LinkedIn Unbundling Services To Create Value

  • LinkedIn is the latest social network company to implement the idea of service unbundling through mobile apps.
  • The company announced the launch of its job search app for iPhone users in the US.
  • Service unbundling along with geographic expansion will lead to topline and bottomline growth at the company, which continues to trade at expensive multiples.

LinkedIn launches job search app

The future of technology will be dominated by mobiles and tablets. This major change in the foreseeable future has catalyzed companies shift from websites to mobile based apps to align with the changing technological environment. In recent times Facebook’s move to unbundle the big blue website into a number of mobile apps has been a confirmation of the trend. We had recently covered the unbundling of Facebook’s services, which has become a central concept of Facebook’s value creation strategy.

Unbundling is the new value creator

The world of technology is steadily but surely moving from a single website with multiple uses design to one with a mobile app for every single purpose. LinkedIn (NYSE:LNKD) is the latest company to take to service unbundling. The image below is a depiction of the transition taking in place at LinkedIn through the process of unbundling.

LinkedIn unbundling

LinkedIn’s blog had previously reported that over 50% of LinkedIn user traffic is on the mobile platform, with the company scaling the 300 million registered users milestone in April 2014. According to the same post the company had embraced the idea of mobile apps over two years ago, aligning itself with the oncoming gush of smartphone users. Following in the footsteps of Facebook, the company had released a mobile app for SlideShare in April 2014 and now has launched the LinkedIn job search app for iOS. Though the app is only available to US iOS customers, it is only a matter of time before the app is made available to other geographies and other O/S.

The advantages of unbundling lie in the clutter free user experience and better targeted products. A user looking for a job can now log into the job search app and see the relevant information rather than logging into the site and being shown all other notifications like pulse, posts from friends, etc.. The result is a more engaged user across each app which in turn improves the quality of users on a platform.

Apart from a more engaged user, unbundling of services into various apps also helps to collect more user information, something which is of immense value in today’s highly social world.

Service unbundling and geographic expansion to drive LinkedIn growth

In conclusion, LinkedIn’s decision to unbundle services helps to the professional platform to better leverage the mobile revolution. This, in combination with geographic expansion, will go a long way in driving the revenue and profitability growth for the Mountain View based company.

At $165 a share, LinkedIn currently trades at a Price/Sales (P/S) multiple of 11.9 making it expensive given its slowing growth and inconsistent bottom line. We continue to reiterate our negative outlook on the LinkedIn stock.

To see LinkedIn’s latest stock price movement, click here (NYSE:LNKD)

Virendra Singh Chauhan Virendra Singh Chauhan   on Amigobulls :

Neither Amigobulls, nor any members of its staff hold positions in any of the stocks discussed in this post. The author may not be a certified/registered investment advisor, and the opinions expressed should not be treated as investment advice.

Buying and selling of securities carries the risk of monetary losses.Readers/Viewers are advised to carry out their own due diligence and consult their investment advisors before making any investment decisions.

Neither Amigobulls, nor the author have any business relationship with any of the companies covered in this post.

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