Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

LinkedIn (NYSE:LNKD)

Q2 2014 Earnings Conference Call

July 31, 2013 5:00 PM ET

Executives

Matt Sonefeldt - IR

Jeff Weiner - CEO

Steve Sordello - CFO

Analysts

Mark Mahaney - RBC Capital Markets

Heath Terry - Goldman Sachs

Eric Sheridan - UBS

Gene Munster - Piper Jaffray

Mark May - Citigroup

Robert Peck - SunTrust

Kerry Rice - Needham

Brian Pitz - Jefferies

Andrew McNellis - Evercore

Doug Anmuth - JP Morgan

Aaron Kessler - Raymond James

Dan Salmon - BMO Capital Markets

Operator

Good afternoon. My name is Hope, and I will be your conference operator today. At this time, I would like to welcome everyone to the LinkedIn Second Quarter 2014 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions).

Thank you. Mr. Mr. Matt Sonefeldt, you may begin your conference.

Matt Sonefeldt

Good afternoon. Welcome to LinkedIn's second quarter of 2014 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, the 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, earnings per share, share dilution, taxes, the product mix between online and field sales, and other drivers of our business. 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 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 tables in our earnings release. This conference call is also being broadcast on the internet and is available through the Investor Relations section of the LinkedIn web site.

Lastly, this quarter on our Investor Relations web site, we have included supplemental slides discussing our Talent Solutions market opportunity and go-to-market. We have also included in our selected company metrics and financials table, history of our internally measured member metrics, the recasted history of Talent and Marketing Solutions revenue, and a field versus online revenue breakout for Talent Solutions.

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

Jeff Weiner

Thank you, Matt, and welcome to today's conference call. I'll start by summarizing the operating results for the second quarter of 2014, and I'll recap some of the key milestones that highlight the success of our strategy. I'll then turn it over to Steve for a more detailed look at the numbers and outlook.

LinkedIn delivered strong financial results in the second quarter, while maintaining continued investment in our member and customer offerings. We made significant progress against several key strategic priorities, including increasing the scale of job opportunities on LinkedIn; expanding our professional publishing platform; adding to our growing portfolio of mobile apps; and successfully positioning our Marketing Solutions business for the future through the growth of Sponsored Updates.

We are also excited about today's launch of the all new Sales Navigator and last week's acquisition of Bizo. Both underscore the opportunities we have to continue building a scalable, diverse business, that adds value for our members and customers based on the critical mass of the LinkedIn network.

For Q2, overall revenues grew 47% to $534 million. We delivered adjusted EBITDA of $145 million, and non-GAAP EPS of $0.51. We continue to see healthy member engagement dynamics across LinkedIn, especially in light of the challenging year-over-year comparison that we discussed last quarter.

During Q2, cumulative members grew 32% to 313 million. Internally-measured unique visiting members to LinkedIn grew 13% to an average of 84 million per month, and internal member pageviews grew 22% percent to 25 billion for the quarter, well ahead of unique member growth.

Organic engagement is one area of particular strength, driven by our mobile and content efforts. Homepage traffic, as measured by unique visiting members, continues to outpace overall site traffic growth, increasing approximately 40% faster over the past year.

Mobile also continues to drive a growing share of engagement, growing more than three times as fast as overall uniques. Mobile now accounts for 45% of total traffic to LinkedIn. The value we deliver to members remains consistent. We enable professionals to build and manage their identities; create and leverage their professional networks; and gain the knowledge they need to be more successful in their careers, across multiple screens and devices.

We want to highlight a few of our efforts since the start of the year that deliver across these value propositions. Within identity, in June, we revamped the design of profiles on LinkedIn's desktop site to make them more visually distinctive and personalized; and earlier this week we launched a major redesign of the LinkedIn profile. The new profile, first introduced on our flagship mobile app, helps members define their professional identities more quickly and effectively. It adds important contextual information, including Recent Activity such as updates and long-form posts, and makes it easier for members to ensure their profiles are up-to-date.

Changes to LinkedIn Profiles help members better showcase their professional brands and get more value out of their LinkedIn networks; and now they can be found more effectively through Galene, our new search architecture rolled out in June. Pageviews to content driven by search have since accelerated.

