Careers-focused social network LinkedIn shook investors' confidence today when it issued a weak guidance.
As we reported, LinkedIn's Q1 2013 performance was decent but trailed analysts' expectations. Members of the press responded to the lower-than-expected revenues by questioning the company's capability to sell advertising on mobile.
And with LinkedIn failing to meet inflated revenue expectations, recent buyers hit the "sell" button in after-hours trading, sending shares down more than $20 at one point from a record close of $201.67 a share earlier today.
In the wake of the press hit, CEO Jeff Weiner pointed to numerous areas of opportunity in future quarters on a conference call. He stressed that full year revenues will climb 47 percent to 50 percent. As Forbes contributor George Anders put it, "Most companies can only dream of such growth rates."
"The stock is somewhat a victim of its own success," Needham & Co analyst Kerry Rice told Reuters. "They had a really big acceleration in Q4," said Rice. "So I think the market kind of expected similar results in Q1 and throughout 2013."
In other words, it will be near impossible for LinkedIn to consistently meet -- or outperform -- the expectations of the Street, especially as it invests in R&D and more long-term growth opportunities.
According to LinkedIn CFO Steve Sordello, who also spoke on the call, the company expects to see a solid and sustainable business model as it transitions to offering sponsored posts in the LinkedIn feed. As a complement to the content business, the social network recently began offering video.
A testament to the emphasis on content and publishing, page views grew 63 percent year to year, fueled largely by increased mobile use.
The biggest revenue-driver, the Talent Solutions division, which provides tools for recruiters to passively engage with candidates, grew 80 percent versus the prior year. LinkedIn continues to see growth in international markets as it expands; 88 percent in EMEA in the first quarter.
However, the company will be unlikely to sustain its accelerated rate of growth. Weiner and Sordello also provided some color on the areas of the business where growth will be gradual, rather than booming.
Weiner said the team is "looking for a more sustainable business model" for its marketing solutions business. Hiring was slow this quarter, and Weiner stressed that the recruiting team is on the lookout for strong candidates in engineering, product development, and strategic development.
In addition, LinkedIn will embark on a multiyear project: a self-managed data center that it expects will cost about $5 million a quarter. Weiner also referenced the $90 million acquisition of social news reader Pulse. "There are some incremental investments coming into play," he said.