Despite slowing growth in its ad business, LinkedIn on Thursday reported a 59% gain in overall sales in the second quarter on the strength of its recruiting and subscriptions businesses.
Revenue for the professional networking site rose to $363.7 million from $228.2 million in the year-earlier period.
The company’s adjusted net income for the quarter was $44.5 million -- or 38 cents a share -- compared with $18.1 million, or 16 cents a share, a year ago. Analysts, on average, had expected LinkedIn to report an adjusted profit of 31 cents a share on revenue of $353.8 million.
LinkedIn’s user base globally reached 238 million in the quarter -- up 37% from a year ago, marking the largest gain since the third quarter of 2011.
“Accelerated member growth and strong engagement drove record operating and financial results in the second quarter," said LinkedIn CEO Jeff Weiner in the company’s earnings release. "We are continuing to invest in driving scale across the LinkedIn platform in order to fully realize our long-term potential."
Sales from LinkedIn’s recruiting services business, called Talent Solutions, increased 69% from a year ago to $205 million, accounting for 56% of total revenue. Marketing Solutions -- its advertising division -- rose 36% to $85.6% million, or 24% of overall revenue. That marks a steep drop, however, from 56% growth in the prior quarter, and 68% in the fourth quarter of 2012.
Sales from LinkedIn’s premium subscriptions grew 68% to $73 million, or 20% of overall revenue.
U.S. revenue totaled $224.3 million -- or 62% of first-quarter revenue -- while international markets contributed $139.4 million, or 38%.
LinkedIn in July formally launched Sponsored Updates, the news feed ad unit it had been testing with select advertisers for the previous six months. As LinkedIn transitions from its reliance on display ads and customized ad offerings to Sponsored Updates, analysts predict the shift would have a near-term impact on ad growth this year.
“We believe home page feed ads on LinkedIn can work particularly well in a professional content environment. However, LinkedIn is likely to increase inventory slowly here and will also face some back-half expense pressures related to data centers and the Pulse acquisition,” stated JPMorgan analyst Doug Anmuth in a research note on Wednesday previewing LinkedIn’s Q2 results.
The Wall Street firm does not expect the new ad format to reach significant scale until late 2013 or early 2014. During the earnings conference call, LinkedIn executives affirmed that view, citing the move away from larger, one-off ad deals to more “scalable” ad options including Sponsored Updates.
Weiner noted the new ad unit was opened up widely through its self-serve ad platform only two days ago, and added that creating a set of APIs (application programming interfaces) to help agencies create campaigns using Sponsored Updates was a “high priority.”
During the quarter, LinkedIn also continued to ramp up its content offerings, expanding its roster of “Influencer” bloggers, revamping its LinkedIn Today digital newspaper, and introducing new tech-oriented discussion groups with tech industry publisher IDG Communications. It also launched LinkedIn Contacts, a new resource to help users build and maintain professional relationships.
LinkedIn drew 143 million unique visitors globally each month on average in the second quarter, up 34% from 106 million in the year-earlier period, according to comScore data. Page views were up 25% to 11.7 million, on average, from 9.3 million a year ago. Its U.S. traffic as of June was 50.6 million.
LinkedIn's outlook for the current quarter calls for revenue between $367 million and $373 million. Following its earnings announcement, the company’s stock price was up about 7% in after-hours trading to almost $229 a share after closing Thursday at $213 a share.