prime Minister, Shinzō Abe; Senator, Elizabeth Warren; Jamie Dimon, and Burberry's CEO, Angela Ahrendts. These leaders and others are turning to LinkedIn for widespread engagement with a professional audience. For example, Bill Gates first post about advice from Warren Buffett, generated more than 1 million page views after only two days. And LinkedIn members are responding. The average post drives more than 300 social actions such as likes or comments. We continue to hear from influencers that LinkedIn ranks among top publishers when it comes to the quality and volume of engagement on their posts.

In Q2, we also introduced channels on LinkedIn, making it easier for members to find relevant professional content. Members can follow more than 20 different channels, with content from these channels appearing in their LinkedIn feed. Since its introduction less than four months ago, LinkedIn members are following over 10 million channels. The increase of professional content appearing in the newsfeed has contributed to homepage page views more than doubling versus last year.

As members more deeply engage with LinkedIn, we continue to work everywhere they work. In April, we revamped LinkedIn mobile phone experiencing, introducing a new iOS and Android app. So far we’ve seen a 40% lift in mobile owned page engagement as compared to the previous app. And a more engaging mobile experience enhances the overall health of the LinkedIn platform. Since the introduction of the new app, we’ve consistently seen increases in social actions, article views and mobile profile edits when compared to the previous version. Mobile remains our fastest growing service. In Q2, we averaged 33% of unique visiting members coming through our mobile apps, versus 21% a year ago.

The value we create for members allows us to deliver useful offerings to customers of our Talent Solutions, Marketing Solutions and Premium Subscriptions products. These product lines are designed to transform the way our customers hire, market and sell on a global basis. In Q2, Talent Solutions grew 69% to $205 million. Marketing Solutions was up 36% to $86 million and Premium Subscriptions increased 68% to $73 million. In Talent Solutions, in April, we launched Recruiter 2.0. This new version has now rolled out to all of our customers and thus far we’ve seen a meaningful increase in their recruiter engagement with candidates, ranging from profile views and searches to [email] outreach.

We also launched CheckIn in Q2, used by recruiters primarily at campus job fairs. CheckIn simplifies how recruiters collect and manage candidate information at these events by enabling college students, among the fastest growing member segments on LinkedIn, to use their LinkedIn profile to register with companies that are hiring. CheckIn became available to all Talent Solutions customers in July and we are seeing strong early demand for the mobile product. You can expect us to introduce more higher education focused products in the coming months.

The Marketing Solutions, our transition to a more sustainable and scalable content marketing model, remains on plan. As we discussed last quarter, we have been ramping our efforts in this area through products such as Sponsored Updates, which allow companies to promote relevant content in the LinkedIn feed that appears on our members homepages. We are encouraged by the results of our pilot program and as of this week, Sponsored Updates are now available to all of our Marketing Solutions customers. GE, Mercedes Benz, Xerox, Cap Gemini and Domo are among the participants in the pilot that will continue through the launch. And we have dozens more high profile brands coming onboard, including Charles Schwab, the Wall Street Journal and The Weinstein Company, with hundreds more in the pipeline.

We are particularly pleased with the ability for Sponsored Updates to generate leads for our customers. Social media marketing firm HootSuite found the traffic to their site from Sponsored Updates converted to leads at 22 times the rate of traffic from banner ads, which resulted in a 32% lower cost per lead. And HubSpot generated 400% more leads among their target audience, compared to their other paid channels.

In Premium Subscriptions, we continued improving our capability to leverage data insights, driving strong subscriber growth. With regard to our Sales Solutions products, we are seeing growing momentum in demand and adoption globally and we are encouraged to see sales teams reaping benefits from the early version of our products. Customers are telling us they’re experiencing significant increases in lead conversion, network reach and team efficiency.

Lastly, a few words about talent, our top operating priority. We now have more than 4200 employees in 26 cities around the world. We continue to place a premium on our workplace culture and our values, which remain a key source of competitive advantage.

And now, I’ll turn it over to Steve for a deeper dive into our operating metrics and financials.

