Biz Break: Social networks making (and spending) big money
By Jeremy C. Owens jowens@mercurynews.com
Today: LinkedIn completes a social-media trifecta of continually booming revenues, following Twitter and Facebook. Also: Apple CEO openly discusses his sexuality for first time.
The Lead: LinkedIn revenues climb, but so do expenses
LinkedIn completed a week full of social-media earnings reports Thursday and followed a pattern established by Twitter and Facebook: Booming revenues that are going to be spent as quickly as the companies can manage.
LinkedIn reported a loss of $4.3 million, or 3 cents a share, on sales of $568.3 million, representing revenue growth of 45 percent year-over-year that beat Wall Street expectations. While impressive, that growth rate can't match the reports from LinkedIn's social-networking brethren: Facebook reported year-over-year revenue growth of nearly 59 percent, while Twitter more than doubled its sales.
LinkedIn lost money in the third quarter despite its growing sales -- as it has in every quarter so far this year -- because it is spending freely, funneling $336 million into product development and sales and marketing in the quarter while committing $175 million to the acquisition of Bizo, a San Francisco ad-tech company. The company also said the third quarter established a record for hiring, as recent college graduates join the payroll, which was also a theme for Google's earnings.
"We continue to make aggressive investments in our member and customer platforms in order to realize our long-term potential," Chief Financial Officer Steve Sordello said in Thursday's announcement.
Social-media companies faced doubts about their ability to keep growing revenues when they went public, but those doubts are starting to fade as online advertising revenues bloom and the companies' networks become essential to users -- an especially important part of LinkedIn's business, which generates revenues from premium and enterprise subscriptions.
All of the companies are seeking to spend that cash to keep growing, though, especially through international expansion and acquisitions. Facebook famously spent $16 billion with additional inducements for messaging service WhatsApp, added Oculus and Instagram in other big-money deals, and told investors on Wednesday that its expenses will still increase by 75 percent in the coming months. Twitter has also been active on the acquisition market, picking up smaller companies like Gnip and TapCommerce, while spending to move its advertising offerings into more overseas markets.
LinkedIn is also looking overseas for growth, with its eyes on a prize that mostly eludes Facebook and Twitter: China. While the other two services are effectively banned in the country, the Mountain View professional-networking service has made inroads by accepting demands to censor content. Executives on Thursday's conference call divulged that China is the second largest source of member growth for LinkedIn, after the United States.
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Biz Break: Social networks making (and spending) big money