LinkedIn joins social media losers

LinkedIn became the third social media company this week to lose a quarter of its valuation in minutes after reporting a weak outlook, following its acquisition of education site Lynda.com and a deterioration in its European advertising sales.

The business networking site saw some $7bn wiped from its market capitalisation in after-hours trading, as it warned sales in the current quarter's revenues would be $45m below Wall Street's forecasts at $670-675m, in part due to currency fluctuations.

LinkedIn also sees adjusted earnings for the year of $1.90, far below the $3.03 analysts had expected.

Earlier this month, LinkedIn announced it was would pay $1.5bn for Lynda.com in its largest acquisition to date.

Its shares fell as much as 25 per cent in after-hours trading, as investors reacted with similar disappointment to reports from Twitter and Yelp earlier in the week.

LinkedIn's revenues for the March quarter were up 35 per cent to $638m, with earnings of 57 cents, adjusted for certain items. Both measures were in line with analysts' estimates but the results mark the first time since LinkedIn became a public company in 2011 that it has not exceeded its forecasts.

Its net loss widened more than threefold to $42.4m for the quarter compared with the same period a year ago.

Jeff Weiner, LinkedIn's chief executive, said the first three months of the year made for a "solid quarter in which we made meaningful progress against our multiyear strategic road map".

"We maintained steady growth in member engagement while achieving strong financial results," he said in a statement.

On a call to analysts, Mr Weiner said that sustained investment and acquisition had expanded its total addressable market in recent years, which required "aggressive" growth in its sales force and higher R&D spending.

LinkedIn's largest source of revenue is its "talent solutions" recruitment business but it blamed a "secular shift away" from traditional display advertising for the disappointing forecast, with a "steeper deterioration" in the last quarter, especially in Europe. The UK general election also disrupted both its advertising and talent solutions revenues, it said.

A change in its advertising formats also contributed to the lower outlook. Foreign exchange fluctuations prompted it to cut $50m from its predicted revenues for the rest of the year. The Lynda deal will shave its margins by 4 basis points to 18 per cent for the current quarter, it added.

The site's cumulative membership grew 23 per cent to 364m, with higher engagement overall, especially on mobile, which now makes up more than half of all traffic to the site.

On Tuesday, Twitter shares dropped by as much as 26 per cent after it missed revenue expectations and lowered its guidance after warning that user growth was off to a "slow start" and that changes to its advertising formats had reduced click-through rates.

Yelp closed 23 per cent lower on Thursday after it missed revenue and earnings forecasts for its first quarter, as well as cutting its outlook. The local reviews site said on Wednesday evening that brand advertising revenue was lower than it had expected, alongside a botched move to a new sales system.

Yet, despite a hiring spree which drove up costs, Facebook - the world's largest social network by members - beat earnings expectations last week and missed its revenue forecasts only due to foreign exchange fluctuations. Its shares have remained relatively steady since, losing about 2 per cent in the past five days.

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