LINKEDIN'S VALUATION HIGHLIGHTS!

VALUATION HIGHLIGHTS

1. Recruitment Services & Job Postings constitute 48% of the Trefis price estimate for LinkedIn's stock.
2. LinkedIn Ads & Marketing constitutes 28% of the Trefis price estimate for LinkedIn's stock.
3. Premium Account Subscriptions constitute 14% of the Trefis price estimate for LinkedIn's stock.

by the Trefis Team

Share Count Calculation & Option Dilution

We have estimated the diluted share count to be around 108 million. This includes 94.5 million shares of Class A and Class B common stock outstanding after the IPO plus 13.1 million shares to account for option dilution. The company has about 16.2 million options at an average exercise price of $5.86. This data is available in the company's S-1 filings with the SEC. Without including the option dilution, the Trefis price estimate for LinkedIn stock would be 15% higher than the present price estimate.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

Below we highlight key drivers of LinkedIn's value that present opportunities for upside or downside to the current Trefis price estimate for LinkedIn.

Recruitment Services and Job Listings

• Average Revenue per Corporate & Business Customer: LinkedIn charges companies for buying advanced solutions from LinekedIn, such as LinkedIn recruiter, Talent Direct, Custom Company Profiles and Jobs Network. We expect the average revenue per client company for LinkedIn to decline in the short term and increase slightly in the long term from around $22,000 in 2010 to around $23,000 by the end of Trefis forecast period. We believe that many of the incremental corporate customers for LinkedIn are likely to be small customers as many of the large companies already use LinkedIn. These customers are then likely to spend less, which means the average fee could come down instead of going up. However, as the number of registered members on LinkedIn increases, it will benefit corporates by allowing them capture large talent pool for job offerings. This means that the average fee could actually go up in the short term instead of going down. In the scenario where the average fees increases to 30,000 by the end of Trefis forecast period, there could be an upside of around 10% to Trefis price estimate for LinkedIn's stock.

Ads & Marketing

• LinkedIn Monthly Unique Visitors: LinkedIn's average monthly unique visitors has increased from around 31 million in 2009 to 51 million in 2010, and we estimate that it could continue to increase to around 215 million by the end of the Trefis forecast period. The unique visitors growth was more during the recessionary period and beyond. This is because the unemployment rate increased during recession and its after-effect were felt even after recession was over. Hence the unique visitors growth should slow down going forward, as the economy recovers leading to lower unemployment rate. However, if the growth continues, there could be an upside of around 10% to the Trefis price estimate for LinkedIn's stock if the number of unique visitors were to increase to around 300 million by the end of Trefis forecast period. 
• Page views per LinkedIn visitor: LinkedIn's page views per unique visitor has declined from around 24 per month in 2009 to 30 per month in 2010. We estimate that it could continue to increase to around 42 per month by the end of the Trefis forecast period. We believe that LinkedIn will continue to bring out features which will increase user engagement. For example, LinkedIn Polls functionality was brought so that if user answers these surveys, it will help increase page views per user.