CHARTS: Why LinkedIn Makes A Profit Selling Ads When Pandora And Groupon Don't

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Another quarter goes by, and LinkedIn’s advertising business—on both the sales and marketing side—continues to impress. I just don’t have anything bad to say about it. (Which is unusual for me).In Q1 2012, LinkedIn took in $188 million in revenues, of which all but $38 million was help wanted ads or marketing/display advertising of some kind. The company spent only $66 million on its sales and marketing staff to make that money.

That’s why LinkedIn is so profitable when companies like Groupon and Pandora are not: It is an incredibly efficient ad-selling machine in which ever dollar spent on sales and marketing salaries generates $2.28 cents in ad revenue for the company.

At Groupon and Pandora, their business models are so expensive that operating costs appear to be permanently greater than any money they’ll make selling ads.

LinkedIn's growth may be slowing a little, but it's still piling on the revenues 12% per quarter and 12% year-by-year.

Here's the breakdown of LinkedIn's ad revenues. 'Hiring solutions' and 'Marketing solutions' dominate LinkedIn's sales.

The result: Growth in its ad business is greater than the company's operating costs, which is why LinkedIn showed a $5 million profit in Q1.

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