LinkedIn Q3 Earnings Preview: Expect Solid Results, Mobile Monetization In Focus

| About: LinkedIn (LNKD)

LinkedIn (NYSE:LNKD) reports Q3 earnings on November 1st.

The Street expects:

  • Revenue: $244 million
  • EPS: $0.11
  • Q4 revenue guide: $272 million

Heading into the earnings, investors can expect the strong momentum from its Hiring Solution and Marketing Solution due to LinkedIn's product innovation. In addition, mobile monetization is in focus as the Street looks for additional color on the mobile ramp up.

In my view, LinkedIn's pace of accelerated product innovation will continue to enhance the platform's value proposition and maintain its robust revenue growth despite the concern over the soft macro environment and mobile migration.

Earlier this month at the Talent Connect Conference, the company introduced Talent Brand Index, which allows employers to measure their brand strength on LinkedIn, a new Talent Pipeline that features Company Followers, Sponsored Jobs based on CPC, and member features with Endorsements and Profile Views notification.

Talent Brand Index gives employers a comprehensive analysis of their brand on LinkedIn using data from member comments, page visits and followers, and allows them to assess their brand reach and engagement against their peers. The feature also allows recruiters to view their brand index based on job function and geography in a time-series format. Although Talent Brand Index is provided to the Corporate Solution customers at no extra cost, I believe that it can only increase LinkedIn's user stickiness and paves the way for greater pricing power in the future.

According to management, 50% of the recruiter customers have activated the Talent Pipeline since May and LinkedIn further enhanced the platform by allowing recruiters to pre-populate the Talent Pipeline with company followers. Based on a survey by LinkedIn, 70% of the company's followers are interested in hearing about potential career opportunities from the companies.

Sponsored Jobs are top-ranked postings in LinkedIn's newsletter/job board "Jobs You May Be Interested." Recruiters can decide how often their job posting to be ranked at the top of the list, and pay as low as $1 whenever a LinkedIn member clicks on the posting. Currently this feature is only available in the US and Asia, and has received positive feedbacks from recruiters.

The new member's features can increase engagement level and user experience, which will likely to result in increasing ad impressions and Hiring Solution revenue.

In September, LinkedIn introduced several features that I believe will increase user engagement on the platform. The two features are:

  1. Visible notification area in which users can see who has checked their profile and other activities
  2. User endorsement that legitimizes a candidate's skillset and knowledge

LinkedIn users often like to be informed of who viewed their profiles and such information could lead to a new network, strategic partnership, or job leads. The desire to become informed leads to increased user engagement on the site as they have strong incentive to log into the platform to check for notifications. As a result, the rising engagement will drive additional ad impressions.

The endorsement feature improves user experience in that it allows the user to highlight their best skillset that can be legitimized by a relevant authority. Such critical information is especially attractive to recruiters who are interested in candidates with endorsed skillsets. Recruiters are likely to pay a premium for additional features of the recruiting tool to increase the likelihood of finding the right candidate and minimize the time spent on candidate search.

Finally, display ads for mobile monetization came out for the iPad app at the end of June and investors will focus on the initial results of mobile monetization. Given how successfully Facebook (NASDAQ:FB) monetized its mobile apps (14% of ad revenue in Q3), I believe that LinkedIn could also deliver robust mobile monetization results due to its execution.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.