Why would LinkedIn buy Pulse?
The social networking website would be able to integrate relevant job postings with the type of content that users view on the news-reading app. Pulse.
Last year, Pulse partnered with The Wall Street Journal to enhance its premium content and expand its reach among a more affluent user base.
Many professionals are likely to have premium accounts on LinkedIn and integrating a news service could be something that they find useful. In addition to this, news-reading habits of LinkedIn users can provide insights about their interests, which can be used by recruiters and marketers.
Although LinkedIn is already doing well in terms of revenue growth, the market valuation suggests that the investors are expecting the company to sustain high growth for a long time, given that LinkedIn is trading at a price-to-earnings ratio) of close to 930. Therefore, we can expect LinkedIn to do multiple experiments and try out a lot of features. Even if one of them becomes big, it might be just what the company needs to sustain its steep valuation.
The value from Pulse may not just be limited to letting marketers and recruiters take advantage of the user data. LinkedIn will have an opportunity to integrate relevant job postings with the type of content that the users read on Pulse. Rather than requiring a manual search, relevant jobs can become ingrained as a natural part of LinkedIn's content. A parallel can be drawn with Facebook (FB), which is tying to smoothly integrate advertisements within the content sharing experience of its users.
The Trefis price estimate for LinkedIn stands at $90, implying a 50% discount to the current market price.
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