LinkedIn: learning to grow

Big brother is watching - and plans to "create an economic graph that details all the skills required for every job for every global company in the global workforce." Fear not. The megagraph will be used only for good - "to lift and transform the global economy" and help people "realise the opportunities they are interested in". This is LinkedIn's vision and its $1.5bn acquisition this week of online educator Lynda.com is the next step in realising it.

How does this translate into a business strategy? LinkedIn users will be able to take Lynda courses to fill their skill gaps to do their job better, or to get a more interesting one. LinkedIn's professional network holds the CVs and job details of almost 350m people, along with users' web of professional connections and data on their job searches.

Lynda's online classes would increase a user's time on LinkedIn, which could mean more ad sales. Harnessing its user and company network, LinkedIn wants to become the market leader in online education, a $30bn addressable market, according to CFO Steven Sordello. The company has to find sources of substantial long-term growth from somewhere to justify a share price of at 60 times its 2016 earnings.

LinkedIn makes money from selling data to recruiters, premium user memberships and advertising (two-thirds, one-fifth and one-fifth of revenues respectively). While it has had strong growth - 25 per cent in users and 45 per cent in net revenues last year - LinkedIn faces increased competition from Facebook at work.

Lynda's price tag was 10 times last year's sales, roughly a 50 per cent premium to its latest private market valuation of around $1bn. Lynda's adjusted earnings margins are slender. Its courses need to succeed in engaging users the way LinkedIn hopes for it to have been money well spent. Shareholders are watching.

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