LinkedIn, the professional social networking site, has become a major player in the online world since its launch in 2003. While many know LinkedIn as the go-to platform for professional connections and job opportunities, less is known about LinkedIn’s origins and when it started making money.
LinkedIn’s Founding
LinkedIn was founded on December 28, 2002 by Reid Hoffman, Allen Blue, Konstantin Guericke, Eric Ly, and Jean-Luc Vaillant. The founders’ vision was to create an online network specifically for professionals that would enable them to connect with colleagues and foster business opportunities.
The site officially launched on May 5, 2003 and within the first month already had 4,500 members. The early adopters of LinkedIn were primarily technology professionals in Silicon Valley. This is because the founders leveraged their own professional networks in the tech space to get early members to join and start populating the platform.
The Early Years: 2003-2005
In its first few years, LinkedIn focused on growing its member base and improving the user experience. There were no revenue streams in the beginning. Hoffman and the other founders invested their own money initially and later raised venture capital to fund the company’s growth.
Some key milestones for LinkedIn in its early years:
- LinkedIn hit 1 million members in March 2004
- The company raised $10 million in Series B funding in October 2004. This included investment from Greylock Partners.
- In May 2005, LinkedIn added several new features including Groups, InMail, Recommendations, and People You May Know. These enhanced the value proposition for members.
- Membership surpassed 5 million in July 2005.
During this period, LinkedIn did not have any revenues. It was completely focused on attracting members to its platform and building up the features of its network.
LinkedIn’s First Revenue Streams
It wasn’t until 2006 that LinkedIn started experimenting with generating revenue. In February 2006, LinkedIn unveiled its first revenue-generating product: Job Listings. This allowed recruiters and companies to post job listings on LinkedIn profile pages. Pricing was on a monthly subscription basis.
In November 2006, LinkedIn launched Corporate Subscriptions. This allowed companies to purchase subscriptions for their employees. The subscriptions gave employees access to LinkedIn’s premium services.
The development of these subscription-based products marked LinkedIn’s evolution into a revenue-generating business. For the first time, the company had multiple streams of recurring revenue.
In 2007, LinkedIn bolstered its offerings with:
- Advertising on member profile pages
- Premium Subscriptions for individual members
- The LinkedIn Business Plus program for sales prospecting
Premium Subscriptions gave members access to features like InMail communication and profile visibility controls. Meanwhile, Business Plus targeted sales professionals with tools to identify leads and manage prospects.
Revenue Growth in the Late 2000s
By 2008, LinkedIn was starting to hit its stride in terms of revenue. It was bringing in money through:
- Hiring Solutions (corporate and individual job listings)
- Marketing Solutions (ads on profile pages)
- Premium Subscriptions (individual and corporate)
In 2008, LinkedIn generated:
- $11 million in Q1 ($4 million from Premium Subscriptions)
- $15 million in Q2
- $21 million in Q3
- $30 million in Q4
For the full year 2008, the company brought in revenue of $78 million. This was up from just $8 million in 2007, so an impressive 366% year-over-year increase.
Revenue sources in 2008:
- Hiring Solutions: $40 million
- Premium Subscriptions: $22 million
- Marketing Solutions: $16 million
Premium Subscriptions and Hiring Solutions made up the bulk of revenue, underscoring the value LinkedIn brought in connecting professionals and enabling recruitment.
The Path to Profitability
With accelerating revenue growth, LinkedIn also started moving towards profitability in 2009.
Some key financial milestones:
- Q1 2009: $41 million revenue, $2.4 million net profit
- Q2 2009: $55 million revenue, $4.5 million net profit
- Q3 2009: $68 million revenue, $4.1 million net profit
- Q4 2009: $83 million revenue, $10.8 million net profit
For 2009 overall, LinkedIn generated revenue of $248 million. It achieved profitability for the first time, with annual net profit at $18.8 million.
By driving revenues up and keeping costs controlled, LinkedIn reached sustainable profitability within the first few years of launching its monetization models. The company was no longer reliant on venture capital. Its three revenue streams gave it diversified income sources as well.
Revenue Growth Leading up to IPO
In the two years leading up to its IPO, LinkedIn continued to post stellar financial results:
2010 Financials
- Revenue: $243 million (up 98% vs. 2009)
- Net profit: $15.4 million
2011 Financials
- Revenue: $522 million (up 115% vs. 2010)
- Net profit: $28.7 million
Hiring Solutions and Premium Subscriptions accounted for the majority of sales. Marketing Solutions also saw rapid growth off a smaller base.
This surging top-line growth and profitability set the stage for LinkedIn to go public.
LinkedIn’s IPO
On May 19, 2011, LinkedIn (NYSE: LNKD) debuted on the New York Stock Exchange.
Key facts about LinkedIn’s IPO:
- IPO share price: $45
- Shares offered by company: 7.84 million
- Total shares outstanding after IPO: 111 million
- Amount raised: $353 million
The IPO was a huge success. On its first day of trading, LNKD opened at $83 per share and closed at $94.25. This gave the company a market valuation of close to $9 billion.
Public market investors were eager to gain exposure to LinkedIn’s dominant professional network platform and rapidly growing financials.
Revenue Growth as a Public Company
Since going public, LinkedIn’s revenues have climbed steadily:
| Fiscal Year | Revenue | Growth |
|---|---|---|
| 2011 | $522 million | 115% |
| 2012 | $976 million | 87% |
| 2013 | $1.5 billion | 51% |
| 2014 | $2.2 billion | 45% |
| 2015 | $3 billion | 35% |
| 2016 | $3.8 billion | 25% |
In 2016, LinkedIn was acquired by Microsoft for $26 billion. But it continues to operate as an independent subsidiary.
As of LinkedIn’s latest earnings report for Q2 2022:
- Revenue: $1.9 billion, up 38% year-over-year
- 322 million members, up 17% year-over-year
The professional network has exceeded 300 million members and keeps growing at a steady pace. LinkedIn’s diversified revenue streams continue fueling financial performance.
Conclusion
In summary, LinkedIn took around 3 years from its launch to start generating revenue. It formed its first revenue streams in 2006 by offering job listings and premium subscriptions. By 2009, just 6 years from founding, LinkedIn achieved profitability. The company saw accelerating revenue growth from 2008 through its IPO in 2011, giving investors confidence in the business. As a public company, LinkedIn has sustained 30%+ revenue growth and now generates nearly $8 billion annually. It took discipline in the early years to build up LinkedIn’s value proposition and cultivate multiple monetization models. But that groundwork has enabled the professional network to scale into a global platform and thriving business today.
