The ‘professional’ social network LinkedIn appears to have taken to heart the old adage that one has to spend money to make money. The firm announced yesterday that it’s buying online training site Lynda for $1.5bn (£1bn), its first trillion dollar acquisition.
LinkedIn has a strong user base of 350 million career-minded professionals, but this resource has perhaps been undercapitalised in the past. The firm, for instance, is increasingly looking to make it easier for users to post and read content in a Facebook-style feed (check out MT’s rather fantastic LinkedIn page here, to see what we mean), rather than just hunt for jobs or recruits.
Its purchase of Lynda is a further example of it branching out and finding new ways to monetise. Lynda charges its members for online video education courses in everything from coding to animation to web design. As LinkedIn boss Jeff Weiner put it, their businesses are ‘highly aligned’.
LinkedIn’s content chief Ryan Roslanksy elaborated on how the two services could tie in. ‘Imagine being a job seeker and being able to instantly know what skills are needed for the available jobs in a desired city, like Denver, and then to be prompted to take the relevant and accredited course to help you acquire this skill,’ he said. We can only dream.
Lynda brings two key benefits for LinkedIn, which any good social network needs. It creates a much-needed new way of making money (Lynda already takes in $150m a year in course charges, a number that presumably will rise with frequent LinkedIn promotions) and it creates a new reason for LinkedIn users to stay on the site for longer.
Big spending hasn’t been LinkedIn’s style in the past – its next biggest purchase was marketing platform Bizo, for which it paid $175m last year. This therefore represents a perhaps risky departure, especially given that its pre-tax profit for 2014 was only $31m. As another adage goes, money doesn’t grow on trees.
LinkedIn’s big spending strategy seems to extend to its junior employees too. Research from salary benchmarking site Emolument has shown that the average salary of its junior employees is a tech sector-topping £60,000.
Emolument looked at what various technology businesses offer European employees with five years’ experience or less. LinkedIn led the pack, followed by Amazon at £55,000 and Microsoft at £51,000. By comparison, HP, eBay and IBM all paid £35,000 or less.
Paying top dollar for the best young developers is another sign LinkedIn is looking at improving its offering (we suggest starting with the less than intuitive interface) and capitalising on its user base, though Emolument did point out that the high salaries may also reflect the fact that LinkedIn ‘arguably doesn’t have the same level of prestige or glamour as Google or Facebook’. No doubt exactly the kind of thing it wants to change.