Specific to network, earlier this month, we unveiled Connected on iOS, the newest mobile app in our growing multi app portfolio. Connected enables LinkedIn members to strengthen their professional relationships by delivering timely updates and opportunities to engage with the people in their networks. Connected has quickly become a top app in the App store business category. Early data shows that active users of the app are using it on average more than four days per week, suggesting that Connected has already become an integral part of each work day.

We also continue to grow the network through international expansion; 67% percent of LinkedIn members come from outside the United States. After launching our Simplified Chinese site in February, China has now become our fastest growing major market for new members over the past several months.

On knowledge, we continue to see LinkedIn members embrace the idea of creating and consuming long-form content through the publishing platform. Thus far, we've ramped the functionality to over 15 million members, on our way to opening up publishing to every member on LinkedIn. We're encouraged by the early trends, recently surpassing 30,000 weekly long-form posts. Since launching in February, traffic to publisher and Influencer posts is up more than 100%.

Finally, two weeks ago, we announced the acquisition of Newsle to accelerate our ability to deliver relevant content to our members. Newsle's technology finds blogs and articles that mention people who may be professionally relevant to you and notifies you seconds after publication. While we are currently maintaining Newsle's standalone site and app, we are already beginning to integrate the functionality into our existing offerings, including the new Sales Navigator launched today.

Creating value for our members enables us to deliver useful offerings to customers of our Talent Solutions, Marketing Solutions, and Premium Subscriptions products. These product lines transform the way our customers hire, market, and sell on a global basis.

In Q2, Talent Solutions grew 49% to $322 million; Marketing Solutions was up 44% to $106 million; and Premium Subscriptions increased 44% to $105 million. For Talent Solutions, our goal is to power the world's hires. In order to achieve this goal, we are investing in our existing portfolio of recruiting products, as well as increasing our focus on members actively looking for work opportunities.

In May, we began testing 'limited listings', an initiative that dramatically grows the number of job opportunities made available on LinkedIn for active job searchers. There are now more than one million jobs on LinkedIn, compared to only 300,000 plus jobs just a few months ago. We expect this number to continue to ramp through Q3 and beyond.

In addition, in June we launched the LinkedIn Job Search App for iPhone. The app addresses the growing level of mobile job interaction on LinkedIn, which at the end of Q2 accounted for more than 40% of all job views versus approximately 25% a year ago. Engaged users of the new app are using it to view an average of 15 jobs per week.

In Marketing Solutions, sponsored updates drove revenue growth in Q2, as we continued the strategic shift towards content marketing. Just last week, we launched Direct Sponsored Content, enabling marketers to test and optimize targeted content campaigns, not specifically limited to company pages. With last week's acquisition, we are also excited to welcome Bizo to LinkedIn. Integration of Bizo will increase the speed with which we can leverage our own content marketing products to create a comprehensive B2B platform and help customers build stronger relationships with professionals.

Within Subscriptions, today we are pleased to announce the launch of the all-new Sales Navigator. This new SaaS product delivers a customized view into LinkedIn to better connect sales professionals with the right buyers, by leveraging key insights and connections across the LinkedIn network. Our research shows that social selling transforms the sales process; buyers are over five times more likely to engage with sales professionals when introduced through a common connection versus a cold call. Just as the launch of our flagship Recruiter product transformed the way talent professionals recruit, we expect Sales Navigator will similarly transform the effectiveness of sales professionals.

Finally, I want to extend a special thanks to our employees. During our most recent InDay in July, thousands of them contributed to more than 40 projects dedicated to helping underserved audiences create economic opportunity for themselves and their communities.

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

Steve Sordello

Thanks Jeff. Today I will discuss growth rates on a year-over-year basis unless indicated otherwise, and non- GAAP financial measures exclude items such as stock-based compensation expenses, amortization of intangibles, and the tax impacts of these adjustments.

We had a strong quarter as we continue to leverage the scale of the LinkedIn network. Each of our product lines performed well; Talent Solutions continued to grow against the larger hiring market opportunity, while investments in content marketing and sales solutions are beginning to take hold.

We also remain focused on aggressively investing in the LinkedIn member platform. Creating increased value for members through a richer experience further expands our long-term opportunity. To that end, organic engagement is on the rise, mobile is contributing greater levels of traffic, and we have seen substantial page view per unique member growth over the past two years dating back to our inversion initiatives.

Last year's strength translated into accelerated member growth and engagement. As we mentioned last quarter, this strength created difficult comparisons for member metrics in 2014, particularly in the second and third quarters.

