LinkedIn Follows Twitter With Disappointing Results

Business social network LinkedIn on Friday became the third social media company in a week to shed billions of dollars from its share price after posting disappointing results and cutting its full-year forecast.

LinkedIn lost about $7bn in market capitalisation in after-hours trading, its shares dropping by as much as 25 percent, after it posted quarterly revenues of $670 million to $675m (£446m), $45m below analysts had forecast.

Social shares drop

Shares of both Twitter and Yelp plunged by around the same percentage over the past week as those companies disappointed analysts, while Facebook shares fell by around 5 percent after missing revenue forecasts.

Taken together, the losses seem to indicate uncertainty for the growth prospects of social networking services overall, according to industry analysts. However, some analysts said they felt the market had overreacted in LinkedIn’s case, considering it a stronger business than Twitter.

“While we are incrementally less positive, we’re not 20 percent less positive,” RBC Capital Markets analyst Mark Mahaney told Reuters.

Currency fluctuations were partly to blame for LinkedIn’s missed estimate, according to the company, but it also said a shift away from standard display advertising had contributed, with a “steeper deterioration” in the last quarter, particularly in Europe.

‘Solid growth’

The UK general election also disrupted LinkedIn’s recruitment and advertising revenues, the company said.

Meanwhile, a change in advertising formats and currency fluctuations led the company to cut $50m from its predicted revenues for the rest of the year, while it said a deal to acquire education site Lynda.com for $1.5bn will cut margins by 4 basis points to 18 percent for the current quarter.

LinkedIn chief executive Jeff Weiner called the quarter “solid”, with revenues up 35 percent to $638m, in line with analysts’ estimates. However, the quarter is the first since LinkedIn went public in 2011 that it has not exceeded forecasts.

The site’s cumulative membership grew 23 percent to 364m, with higher engagement overall, and mobile now making up more than half of all traffic to the site.

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