Steven Sordello

Thanks Jeff. Before reviewing the results, let me remind you that I will discuss growth rates on a year-over-year basis unless indicated otherwise, and that non-GAAP financial measures excludes stock-based compensation expenses, amortization of intangibles and the tax impacts of these adjustments.

Ongoing investment in the LinkedIn platform produced another quarter of strong results. Member trends accelerated, both in signing up new members, while cumulative growth improved to 37% year over year, but also an underlying engagement as shown by both Comscore and our internal metrics. As measured internally, the percentage of members coming back to LinkedIn increased as unique visitors grew 45% year over year. And despite rising mobile usage, internally measured desktop page view growth rose to 32% year-over-year versus 31% last quarter. Turning to monetization. Second quarter sales grew 59% year-over-year to $364 million. Talent solutions remains our largest and fastest growing product line. Sales increased 69% year-over-year to $205 million, representing 56% of total revenue versus 53% last year.

We continue to see solid performance within both field and self-served channels. Within field sales, we remain focused on impacting a larger number of hires through a broad and integrated product offering. During the quarter we added over 2100 new corporate customers, bringing total accounts under contract to over 20,000. At the same time, business with existing customers remained healthy reflected by stable deal size and productivity. Renewals and add-ons net of churn decreased versus last year at a similar rate as the first quarter and increased slightly versus the first quarter in what is a normal seasonal pattern.

And finally, we recently crossed the quarter million open job milestone LinkedIn, maintaining growth in excess of 75% year-over-year. Self-serve jobs benefited from higher prices in select markets. With regard to marketing solutions, revenues grew 36% year-over-year to $86 million, representing 24% of overall revenue versus 28% last year. Last call we discussed beginning a transition to a more scalable content marketing platform that will take place over the next few quarters. And in the second quarter, field sales performance was impacted by a shift away from large one off campaigns resulting in lower renewals with larger customers.

On the other hand, LinkedIn Ads, our self-service platform, showed strength with accelerating revenue growth, benefiting from rise in desktop side engagement, a greater allocation of inventory, and rising ECPMs on improved click-through rates from product improvements. As planned, Sponsored Updates did not generate material revenue in the second quarter as we were still in the pilot program. Premium Subscriptions showed sustained performance with revenues increasing 68% year-over-year to $73 million, representing 20% of sales versus 19% last year.

We continue to improve our ability to quickly test, build and iterate our new subscriber identification and conversion products. In the second half of last year, this work helped create a meaningful performance lift to our expected revenue. And we are having success in 2013 driving higher renewals rates and increase in annual subscriptions. With regard to sales solutions, we saw a nice growth in field sales albeit on a small base. We added customers across both enterprise and S&D segments, including nine new Fortune 500 customers. We also had success expanding deal sizes from existing accounts, particularly in larger contracts, while churn remained healthy.

In light of these encouraging trends, I want to emphasize that our product and sales efforts remain at our early stage of development. Turning to geography. International revenue represented 38% of sales compared to 35% last year. EMEA saw steady performance with strong early traction in the Middle East offsetting general economic weakness in the region. In APAC, growth remains solid and we are seeing positive indications from efforts to strengthen sales management in both Australia and India.

In terms of channel, field sales remains the larger and faster growing aspect of our business, representing 58% of overall revenue compared to 57% last year. As discussed previously, field sales growth was impacted by the shift in market inclusions, in what is typically a seasonally stronger ad sales quarter. Self-served products once again performed well due to overall strong engagement and product optimization. Online comprised 42% of sales compared with 43% last year.

Turning to the P&L on a non-GAAP basis. Greater scale in online revenue growth helped generate $89 million in adjusted EBITDA, a 24% margin compared to 22% last year. Our expense line items were relatively consistent compared to past quarters with gross margin of 88%, sales and marketing of 31%, R&D of 19%, and G&A of 13%. The second quarter included a number of investments we have highlighted in the last call, including initiating our data center project and the Pulse acquisition. Also, we witnessed higher than expected employer pay-roll taxes related to employee equity awards against a higher share price.