Briefly reviewing what happened last year illustrates these trends; in early 2013, we improved new member onboarding to the site by better leveraging key products including People You May Know, the homepage, and address book invitations.

Starting in the second quarter of last year, these initiatives led to a dramatic pull forward of new member growth. As a result, monthly member signups accelerated between April and September; from single digits to at one point nearly 70% year-on-year growth. This also drove accelerated unique and page-view growth through the middle of 2013.

Just recently, new member additions on an absolute basis returned to a more normalized level, compared to our historical trend and we expect stable engagement trends through the rest of 2014.

For the remainder of the year, we are focused on continued investment in core experiences like the homepage and the multi-app strategy. Longer-term, we look forward to the impact of newer member initiatives like the publishing platform, jobs and deeper international engagement in new geographies like China.

With regard to monetization, all three product lines experienced strong growth, leading to $534 million in revenue, an increase of 47% percent year-over-year. Talent Solutions continued to perform well as our largest and fastest growing revenue line. Revenue increased 49% year-over-year to $322 million, representing 60% of total sales. Field sales, representing 75% percent of Talent Solutions revenue, showed balanced strength between new customer acquisition and relationship management.

Over the past three years, our land & expand playbook has consistently driven growth. Recent three year U.S. cohort data highlights that enterprise customers increased spend by five times, in some cases much more. This has led to consistent revenue growth per customer, even as we've added many smaller accounts over time.

Across our base of more than 28,000 field sales customers, we've had continued success deepening relationships with accounts as illustrated by improvement in the net ratio, which measures year-over-year growth of existing customer spend, net of churn. This increase in net ratio is a better than expected outcome, given the increasing scale of the business.

Our hunter reps also performed well, and we plan to add more hunters and relationship managers in the second half than initially planned as we see opportunity expanding into next year.

In addition, the online channel showed strength, especially job seeker subscriptions, now one of the fastest growing products within Talent Solutions. More broadly, our opportunity within the global hiring market continues to expand as our member base grows, as we increase hiring activity on LinkedIn, and as we grow our existing business.

Marketing Solutions grew 44% to $106 million, representing 20% of total sales. During the quarter, we benefited from strength in sponsored updates and traditional display. This is compared to the relatively muted growth in the second quarter of last year, when we transitioned away from one-time deals to a more scalable content marketing strategy.

Sponsored updates maintained strong momentum through the second quarter; where it represented 28% of Marketing Solutions revenue, up from 23% in Q1, 15% in Q4, and 7% in Q3 of last year. The product and sales teams remain focused on driving demand, contributing to a 20% increase in effective pricing during the quarter and we expect auction dynamics to further improve over time with the launch of Direct Sponsored Content, API partner growth, and the integration of Bizo's targeting and ROI tools.

In addition, our display-driven business unexpectedly benefited from Sponsored Updates traction. Compared with last year, field sales sell-through improved and the average spend for display customers slightly increased. For the online business, one by-product of field success has been reduced self-serve ad inventory.

Finally, we are excited to welcome Bizo and begin investing in creating a broader B2B platform, building on the current success of sponsored updates. Premium Subscriptions grew 44% to $105 million, contributing 20% of revenue. General Subscriptions, which still represent the majority of subs revenues, had a good quarter, with stable churn and a nice uptick in new subscriber ARPU. Moreover, we are excited to launch the new Sales Navigator. Today, field sales generates roughly one-third of Sales Navigator revenue, but over time, we expect Sales Solutions to be more field driven as the business scales, much like Talent Solutions.

Over the past year, we've invested in building a standalone salesforce, which today is split roughly 60% US versus 40% international. We will also sell the same flagship Sales Navigator product on a self-serve basis for small business and individual sales professionals, wanting to leverage social selling.

In terms of geography, we continue to become more global across the business. International now represents 40% of overall revenue versus 38% last year. By channel, field sales contributed 60% of revenue versus 58% last year, with Marketing Solutions in particular driving strong field sales performance.

Moving to the non-GAAP financials, revenue outperformance resulted in adjusted EBITDA of $145 million, a 27% margin compared to $89 million and a 24% margin last year. Depreciation and Amortization totaled $56 million, while stock compensation was $75 million. On taxes, GAAP expense was $16 million, while non-GAAP expense was $34 million, reflecting the static 35% non-GAAP tax rate we expect throughout 2014.

