LinkedIn Corp Expands Into China, While Facebook Sits On The Sidelines

LinkedIn Corp Expands Into China, While Facebook Sits On The Sidelines

LinkedIn Corp (NYSE:LNKD)’s new network taps one of the largest and fastest growing populations of professionals in the world.

LinkedIn has launched the beta version of its Chinese network, pronounced “ling yang”, which will build on the 4 million Chinese professionals already using the professional networking service, reports John McDuling for Quartz.

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“Our mission is to connect the world’s professionals and create greater economic opportunity—and this is a significant step towards achieving that goal,” said Derek Shen, president of LinkedIn’s China division.

LinkedIn less affected by censorship than other internet firms

LinkedIn Corp (NYSE:LNKD)’s focus on professional networking has made it a niche site in the West and limited its appeal largely to people who are either in professional sectors with high turnover such as IT or who may be looking for a new job. This also limits the amount of time each person spends on the site since personal social networking is done elsewhere.

But this focus on professionalism has made it easier for LinkedIn to succeed in China where government censorship has proven to be a headache for other tech firms. Facebook is a perfect tool both for organizing people around a common cause and for spying on those people, but opening its database to abet repression would hurt Facebook Inc (NASDAQ:FB)’s reputation worldwide. Google Inc (NASDAQ:GOOG) pulled out of China after complying with search result censorship for a few years, and Yahoo’s compliance has brought heavy criticism.

But people don’t usually express strong political viewpoints or try to organize dissident movements on LinkedIn Corp (NYSE:LNKD), so censorship is much less of a concern.

China could drive LinkedIn growth

While China has a number of homegrown social networks including Baidu  and Sine Weibo, it doesn’t have a dedicated professional networking site like LinkedIn. What it does have is plenty of professionals – 140 million and counting. If the economy manages to transition part of its manufacturing base into services as GDP growth cools, something the Party certainly wants to do, the number of Chinese professionals could really take off.

For investors who have cooled on LinkedIn Corp (NYSE:LNKD) over the last six months, growth in the Chinese market without the usual competitors could be an interesting new investment thesis. Heavy investments to create the new Chinese-branded network (among other things) were a drain on EBITDA last quarter, causing some analysts to lower their 12-month price targets, but if the expansion pays off it could be the key driver of future earnings growth.

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