Depreciation and amortization was $32 million while stock compensation was $48 million. GAAP taxes were $4 million, a 52% effective rate, while non-GAAP taxes were $17 million, a 28% effective rate. GAAP net income for the quarter was $3.7 million versus $2.8 million last year, resulting in $0.03 of EPS on $117 million fully diluted weighted shares. The same level of EPS versus the prior year. Non-GAAP net income was $44 million versus $18 million last year, equating to $0.38 of diluted EPS, more than double the $0.16 in the second quarter of 2012.

Exiting the second quarter, we remain encouraged by our strong financial position, with $817 million in net cash, cash equivalents and short-term investments against zero debt. In the second quarter we generated a record $124 million in operating cash flow. As expected, CapEx rose this quarter to $93 million, given the purchase of equipment for our new data center. And free cash flow during the quarter was $31 million, compared to $9 million last year.

We will close the call with guidance for the third quarter and a revised full year outlook. We expect third quarter revenue between $367 million and $373 million, a range of 45% to 548% year-on-year growth. For the full year, we have raised our guidance upward to between $1.455 billion and $1.475 billion, 50% to 52% year on year growth.

Channel Solutions remains our core and we expect continued solid performance supported by customer engagement with improved products and momentum from our major customer conferences.

With respect to Marketing Solutions, the Sponsored Updates ramp will continue through the third quarter and into the fourth and we look forward to having this platform firmly in place in 2014.

For adjusted EBITDA, we expect $81 million to $83 million in the third quarter, a 22% margin at the midpoint. The sequential margin downtick from the second quarter is consistent with past years and is driven in part by a higher expense base from investments made in Q2 on what is generally a seasonally slower revenue quarter. For the full year, we have revised the midpoint of our range upward to between $340 million and $355 million. This adjusted EBITDA guidance reflects a 24% margin versus the prior guidance of 23%, reflecting first half strength.

On expenses, investments we began in the second quarter will flow through the rest of the year, including our new data center, the Pulse team and expanding our facilities footprint. And similar to the second quarter, we expect $4 million to $5 million of additional employer payroll tax expense in the third and fourth quarters.

For depreciation and amortization we expect $38 million to $40 million for the third quarter and a slight increase to $135 million to $140 million for the full year. For stock compensation, we expect expense of $49 million to $51 million for the quarter and a slight decrease for the year to between $183 million and $188 million. In the second half we expect GAAP taxes to remain high relative to pretax results and on a non-GAAP basis, expect a roughly mid 30% range.

As we end this quarter’s call, I want to reflect on the long term investments we continue to make against our operating priorities. We have had success in developing and scaling our teams and our R&D recruiting has been a particular point of strength. We also continued to make considerable progress in our technology infrastructure and development capability. We recently achieved the ability for any independent product team at the company to release code essentially at will each day. This stands in contrast to two years ago when release cycles for the entire company could exceed two weeks. Also, our data center project will allow us to eventually run LinkedIn from multiple locations, increasing speed and reliability for members and enabling scalable growth.

On product, we remain focused on innovating in our core identity insights and everywhere value propositions. In addition, we are investing in strategic areas, including experience for students and young alumni, productivity within the enterprise, localization and new geographies like Asia, evolving our publishing platform and expanding our mobile offerings.

Investment success in these initiatives will help drive monetization growth, our fourth operating priority. We are particularly focused on further differentiating core talent solution products, creating scalable content marketing platform, improving the premium member experience and building our sales solutions product. We continue to operate at a high level, evidenced by accelerating engagement, steady growth and increasing cash flow. By investing for the long term, we continue to focus on building a company that can add significant value for both members and customers at a much larger scale.

Thank you for your time and we’ll now take questions.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from Scott Devitt from Morgan Stanley.

Scott Devitt – Morgan Stanley

I had two. First one on the LCS account addition. It was strong again and was just wondering in terms of what’s driving the growth. Is the mix of LCS shifting more towards international accounts now that you’ve more aggressively built up the sales force or is this still dominated by the US? If you could just add some color to that. And then secondly, and I have may have missed this, but the acceleration in memberships sign-ups, it was noted, you know the strongest since 2011. I was wondering if there were specific reasons that you would highlight that drove the acceleration. And then if you could also just add whether the membership actually accelerated as it exited the quarter or some sort of month by month on the membership numbers. Thanks.