GAAP net loss was $1 million, resulting in a $0.01 loss per share, compared to last year to a gain of $4 million and earnings per share of $0.03. Non-GAAP net income was $63 million, resulting in earnings of $0.51 per share, compared with $44 million and $0.38 last year.

The balance sheet remains strong with $2.4 billion of cash and marketable securities. Operating and free cash flow were $128 million and $32 million during the quarter, both slightly higher than last year.

I will end the call with guidance for the third quarter and an updated outlook for 2014. For revenue; we expect Q3 to range between $543 million and $547 million, 39% growth at the midpoint. For the full year, we are raising our outlook by $75 million, to range between $2.14 billion and $2.15 billion, a 40% annual growth rate compared to the 35% reflected in prior guidance. Revenue guidance incorporates stable and consistent Talent Solutions performance; more normalized Marketing Solutions comps versus last year; and transitioning to the new Sales Navigator product, which due to its SaaS nature will build gradually over time.

For Adjusted EBITDA, we expect Q3 to range between $134 million and $136 million, a 25% margin at the midpoint and for the full year, we are raising our outlook to between $545 million and $550 million from approximately $505 million to $510 million, now a 26% margin at the midpoint.

Adjusted EBITDA guidance incorporates continued heavy investment in the second half, especially in R&D and sales, to support our 2014 strategic initiatives. Guidance also includes the following acquisition impacts; specific to Bizo, the longer-term strategy is to leverage Bizo's products and technology to create a larger B2B focused business. We plan to maintain a portion of their existing business, specific to multi-channel advertising and for revenue, we expect Bizo to add approximately $3 million in Q3 and $6 million in Q4.

For Adjusted EBITDA, we expect Bizo to have a negative $2 million impact in each of Q3 and Q4. This is in addition to the $8 million to $10 million full year adjusted EBITDA impact from Bright.

Lastly, we expect Non-GAAP EPS of approximately $0.44 for Q3 and $1.80 for the full year. Additional guidance inputs include; depreciation of $50 million for Q3 and $202 million for the full year. Amortization of $8 million for Q3 and $28 million for the full year. Stock based compensation of $80 million for Q3 and $305 million for the full year; and fully diluted weighted shares of approximately 126 million for both Q3 and the full year.

In closing, we are pleased with the strong results across the business. We continue to make long-term investments to drive both deeper member engagement as well as broaden our business through initiatives like Sales Navigator, B2B marketing, and greater scale around hiring. As we focus on the second half, we will maintain this long-term approach in scaling both our member and customer platforms.

Thank you for your time and we will now take questions.

Question-and-Answer Session

Operator

(Operator Instructions). Your first question comes from the line of Mark Mahaney from RBC Capital Markets.

Mark Mahaney - RBC Capital Markets

Thanks. Steve, you talked about kind of a switch in the outlook, back towards more hunter ads in terms of the salesforce? You mentioned that there were some conditions that changed, that made you kind of skew back that way? Could you describe what those were, that seems like something of a notable change from last quarter, when the emphasis was more on a former side? Thank you.

Steve Sordello

Yeah, and I would say it’s a slight change in terms of the mix. We are still adding both relationship managers and hunters, so its still fairly balanced. But I think it is modestly shifting more towards hunters, particularly internationally. One of the things that we continue to grow this business, both in terms of new customer additions, as well as kind of going deeper within accounts, is we continue to see that the opportunity is, in some cases growing larger. And so, we are going to take the opportunity to pull forward some of the headcount to go after that opportunity for next year.

Mark Mahaney - RBC Capital Markets

Thank you, Steve.

Operator

Your next question comes from the line of Heath Terry with Goldman Sachs.

Heath Terry - Goldman Sachs

Great. A couple of questions. Jeff, Bizo has been described by some as sort of being your MoPub, or having the potential to become your MoPub or your FeX. Given the success that both Twitter and Facebook has seen in that end of the market, I am sort of curious how you see those comparisons as whether or not they are sort of fair? And then Steve, it was Q4 of last year, where you really started to significantly ramp the sales headcount associated with Sales Navigator. You said in the past that its usually sort of six to nine months before salespeople become really productive at LinkedIn. Wondering how much of that is -- if that's accurate and applies to Sales Navigator in general, how much of that is sort of factor into the guidance for Q3 and sales navigator in particular?

