LinkedIn may have more than doubled revenue last year to $522 million but it actually rendered itself less profitable by nearly tripling its sales and marketing costs.
It earned net income of just $26 million. The company could have been a lot more profitable if it hadn’t increased its sales and marketing staff to 844 people (up from 313 in 2010), a runup of 270 per cent.
- See inside LinkedIn’s Empire State Building office.
The increase had a similar effect on the S&M budget line, which went from $59 million in 2010 to $165 million last year.
The company said it is sacrificing profitability for brand awareness and customer account growth:
“We plan to continue to invest heavily in sales and marketing to expand our global footprint, grow our current customer accounts and continue building brand awareness. In the near term and consistent with our investment philosophy for 2011, we expect sales and marketing expenses to increase on an absolute basis and as a percentage of revenue and to be our largest expense on an absolute basis and as a percentage of revenue.”
This chart, from page 53 of LinkedIn’s annual report, shows how sales and marketing is growing much faster than LinkedIn’s underlying business. Note the increase in “percentage of net revenue”:
LinkedIn’s other operating expenses—product development and administrative costs—were all kept in line with revenues:
The result is that although LinkedIn has a healthy, growing business, its remains only anemically profitable:
NOW WATCH: Briefing videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.