Steven Sordello

Hey, Scott, this is Steve. We did see another very strong quarter in Talent Solutions. The 2100 additional customers were, [but] 20,000 a day. We are signing out more SMB as a percentage but on a bookings basis, it actually was flat year-on-year, roughly 29% of the business. So we are signing larger deals upfront. We have a record ARPU despite signing more SMBs so continuing the trend that we've had over the last few quarters.

Jeffrey Weiner

And Scott, it's Jeff. Yeah, we did see an acceleration in growth and that’s largely the byproduct of a number of different optimization initiatives that our growth team has put into place. And that’s really all starting to come together now and we are seeing some compounding effects. And one of the interesting things to note there is it’s not in any one particular region. In some of the markets that we would have expected to be a little more mature, where we would have seen growth coming down a bit, we saw acceleration there. Southern Europe not surprisingly continues to be strong in light of some of the macroeconomic challenges. Asia, developing economies, South America, Brazil, notably India, these are just strength across the board. So that team is really doing a nice job on the execution front.

And then in terms of where we exited the quarter, we haven’t provided that kind of guidance but suffice it to say, we continue to see strength.

Operator

Thank you. Our next question comes from Mark Marcon from Robert W. Baird.

Mark Marcon - Robert W. Baird

Wondering, on the marketing solutions side, with the sponsored content, can you talk a little bit about how much that ended contributing during the quarter? And how should we think about the growth going forward? The performance there was a little bit better than what I was expecting. Thank you.

Steven Sordello

So for sponsored content, it was really immaterial now in Q2. We were really just in the pilot program. So in marketing solutions, generally we saw strength primarily on the self-serve side on LinkedIn ads within the quarter. So as we look towards -- the transition towards sponsored content, it's really going to more impact the back half of this year as we continue to ramp it and the goals have it firmly in place by the beginning of 2014.

Mark Marcon - Robert W. Baird

Great. And can you talk a little bit about the near-term outlook in terms of the growth rate within marketing solutions?

Steven Sordello

Relative to the guidance, that is the one business that’s primarily going through the transition. We talked about this a little bit in last call. We are shifting focus away from kind of one off, larger custom deals towards this more predictable scalable model. And that’s kind of really the transition period. We are also -- as you are seeing, more broadly -- there is broader industry shift towards performance based advertising. I think in terms of sponsored content, sponsored updates, the early signs are encouraging again. Again it's a very early stage, but we are very very encouraged so far as we are going to bring up slowly with a member oriented approach. And I would just highlight that early signs are encouraging, particularly in mobile.

Operator

Thank you. Our next question comes from Mark Mahaney from RBC Capital Markets.

Mark Mahaney - RBC Capital Markets

Let me try two questions. One big picture question. With 238 million registered members, I think that means you have about 10% penetration of all internet users worldwide. So what do you think is the issue that allows you get 30%, 40%, 50% penetration? I know those are big numbers, but you should have a pretty broad solution. So just bit picture, how do you think about how big that number could be? What kind of penetration you could get. And if you could just talk really briefly about push back feedback, you have gotten on some of the price increases in talent solutions so far. Thank you.

Jeffrey Weiner

Hey, Mark, it's Jeff. In terms of adjustable opportunity with regard to the membership, our [need] addressable, we define as knowledge workers. So that’s roughly 600 million professionals on a global basis and we are making good progress towards that end. The vision, the much longer term goal, essentially the dream is to create economic opportunity of the 3.3 billion people in the global workforce. And so over time we want to continue to scale the platform and provide the kinds of products and services that are going to generate those opportunities for those people. That’s a much longer term vision and for now we’re very focused on the immediate addressable of the $600 million workers.

Steven Sordello

And Mark, in terms of the price increase, in the quarter we continued to see healthy metrics in terms of we look at our customer churn and renewals and add-ons. Metric remained healthy. In terms of the price increase, really only impacted a small percentage of our member base. It will build throughout the year, ending in Q4 being the largest quarter for (inaudible). So we’ve got 15% in Q2 and we really haven’t seen anything distinguishable among those accounts based on the price increase yet.