Jeff Weiner

Thanks Heath. With regard to Bizo, its going to anchor our B2B marketing solutions platform, and we are excited about that as a standalone effort, and we are even more excited about that, when you think about the nexus of B2B and the success that we have had thus far to-date with sponsored content.

I would characterize it less as an ad network play. Although of course, our customers are now going to be able to target the right prospect, engage that prospect, and nurture that prospect through multiple channels on LinkedIn and [indiscernible].

Steve Sordello

And I will take the sales solution question. So today, the current business mix is roughly two-thirds online, one-third field, we expect that to migrate more towards field over time. I would say, the headcount ramp which we grew throughout the year to 130 last year, stands at about 150 today. And it’s a little too early to tell for the new products, what will be the sales cycle. I should say, for the old product, I think throughout the year, we saw improving performance, we saw churn improve, our net ratio for that business remains very healthy. Its actually similar to rates to what Recruiter was in its early days. But this is a new product, in a lot of ways, and along with that, there is customer education with it. It has a number of different value props that I think are pretty compelling and we are excited about it.

Against that backdrop, its also a ratable business, and so this is something that builds over time, very similar to our Recruiter business within Talent Solutions. So the guidance in the back half of the year, there really isn't a material increase in terms of the revenue, and so we will monitor other metrics to kind of see the pace there. We are very excited about it.

Heath Terry - Goldman Sachs

Great. Thank you both.

Operator

Your next question comes from the line of Eric Sheridan with UBS.

Eric Sheridan - UBS

Yes, hi. Thanks for taking the question. So I guess with the customer count within Talent Solutions, I was curious if there were any dynamics in that reported number that could be tied back to any reclassification of customers in the quarter? And then second, on the direct sponsored content product, wanted to know if you could update about sort of what you're seeing there from the early read perspective? Thanks.

Jeff Weiner

Sure. On the customer count, across the board we had a strong quarter, I mentioned both in terms of new and existing relationships. On the new side, we added over 2,200 accounts. As we spoke about before, there is, from time to time, some consolidation that happens there, within companies, as we grow and attach different departments. Nothing material there, similar to last quarter's trends. So a nice uptick in terms of new customers.

I will relate just like last quarter, I think in any given quarter, most of the business is driven by the existing customer base, given that we are over 2,800 customers, and the metrics behind that continue to be very strong, in terms of the add-on, the renewals and churn, maintaining healthy levels. So its kind of a combination between these two elements, that the business is sustaining in terms of its momentum.

Steve Sordello

Hi Eric. With regard to direct sponsored content and taking a read on that newly introduced service, it’s a little too early to project anything longer term, but thus far, we are very pleased with the results, and we have seen a deeper engagement, increases in spend, increases in relevancy for the content that is now being optimized through direct sponsored content, and not necessarily limiting our customers to the content that is publicly visible through their company profile. So we are encouraged by what we have seen thus far, but still a little too early to make longer term projections.

Eric Sheridan - UBS

Great. Thanks a lot.

Operator

Your next question comes from the line of Gene Munster with Piper Jaffray.

Gene Munster - Piper Jaffray

Good afternoon and congratulations. Steve you mentioned -- most of the Sales Navigator, there is a lot of high value propositions. Can you give a little insight in terms of helping us understand a little bit more about the products, what is the [indiscernible] and why are you so excited about it?

Jeff Weiner

Hey Gene, its Jeff, I will take that one. With regard to sales navigator, we think this really helps usher in, in a meaningful way [indiscernible] our social selling. And we have seen internally and through early customers of our existing sales navigator products. Those customers that participate in our charter program, we have seen very significant lifts in sales effectiveness and efficacy, as a result of converting what normally would have been a cold call through your relationships, you can convert that cold call into a warm prospect.

And then going beyond identifying the ideal prospect, and figuring out the best way to contact that person, is also the way in which you can engage with them. By virtue of seeing what content they have shared or a post that they have written, you get a better sense of the way they are thinking and the way they are approaching their specific market.

So through those three value propositions, identifying the right prospect, connecting with the right prospect, and engaging with the right prospect, we are very encouraged and excited about the launch.

Gene Munster - Piper Jaffray

Just a quick follow-up, can you talk a little bit about when we should start to expect more meaningful revenue from it?

