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Biz Break: Social networks making (and spending) big money [San Jose Mercury News](San Jose Mercury News (CA) Via Acquire Media NewsEdge) Oct. 30--Today: LinkedIn completes a social-media trifecta of continually booming revenues, following Twitter and Facebook. Also: Apple CEO openly discusses his sexuality for first time. The Lead: LinkedIn revenues climb, but so do expenses LinkedIn completed a week full of social-media earnings reports Thursday and followed a pattern established by Twitter and Facebook: Booming revenues that are going to be spent as quickly as the companies can manage. LinkedIn reported a loss of $4.3 million, or 3 cents a share, on sales of $568.3 million, representing revenue growth of 45 percent year-over-year that beat Wall Street expectations. While impressive, that growth rate can't match the reports from LinkedIn's social-networking brethren: Facebook reported year-over-year revenue growth of nearly 59 percent, while Twitter more than doubled its sales. LinkedIn lost money in the third quarter despite its growing sales -- as it has in every quarter so far this year -- because it is spending freely, funneling $336 million into product development and sales and marketing in the quarter while committing $175 million to the acquisition of Bizo, a San Francisco ad-tech company. The company also said the third quarter established a record for hiring, as recent college graduates join the payroll, which was also a theme for Google's earnings. "We continue to make aggressive investments in our member and customer platforms in order to realize our long-term potential," Chief Financial Officer Steve Sordello said in Thursday's announcement. Social-media companies faced doubts about their ability to keep growing revenues when they went public, but those doubts are starting to fade as online advertising revenues bloom and the companies' networks become essential to users -- an especially important part of LinkedIn's business, which generates revenues from premium and enterprise subscriptions. All of the companies are seeking to spend that cash to keep growing, though, especially through international expansion and acquisitions. Facebook famously spent $16 billion with additional inducements for messaging service WhatsApp, added Oculus and Instagram in other big-money deals, and told investors on Wednesday that its expenses will still increase by 75 percent in the coming months. Twitter has also been active on the acquisition market, picking up smaller companies like Gnip and TapCommerce, while spending to move its advertising offerings into more overseas markets. LinkedIn is also looking overseas for growth, with its eyes on a prize that mostly eludes Facebook and Twitter: China. While the other two services are effectively banned in the country, the Mountain View professional-networking service has made inroads by accepting demands to censor content. Executives on Thursday's conference call divulged that China is the second largest source of member growth for LinkedIn, after the United States. The difference for LinkedIn is their expansion is taking them into new fields, while Facebook and Twitter are mostly seen as advertising channels with few other avenues to revenues. "The near-term catalysts are (LinkedIn's) emerging businesses," BMO Capital Markets analyst Dan Salmon told Bloomberg News. "They're moving from this very narrow view that this is a tool for recruiters and HR managers and people looking for jobs, to being one that is driven by products built for salespeople, products built for chief marketing officers." Facebook and Twitter suffered after their earnings reports earlier this week, but LinkedIn overcame a brief decline in after-hours trading to post gains: Shares closed with a 1.7 percent gain at $202.90, then topped $205 in late action. SV150 market report: Wall Street gains, but Silicon Valley stocks fall Wall Street enjoyed a strong day as Foster City-based Visa helped fuel an overall advance, but Silicon Valley tech stocks dipped slightly on a day when much of the focus was off finances and on Apple CEO Tim Cook. Cook became the most prominent U.S. executive to publicly declare he is gay, writing in an essay for Bloomberg Businessweek, "While I have never denied my sexuality, I haven't publicly acknowledged it either, until now. So let me be clear: I'm proud to be gay, and I consider being gay among the greatest gifts God has given me." Rival executives and even former President Bill Clinton praised Cook's decision, as did many who rushed to social media to comment on the essay. Apple shares dropped 0.3 percent to $106.98 despite a report that said smartphone and tablet shipments continued to grow in the third quarter. GoPro enjoyed its second earnings report since going public in a massive IPO earlier this year: The San Mateo action-camera company easily beat expectations and shares jumped more than 10 percent in after-hours trading. Google added 0.3 percent to $560.27 as Google Glass was officially banned from movie theaters and a "Google Tax" that rewards news publishers for links was approved in Spain. Twitter dropped yet again while demoting its head of product, the second straight day executive changes have hit the news; the San Francisco company's stock fell 0.7 percent to $41.80, its lowest closing price since July. Up: SolarCity, Gilead, Electronic Arts, NetApp, LinkedIn, Workday Down: Intel, Pandora, SunPower, Facebook The SV150 index of Silicon Valley's largest tech companies: Down 1.70, or 0.11 percent, to 1,608.75 The tech-heavy Nasdaq composite index: Up 16.91, or 0.37 percent, to 4,566.14 The blue chip Dow Jones industrial average: Up 221.11, or 1.3 percent, to 17,195.42 And the widely watched Standard & Poor's 500 index: Up 12.35, or 0.62 percent, to 1,994.65 Sign up for the 60-Second Business Break newsletter at www.siliconvalley.com. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/jowens510. ___ (c)2014 San Jose Mercury News (San Jose, Calif.) Visit the San Jose Mercury News (San Jose, Calif.) at www.mercurynews.com Distributed by MCT Information Services |