Operator

Our next question comes from Heath Terry from Goldman Sachs.

Heath Terry – Goldman Sachs

Just wonder if you could give us a sense of, when you look at the early results on Sponsored Updates, what impact are you seeing on early adopters, advertising, total budgets with LinkedIn? And is there a difference either in the metrics that you’re seeing or the way that these advertisers are viewing updates that run on desktop versus mobile? And then I guess just finally if you could share with us where the Slideshare team is in the process of leveraging their inventory for marketing.

Jeffrey Weiner

Thanks Steve. On the Sponsored Updates front, as Steve alluded to earlier, it’s still early days, but the signs are encouraging. So thus far we’ve seen a positive momentum in terms of the quality and quantity of marketers in terms of the content flowing through the system, in terms of the engagement of members with that content. We have seen significant gains on the mobile side when compared versus desktop and that’s very consistent with what we’re seeing and hearing industry wide. Content marketing within mobile has proven to be an effective form of marketing solution. And so we’re excited about the prospects there. It’s still very early days and as you know, with regard to projecting the value of a given marketplace, it really comes down to liquidity and scale, but we like what we see in terms of the start we’re off to. I would just remind you, we opened it up for field sales customers last week. We opened it up for sales serve customers only two days ago. But thus far the signs are encouraging.

With regard to Slideshare, we’ve been very focused on the integration of the acquisition and we’re very pleased with the results we’ve seen thus far to date on that front. According to the most recent Comscore results, Slideshare uniques and page views were up north of 100% year over year. So we’re going to continue to focus on Slideshare as a core part of LinkedIn as the definitive publishing platform for professionals. And we will address monetization consistently with our strategy for content marketing more broadly. One example of where we could take Slideshare has already been launched and that provides large scale enterprises, companies, marketers, et cetera, the opportunity to take a Slideshare presentation and embed that into a display ad. So that’s already up and running.

Operator

Our next question comes from Mark May from Citi.

Mark May – Citi Investment Research

One has to do with the transition in the ad products. I believe some of the ad products that you have that are more focused on the employers, that revenue is booked in the Talent Solutions segment. So question is, as you make this transition to some of the new ad units, will there be a mix shift in the type of advertisers that are more prominent on LinkedIn going forward? And might that change from a P&L perspective, Steve, where ad revenues are booked in these different segments or am I completely getting this? Am I off base in the questioning? And then secondly, you mentioned on the acceleration some of the member metrics “optimization initiatives.” I wonder if you could just provide a couple of examples to help me think about that. Thanks.

Jeffrey Weiner

Mark, on the portion of the Marketing Solutions business that’s recruiting related, it’s a relatively smaller percentage of the overall ad sales flowing through Marketing Solutions. I would say right now it’s difficult to predict in terms of the type of inventory. Today so far most of the customers that were in the pilot program or or in general availability, are not from the recruiter side that are on the Sponsored Updates platform. It doesn’t mean that going forward that that won't be a portion they will utilize that inventory as well. It's just too early to say.

Jeffrey Weiner

Yeah. Before I address the optimization question, the only thing I would add to Steve's comments are, we think there is a lot of potential with regard to companies seeking to do talent branding. In other words, market-wide, there companies are the best place to work through content marketing. It gives them a really optimal opportunity to get that narrative across people. So we are looking for it to making continued progress on that front. With regard to the optimization specifically, it's really about making it easier for people to join LinkedIn, get through the registration process, import their address book. We think that about that funnel top down and throughout we are looking at optimizing the language. We are trying to make it simpler, reduce friction. Just make that an easier process. Provide relevant recommendations and suggestions in terms of people you can add to your network. Those are the kinds of examples of optimization we are talking about.

Operator

Thank you. Our next question comes from Robert Peck from SunTrust.

Robert Peck - SunTrust Robinson Humphrey

So looking at bookings, bookings grew about 58%, about 1% less then revenues. In line with historical patterns. Could you talk about how we can look at bookings as a future gauge for revenue growth going forward, given the different mix shift? And I have one follow-up question.