Steve Sordello

This is Steve. As I mentioned, this is -- I think there is two components. One is, there is somewhat of a transition, and I mentioned, this is in many ways, a new product which has education associated with it, in terms of the customer adoption cycle. But more importantly, it’s the ratable product, and so it builds over time, there is a backlog that builds, as the business -- as the customer base builds. And just like Talent Solutions has over the last several years, our approach will likely be very similar in terms of the land and expand type of go-to-market approach. But it is important at least for this year. It’s the ratable recognition of revenue, impact on the top line.

Gene Munster - Piper Jaffray

You think 2015 will be ratable revenue from it?

Jeff Weiner

Yeah I think it will continue to scale. Ultimately, we have talked about this in the past, Sales Solutions being our third line of business, and I think going into next year, we are currently thinking as kind of a certain scale, where that may happen.

Gene Munster - Piper Jaffray

Great. Thank you.

Operator

Your next question comes from the line of Mark May with Citigroup.

Mark May - Citigroup

Thanks for taking my questions. Just a follow-on with the Sales Navigator. Can you remind of the pricing and pricing strategy, and then also, what types of salespeople by industry vertical are your field sales team targeting? And then secondly on advertising, I think despite the new [indiscernible] pageview metrics that you are reporting, which I think are a bit smaller than what the previous were. But they are also showing a deceleration at your point around the tough comps year-on-year. You were able to post accelerating marketing solutions revenue growth in the quarter. Can you just talk a little bit more about why that was possible, despite kind of the usage metrics that we are looking at, and how sustainable that is?

Steve Sordello

Yeah, on the pricing for Sales Navigator. So on the subscription product, it has been averaging roughly $700, per set vary depending on a field customer versus an online customer. The price point for the new Sales Navigator is about $1,200, so there is inherent price increase.

In terms of the customer set, very similar to our Recruiter customer set. There is a broad based -- I'd say its actually broad based than where Recruiter was in its early days in terms of the industry. Technology, financials, healthcare, its pretty broad based in terms of the market opportunity.

In terms of the Marketing Solutions revenue related to engagement, one of the drivers of the growth from Marketing Solutions this quarter, relative to Q2 last year, was the fact that last year, the comp was relatively muted. We went into that period, when we were transitioning to sponsored content. We were moving away from customized one time deals, and so the overlap, relative comp 44% growth is partly driven by that.

That being said, the performance is very strong, in terms of sponsored updates, continue to grow as a percentage of our business. The display side, where we initially expected some form of cannibalization, as we focus more on sponsored content. It actually has upticked a little. We've seen nice performance in terms of pricing on both those fronts, and sell-through rates, from the field in particular.

So there is some varying factors, in terms of the impact on growth. As we look forward to Q3, we expect it to more normalize in terms of the year-on-year comps, relative to Q2 being our low point last year. And then on engagement side, again, the comps there, difficult in Q2, we expect those from a growth perspective to stabilize in the back half of this year, for engagement metrics.

Mark May - Citigroup

Thanks Steve.

Operator

Your next question comes from the line of Robert Peck with SunTrust.

Robert Peck - SunTrust

Yeah, I was wondering if on marketing solutions, you could talk about a couple of things. One, could you give us a little more color on $80 million reclassification, and what exactly was going on there? And then, could you talk a little bit about the availability of inventory for some of your preferred marketing partners? Do they have full access to inventory right now, and can you give us some examples of what we are seeing, as far as CPMs pricing in ROI? Thanks.

Steve Sordello

I will take the first one. So we had a portion of CPM based recruitment media, that's an ad product that we have historically classified in marketing solutions. As that business has grown, it really better aligns with Talent Solutions' customers, its increasingly a larger part of how they recruit, and so we felt it made more sense to reclassify it there from just a business reporting perspective. So in the documents on Investor Relations web site, it has all been reclassified, so its apples-to-apples. But just felt like it gets better, under the business line.

Jeff Weiner

Its Jeff. With regard to inventory, there is plenty of inventory headroom on the traditional display front. Though that said, we have seen a nice increase in sell-through rate, which is in part, a byproduct of a positive halo effect from the demand for sponsored content. So that's an encouraging trend. There is also, good headroom, with regard to sponsored content inventory, and that also has the added benefit of being a marketplace driven business.

So to the second part of your question, ECPMs, with regard to sponsored content, is moving in a positive way, and we are pleased with the results there thus far.

