LinkedIn Continues to Impress

Dan is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

LinkedIn (NYSE: LNKD) has gone up more than 100% over the past year. Top-line growth has been phenomenal and it seems to have a lock on the online professional network market. Furthermore, management is top-tier, which we’ll get to soon. All that said, LinkedIn might not be a great investment at this point in time. 

A high-quality operation

LinkedIn is a monetization machine, and considering the company’s user base of approximately 225 million, this is a big deal. LinkedIn generates most of its revenue through Talent Solutions, where recruiters and potential job candidates are connected.

LinkedIn recently made moves in an effort to improve ad revenue, which currently represents approximately 20% of total sales. LinkedIn added two new features to SlideShare -- a new infographics player and a SlideShare Pro analytics upgrade. These two features have the potential to increase time-on-site, which would lead to a boost in advertising revenue.

According to Alexa.com, time-on-site has declined 3% over the past three months, so these innovations could be a shot in the arm. Though time-on-site has declined, LinkedIn has seen a consistent increase in traffic this year.

LinkedIn.com is now ranked No. 14 in the world and No. 10 in the United States for online traffic. These are stratospheric rankings that won’t just lead to more traffic, but increase brand recognition.

LinkedIn also ranks high for company culture. According to Glassdoor.com, employees have rated their employer a 4.1 of 5, and 81% of employees would recommend the company to a friend. Even more impressive is that 93% of employees approve of CEO Jeff Weiner.

In anonymous reviews, employees state that LinkedIn workers are filled with passion and that the majority of those workers are highly intelligent. The morale is noted to be high and management is often referred to as hard-working. The latter is extremely difficult to find in any industry.

In most cases, employees dislike their managers because they work less and take home a bigger paycheck. However, there doesn’t seem to be any friction here. And as you know, happy employees make for happy customers.

LinkedIn vs. peers

LinkedIn might be seeing consistent top-line growth, but earnings declined in 2012 after several years of improvements. Just don't think the story is changing, the lack of profitability was simply due to a temporary rise in costs.

Over the long haul, LinkedIn should be able to grow its top and bottom lines. When a company establishes a user base of 225 million and dominates market share, the future is likely to be bright.

The biggest concern for LinkedIn right now has nothing to do with future potential, but valuation. LinkedIn is currently trading at 99 times forward earnings, which means expectations are extremely high. If it missed earnings, the stock could suffer significantly in a short period of time.

Monster Worldwide (NYSE: MWW) was once a well-run operation with a bright future, but things change quickly in the business world. To give you a general idea of the difference in online exposure, Monster Worldwide ranks No. 526 globally and No. 117 in the United States for online traffic.

Monster Worldwide’s company culture is poor, as employees see no future, and they’re frustrated with management’s unwillingness to take a risk in an attempt to increase market share. To some it seems as if management is simply collecting paychecks until the business runs its course.

The company’s technology is outdated and the only thing its been doing lately is cutting costs. Unfortunately, cutting costs isn’t a viable long-term strategy. Monster Worldwide's revenue declined in 2012 and it swung to a loss. If big changes aren’t made soon, then Monster Worldwide will continue to sputter down a dark tunnel without any hope of rescue. 

Facebook (NASDAQ: FB) is similar to LinkedIn because of its social media framework. Some felt Facebook lacked direction when it went public, but with a strategy to generate revenue through mobile, the future looks bright.

Facebook’s ability to track personal details leads to highly targeted ads, which is a big plus. Facebook plans on investing more in mobile, which will lead to a temporary increase in costs, but as long as the advertising market stays healthy, Facebook should be able to reap the rewards.

On the other hand, Facebook needs to find more ways to monetize its user base, without ticking off its users. That’s the key. If Facebook is reliant on the advertising market and that market falters due to a downturn in the economy, Facebook shares could drop significantly.

Like LinkedIn, Facebook has seen superb top-line growth. Annual earnings have been inconsistent, but upper management believes this will change over the long haul.

Conclusion

Facebook is by far the largest of the three and it seems to be on track right now. Monster Worldwide looks to be suffering from a slow death and you should strongly consider avoiding the stock. At this point, there appears to be little hope for a turnaround.

LinkedIn might not be as big as Facebook, but it has been better at monetizing its user base. Management is top-notch, and the company is strongly positioned for the future. The one major negative is valuation. Still, this business might be worth a closer look.

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Dan Moskowitz has no position in any stocks mentioned. The Motley Fool recommends Facebook and LinkedIn. The Motley Fool owns shares of Facebook and LinkedIn. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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