Jeffrey Weiner

Yeah. Well it's not -- first of all, we don’t report bookings. You maybe referring to deferred revenue changes on the balance sheet and that tends to be somewhat noisy if you look at trends. That grew 72% year-on-year, so faster than revenue growth. And there is a lot of ins and outs in the difference business units. So it's a signal but not necessarily directly aligned with revenue on a quarterly basis.

Robert Peck - SunTrust Robinson Humphrey

Okay. And then my second question was on mobile. Could you talk a little bit about time spend as a percent on mobile and how you see that versus percent of revenues going forward? Thanks so much.

Jeffrey Weiner

Yeah. We are not as focused on time spent as a key performance indicator. As we like to say, LinkedIn is about making the members more productive and successful. So it's really about helping folks save time as opposed to how they spend their time. That said, we do see higher levels of mobile engagement. Our recent application was improved via mobile, iOS, Android and a number of other different operating systems. And the results have been strong. We saw a 40% lift when compared to the previous application with regard to home page views. Which is certainly encouraging in light of our continued progress as a publishing platform.

We saw a lift across the board in terms of social gestures, profile views. We recently added the ability to edit your profile via mobile. And we are going to continue to invest there.

Operator

Thank you. Our next question comes from Brian Nowak from Susquehanna.

Brian Nowak - Susquehanna

On marketing solutions, is any more help on how big the Sponsored Updates revenue headwind was from the reduction in large one off deals in 2Q? And then how should we think about kind of the headwind for the rest of the year that’s factored into the guidance. Thanks.

Jeffrey Weiner

So it was from a few perspectives, one is the focus away that we talked about, without quantifying some of the larger deals, was a main factor. And then as we ramped this business, some of the newer customers that would typically spend on display are testing this platform as well. So those are all taken into account in terms of the guidance. And in terms of looking forward relative to guidance, I think it's back to wanting to do this right. Advertising is 24% of overall business. You know we have a members oriented approach to rolling a product like this out. And so we have that accounted for in the guidance in the back half of the year. And again, we want to ramp this toward kind of being firmly in place, we are looking at the beginning of 2014. So it's embedded in there. It's the transition as well there are some other secular shifts happening in the industry towards more performance based advertising that also accounted for  as well.

Operator

Thank you. Our next question comes from Douglas Anmuth from JPMorgan.

Douglas Anmuth - JPMorgan

Just wanted to ask two things. First, and it's early in Sponsored Updates, but I want to understand how you are thinking about the timing for an API here for programmatic buying and how meaningful that can be going forward? And then secondly, can you just remind us on Talent Solutions how you’re thinking about the TAM, both in terms of the number of corporate customers and then also the potential number of seats per company. Thanks.

Jeffrey Weiner

Hey Doug, it’s Jeff. I’ll start on the API question with regard to Sponsored Updates. It’s exactly the right thing to point out. We think introducing a robust set of APIs there in terms of facilitating the way agencies in particular social media, marketing agencies can best leverage our content marketing platform is a high priority. We’re not going to pre announce any specific dates, but suffice to say it’s at or near the top of our list. In terms of TAM on the talent side, so we look at it several different ways. We haven’t really changed our view there, $27 billion top down number when you look at industries such as job, staffing, media spend. When we look at it more bottoms up, we look at the number of companies or number of employees in a company as a proxy.

When you look at companies with greater than 500 employees, there’s 20,000 companies in the U.S and somewhere between 50,000 and 100,000 globally. And when you look at the S&B space which is less than 500 employees, those numbers turned about 50,000 in the U.S and about 200,000 globally. And so we’re at 20,000 today. So we believe there’s still a lot of headroom there. And then within our existing accounts, we believe there’s still about 2x headroom in the U.S, larger internationally. And then I think as we think longer term, we ultimately can leverage our assets to expand in other areas of the HRM spectrum. That’s on a longer term basis. So we’re still feeling really good about the TAM opportunity.

Operator

Our next question comes from Ken Sena from Evercore.

Ken Sena – Evercore Partners

Your platform is very strong around data insights. And I know you use it for all three of your segments, but I was wondering if you have any plans to maybe offer it more directly to enterprise customers and S&B customers maybe on a day basis anytime soon. Thank you.