Operator

Your next question comes from the line of Kerry Rice with Needham.

Kerry Rice - Needham

Thanks a lot. Couple of questions, maybe the first on ARPU in Talent Solutions keeps growing nicely. I was wondering if you could talk about our new or existing customers coming in and purchasing more seats, or maybe the initial purchase have more seats or job slots there? And then the second question is, you mentioned that you're hiring more hunters, and particularly around the international markets. Can you talk a little bit more about what you're doing there, or initiatives to grow the international revenue, and may be you can loop in what you guys -- what the progress is, in China?

Steve Sordello

Sure. So the ARPU is a factor of the two components. I would say on the new booking side, yes, I think we had more success upfront selling bigger deals, which has helped a broader portfolio of products than in the past, and that has been a consistent theme. So that helps the ARPU, particularly balancing against -- adding more smaller amounts. I think also on the existing business side, we continue to sell more deeply. This aligns with the land and expand approach, the fact that our customer base over the last three years has increased spend by about five times, and in some cases, much more. And that's helped offsetting the kind of buildup of small business' impact -- the negative impact on ARPU. So very pleased with the ability to maintain that ARPU.

On the international front, we do see our international revenue within Talent Solutions is roughly just under 40%, that's up from about 35% a year ago. So it continues to grow, and I think that as we look at the opportunity, we have expanded our field sales presence. It is an important piece of growth, and part of the opportunity of pulling forward the heads to grab the opportunity, it is in the U.S. as well, but weighted more internationally. So that -- at a high level, we do see a broader opportunity internationally.

Jeff Weiner

We forgot China. Priority number one there was making sure we had a world class team in place, and we are making very strong progress along those lines. We are also seeing encouraging results with regard to our growth. Chinas has become the fastest growing major market, in terms of new members. We are also seeing healthy trends there in terms of engagement. So we are pleased with the results thus far. There is certainly going to be challenges ahead. But we think we are laying a strong foundation, and we are excited about the future.

Operator

Your next question comes from the line of Brian Pitz with Jefferies.

Brian Pitz - Jefferies

Sorry, I was on mute. Thanks for the question. From a high level, you're taking share and recruiting market that generally is not growing. Can you give us any update on who you are really displacing or where those dollars are coming from? And just quickly, would you give us an update on inventory sell-out in Q2 for Marketing Solutions? I assume it was a total sell out like in previous quarters. Thanks.

Steve Sordello

Sure. In terms of the overall opportunity, the way we look at it, has not changed significantly. We are roughly $1 billion LTS business today. The overall opportunity is $27 billion, when you look at the markets that we participate in. Exec recruiting jobs [indiscernible]. Actually much larger than that, when you consider part time. So we believe we are still very early days. I think also, in terms of that market, obviously, we -- our value prop is different than other players, in terms of what we can do, via passive recruiting, in terms of unlocking value, in addition to the active recruiting side, and the strategy around increasing jobs.

So we feel like we are still early days, both in terms of the broader opportunity, as well as within the opportunity we have expanding within our existing accounts.

Operator

Your next question comes from the line of Ken Sena with Evercore.

Andrew McNellis - Evercore

Thanks this is Andrew McNellis in for Ken. We are wondering if we could briefly discuss, how you think about the search experience on LinkedIn? It seems like there could be a potentially large opportunity for commercial search on the platform. But as things currently stand, users typically run into paywalls for that unrestricted search functionality. But it seems like there could be a lot of professionals on the other side of that, that would pay for that user discovery, similarly to have paid search works on larger platforms now. So just wondering if you have ever considered a different approach to how search is monetized on LinkedIn?

Jeff Weiner

You know, search is really at the core of our flagship recruiter offering. So to that extent, there is already a commercial offering there. It also powers the ecosystem, which the vast majority of our products and services are free. So there is no intention to change that anytime in the foreseeable future. If anything, we continue to invest in that free offering, and continue to innovate on our search capabilities. Going beyond people, which is one of our core applications with regard to professional identity, and making it easier than ever before to search amongst the companies and universities and specific content that's been published on LinkedIn.

Andrew McNellis - Evercore

Okay. Thanks.

Operator

Your next question comes from the line of Doug Anmuth with JP Morgan.

