LinkedIn Around the World
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I have written both articles on why LinkedIn (NYSE: LNKD) is overvalued, and also why they may live up to expectations because of their leadership. However in this article, I want to focus a little bit on the topic of growth. When you talk about LinkedIn, you have to talk about growth because of their near 900 P/E ratio. What on earth justifies such a valuation? Quite frankly, the earth itself.
We are bombarded every solitary day about global economy this, and global repercussions that. But I think that very few of us have grasped this change that has very quickly come about. A country can no longer be a serious goal for a business; they simply must set their sights on the world. Perhaps it is here that I shall recall in the words of James Bond: “the world is not enough.”
With only 311 million people in the United States compared to the 7 billion worldwide, it seems only rational to expand your customer base by over 1,000%. And it works, that is when people need and want what you have to offer. The plan fails when it does not scratch the itch of the populace.
History shows us that there have been winners. Coca-Cola (NYSE: KO) is notably a big winner here. According to the Company, you can buy a Coke in over 200 countries. I stopped and Googled how many countries there are. The answer I got was 196. Coca-Cola is doing pretty well it seems with global domination. I guess people like Coke?
McDonald's (NYSE: MCD) is another global leader. They not only have a world-wide presence, but they are smart enough to tailor their offering to fit local cuisine. A word of advice: try the empanadas off the value menu in Argentina. Trust me it’s worth it. Of course, bringing up McDonalds in South America obliges me to bring up franchisee Arcos Dorados (NYSE: ARCO). (Arcos Dorados means Golden Arches, in case anyone was wondering) Arcos Dorados, like the name implies, get automatic business not because people have grown to love the franchise, but because those arches are recognized and associated with some good food.
Even Hollywood gets in on this international action. Disney (NYSE: DIS) does great globally. Consider that the Avengers, Pirates of the Caribbean, and Toy Story all pulled in over $1 billion in international ticket sales. News Corp’s 20th Century Fox has the top 2 international films: Avatar and Titanic.
The question is not whether money can be made overseas or not, the question is “do people around the world want what LinkedIn’s got?”
LinkedIn has cited their extreme growth overseas, namely China and Brazil, as to reasons to believe LinkedIn will keep the winning streak going in foreign lands. It has been said, and I believe correctly, that the world is homogenizing into a one world culture. There’s a lot of truth to that. Having visited several capital cities around the world, it’s amazes me how easy it can be to sit down and relate with people who have an entire life experience completely foreign from your own. Its also interesting that in the year 1800, only one city in the world had 1 million inhabitants: London. Today there are over 300 cities that can boast that claim. It is in these urban new world cities that LinkedIn is and will experience growth to some extent.
There has been a huge human migration towards cities in modern times. That's what lends to cities being a one-world culture kind of place more than in rural areas. Everyone is leaving their home, and making a new one in the city, so cultures tend to melt into one. But a problem when people move to the city is that they are coming to seek the fortune of city life, but don't always find it. According to the United Nations 37% of city folk lived in slums. Its really hard for me to imagine LinkedIn being relevant in the slums.
I have also been to the village in foreign countries where many people live. I have seen the poverty, and the subsistence living that much of the world experiences, and I have never heard them ask for a professional network.
Anyone anywhere would want to drink a Coke on a hot day, or sink their teeth into some fries when they need a bite to eat, but not everyone needs a professional (as the west defines it) network. I have read articles talking about how Brazil’s population is the size of the United States, and that India is a goldmine for LinkedIn to tap with 1 billion inhabitants. But, if you look closer you see that this company is largely irrelevant for a large portion of the world.
Here's something to consider. I would think that LinkedIn would be largely irrelevant to someone earning less than $2 a day. Consider the likelihood of someone in that situation putting his best foot forward, and networking with business professionals to find a better job. In Brazil up to 20% are estimated to live on less than $2 a day. Also, if 20% are living on less than $2, how many are living on less than $5 a day? Consider that average internet costs are $15 a month. If you made $30 a month, would you spend half on internet? Let alone then use the internet to build a professional business profile?
If you turn your attention to India (which you must do, considering they have 1.2 out of the 7 billion people that exist) the picture becomes more grim. Up to 80% of India's population lives on less the $2. That's nearly 1 billion people folks.
Where in the United States, Canada, and perhaps other western countries, it wouldn't be hard to imagine LinkedIn tapping a large percentage of the population as Facebook has done, it really becomes unrealistic to think that they will achieve the same results in the rest of the world. I'm not saying that LinkedIn will completely flop overseas, I just don't see it achieving its growth goals by reaching the general populace. As we have seen, the only thing keeping LinkedIn's valuation afloat, is the hope of monetizing the world. But given the different dynamics in a global scenario, it becomes clear that the world is not enough.
thequast has no positions in the stocks mentioned above. The Motley Fool owns shares of Arcos Dorados, Walt Disney, The Coca-Cola Company, LinkedIn, and McDonald's. Motley Fool newsletter services recommend Arcos Dorados, LinkedIn, McDonald's, The Coca-Cola Company, and Walt Disney. 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.If you have questions about this post or the Fool’s blog network, click here for information.