How far up can a company go before it reaches its peak? Is it possible to keep growing forever? For LinkedIn, at least at first, the answer appeared to be “yes.” Since going public in 2011, the social media company has beaten the top-line targets and predictions laid out by Wall Street professionals every quarter. Its membership climbed 7 percent, from 249 million to 277 million worldwide.
However, in the last few quarters that pace has started to slacken off. While the company posted a 20 percent rise in non-GAAP net income, reaching $48.2 million in the fourth quarter of 2013, the first quarter of 2014 missed analysts’ expectations. Both revenue and sales were below expected, causing a drop in the price of shares to the tune of about 8 percent.
While it might seem odd that a company that is continuing to grow would be penalized simply for not doing as well as expected, analysts are carefully watching LinkedIn to see if it is possible for a social media company to be successful in the long term. There are only three real public social media companies–Twitter, Facebook, and LinkedIn–and many investors are curious to see if their audiences are sustainable and capable of monetization. In fact, many experts half-expect social media companies to flame out like Zynga or Groupon did.
LinkedIn does have some plans to continue developing a sustainable audience. On Thursday the company announced that they will be acquiring the online job search service Bright, which should help broaden the user base and improve online matches. The company is also exploring ways to make money off of its mobile applications and sponsored updates.
The biggest avenue of growth for the company, however, is internationally. LinkedIn is working at expanding its user base abroad and solidifying its hold on foreign job markets. But while that tactic might work for a while, it is hardly one that is sustainable in the long term.