Doug Anmuth - JP Morgan

Thanks for taking the question. Just on the Sales Navigator, on the launch, I know you're optimistic certainly on the value proposition. I think you have talked in the past about how the new version will increase functionality by about 60% to 70%. Can you just talk in a little bit more detail about some of the differences in the tools and capabilities here, versus the original version?

And then secondly on mobile having good headroom in terms of inventory going forward. Is there potential to how sponsored content beyond the homepage on other parts of the app? Thanks.

Jeff Weiner

Yeah thanks Doug. With regard to the differences between the previous product and version of Sales Navigator and the new one; I think, one of the most material differences is going to be the focus on insights and business intelligence about your potential prospects, and who is going to make for the best prospect, the best way to get in touch with that prospect, changes to their jobs, changes to their companies. The kind of information that you can leverage to best engage with that prospect. We mentioned Newsle integration which we are very excited about, given how recently that acquisition was completed. So that's a good indication of the direction of that product, and we are looking forward to taking that to the market.

With regard to sponsored content beyond the homepage on mobile, and of course, the homepage on desktop, yeah, there aren't going to be opportunities to distribute sponsored content in alternative products and services. One of the areas we can explore there is the publishing platform, and that's not just going to be LinkedIn post, LinkedIn publisher post, but also environments like SlideShare and some of our new applications that are consistent with our multi-app strategy.

Doug Anmuth - JP Morgan

Great. Thank you.

Operator

Your next question comes from the line of Aaron Kessler with Raymond James.

Aaron Kessler - Raymond James

Hi guys. Good quarter. Quickly on the monetization of expanded job listings, how do you plan to monetize expanded job listings, and two, do you think there will be any friction with the kind of current job listings, [indiscernible] much bigger, how are you going to manage the revenues there? Thank you.

Steve Sordello

So I will start with the first one. With regard to expanded job listings, there is a paid component and a free component. The free component is characterized as limited listings, where our active jobseekers are going to be able to see those jobs. There is roughly 1 million jobs available to active jobseekers on LinkedIn, and our paying customers are going to be able to get their jobs in front of both active candidates and passive candidates, so we can get the right job in front of the right member at the right time, leveraging things like matching capabilities, relevancy, algorithm, specific email digests, and a number of different ways in which we can connect our members to those jobs.

Aaron Kessler - Raymond James

Great. And just quickly, is this going to expand jobs also to more non-professional verticals?

Steve Sordello

I think that would certainly be the case longer term, when you start thinking about the vision for the economic craft, and being able to create economic opportunity for every member of the global workforce, that's 3 billion members of the global workforce, that goes well beyond the current addressable opportunity for LinkedIn, which is professionals and knowledge workers, and there is roughly 600 million knowledge workers in the world. Similarly, with regard to jobs, we have grown from just north of 300,000 jobs a few months ago to roughly 1 million today, and that number is expected to continue to ramp through the end of this year and beyond, and I think you are going to see the kinds of jobs that we are able to offer, is going to mirror our membership, over time.

Aaron Kessler - Raymond James

Great. Thank you.

Operator

Our final question comes from the line of Dan Salmon with BMO Capital Markets.

Dan Salmon - BMO Capital Markets

Hi guys. Good afternoon. Jeff, just a quick follow-up on the new sales navigator pricing. You mentioned that its averaging about $1,200 for the year, or about $100 a month. Just looking at the web site, it looks like we are still listing some older pricing, is that correct?

Jeff Weiner

Yes. There will be a transition period, as we go to market with this product. So it will not be offered directly, initially then with all members, except going through a certain path to get there. So there will be a transition period over the next couple of weeks here.

Dan Salmon - BMO Capital Markets

Okay. And then one quick follow-up, any update on your sponsored updates API program? I know you started it off really small with a small group of vendors helping there, but as you get that underway, are you looking to expand it anymore, and ramp up that channel anymore?

Jeff Weiner

Yes. We are going to continue to expand it. It has expanded from that initial launch, and our initial five or so pilot partners, and we are seeing good engagement and strong results. So we are going to continue to invest there.

Dan Salmon - BMO Capital Markets

Thank you.

Jeff Weiner

Okay. With that, thank you all for joining and we will talk to you next quarter.

Operator

Thank you. This does conclude today's conference call. You may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: LinkedIn's (LNKD) CEO Jeff Weiner on Q2 2014 Results - Earnings Call Transcript

Check out Seeking Alpha’s new Earnings Center »

This Transcript
All Transcripts