Steven Sordello

Ken, thanks for the question. No plans offered on a paid basis, but we want to continue to layer in those analytics and increasing real time analytics into the products and services we’re already offering to our enterprise customers. And not just the customers, also our members. So we’re excited about the ability to show members only who view their profile most recently, who view their update. And going forward there’s a lot of really interesting things we can be doing to provide our members even more in the way of analytics there and really bring them to life on how people will get a better experience on LinkedIn. So I think you’ll see more in the way there on both the monetization and the member side, but no immediate plans to be charging for that specifically.

Operator

Our next question comes from Kerry Rice from Needham.

Kerry Rice – Needham & Co.

Again I know we’ve talked a lot about the Sponsored content and Sponsored advertising, but one thing I was thinking about related to the addressable market is thinking about page views. And I don’t know if you could give any context around the page views and maybe the percentage that are on home pages versus other pages as we think about that opportunity for Sponsored content.

Jeffrey Weiner

We don’t provide that level of granularity. I would say that we – our desktop or our homepage page views continue to grow at a very nice pace. The product releases that we have engaged in over the last six, nine months have accelerated growth. So we have plenty of headroom there in terms of both page view growth, unique visitor growth. People are coming back to the site more often. And I would just give you a high level metric. The homepage is up over 2x year over year and clearly that’s driven by launches like LinkedIn Today, The Influencer program, things that are bringing people back to that particular page. And then of course we’re seeing nice growth on the mobile front. If you look at page views in total, we’ve got accelerating growth. If you break it down in terms of both mobile and desktop, each of those saw accelerating growth as well.

Operator

Our next question comes from Justin Post from Merrill Lynch.

Justin Post – Bank of America Merrill Lynch

A couple of questions. First, can you talk a little bit about the sales navigator product? How is that looking and do you think you can develop a product that’s both a very good sales tools and also beneficial for users? And then secondly, as you look at your LCS pipeline, obviously you’ve got 20,000 customers now. How does it look going forward to say a year ago? Do you still feel very confident that there’s quite a number of corporate clients out there for you to get? Thank you.

Jeffrey Weiner

It's Jeff. I will start with the Sales Navigator question and turn it over to Steve. So we definitely think we can strike the right balance between the value generated for the sales person, the business development professional and the member. We have tried to take as thoughtful an approach as we possibly could to this business, which is one of the reasons, we have been patient and are kind of bringing along at what we believe to be the right pace. We are seeing good traction there. Steve alluded to that earlier in terms of some major company customer adds. Which it's in the Fortune 500 by way of example. People are finding the tools to show material lift in terms of sales efficiency and effectiveness.

From the member perspective, it generates more relevant, inbound messaging from sales people. Just as sales people would love to be able to convert cold calls into warm prospects, I think everyone would agree they don’t want to be on the receiving end of the cold call. And if someone has a better understanding of the kinds of products and services you are in the market for, it can create real value there. So we are trying to strike the right balance with regard to the sales navigator ecosystem, and we think we are off to a good start.

Steven Sordello

In terms of the pipeline, no, we don’t give guidance in terms of targeted number of new customers. But based on the TAM opportunity that I described, we feel like there is still headroom. And I think when you look at it, both in terms of the SMB space as well as international opportunities as we have invested, sales, direct sales, talent internationally over the last two years, there is opportunity to continue to grow that base of customers.

Justin Post – Bank of America Merrill Lynch

Okay. Thanks. Maybe a follow-up. Jeff, what kind of sport response rates are you getting on Sales Navigators. What kind of enquiries are people getting and what kind of things are you seeing on the response rate side?

Jeffrey Weiner

Yeah, we haven’t disclosed the specific response rate since some of this is in-mail. In-mail continues to be a very effective way for enterprises to reach out and connect with their target audience. What we have seen is measurable gains in sales effectiveness and in sales yields, sales successes. And we are going to continue to use that as one of the most important measures of the success of the product.

Okay. With that we are going to wrap things up. Thank you for joining us and we will talk to again next quarter. Thank you.

Operator

Ladies and gentlemen thank you for participating in today's conference. This concludes our program, you may all disconnect and have a wonderful day.

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