Why Linkedin Corporation (LNKD) is Like Digital Film

Page 1 of 3

Or should it be Digital Non-Film?

Not so long ago Eastman Kodak was one of the strongest companies in North America and a favorite of investors, such as the legendary Peter Lynch. But then everything started to go wrong culminating in the company seeking Chapter 11 bankruptcy protection in January 2012.

Kodak’s expertise was in making photographic film (holding a 90% market share in 1976). But the advent of digital cameras hit the photography market like a whirlwind, and traditional cameras became virtually obsolete in the space of a few years.

LinkedIn Inc.I run a small software business in Wales. Recruitment is huge problem for a business like mine. Candidates for sales positions often sell themselves far more effectively than they will ever sell the software, and potential developers may portray themselves as brilliant programmers at the interview, but then struggle to deliver once they have been employed.

To help avoid these problems, I have used recruitment agencies. They charge a hefty percentage of a successful candidate’s salary and allow only a short period of time during which the fee is refundable.

But it usually takes a few months for the new employee to be ‘found out,’ leaving the unlucky employer (in this case, me) facing an expensive fee, while still having a problem with an unsuitable employee.

A few months ago I was looking to employ a sales person. I had been reading about Linkedin Corporation (NYSE:LNKD) on the Fool site, so I decided to give it a try.

I was able to place a job advert for around 120 pounds (about 180 U.S. Dollars). I received a wide range of replies from candidates with great C.V.’s and I was able to manage the recruitment process myself.

Don’t get me wrong, I can still choose the wrong person, but now I have a wider range of choice to choose from and the recruitment fee is a tiny fraction of an agency fee.

So the question crossed my mind: why would anybody consider using a recruitment agency? At that point I bought shares in LinkedIn.

Let’s consider the numbers. Mark Mahaney of Citigroup has estimated the size of the online jobs recruitment market to be $3 billion. LinkedIn had revenue of $243 million in 2010, $522 million in 2011, and recently reported revenue of $972 million in 2012. At face value, continued growth at this rate would give Linkedin Corporation (NYSE:LNKD) a 100% market share within 2 years! But I think we are looking at a different story. According to a research report by Koncept Analytics, the worldwide recruitment market in total is estimated to reach $369 billion in 2014. LinkedIn did not come to my attention as a replacement for another online service; it replaced a traditional recruitment agency. So it is not the paltry $3 billion that LinkedIn is going for; it has the entire, traditional worldwide recruitment market of $369 billion in its sights. The recent growth seems to indicate that LinkedIn is already encroaching into the traditional agency market, as this provides a plausible explanation as to how it could so quickly capture such a large share of a market ostensibly limited to just $3 billion.

Page 1 of 3
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!