LinkedIn Corp. will start to disclose new details about its mobile and non-U.S. businesses as soon as next week after the Securities and Exchange Commission told the professional network the information was “material” to investors.
LinkedIn, after resisting the SEC’s demands in June, agreed by August to give investors some data related to key areas of prospective growth, according to correspondence between the company and the agency made public yesterday.
There may be tools in place to disclose membership by region in its regulatory filing of third-quarter results due Oct. 29, Mountain View, California-based LinkedIn told the SEC on Aug. 29. Also “in response to the staff’s comment” about the materiality of the data, the company said it expects to be able to report revenue by product in and outside the U.S. in its earnings filing for the quarter ending March 31, 2014.
LinkedIn told the SEC it’s also seeking to “refine” its methodology enough by the March 31 quarter to be able to report mobile unique visitors as a percentage of total unique visitors.
The company currently doesn’t have a reliable way of tracking such users, as there are no industry standards and “mobile engagement across the Internet remains in its infancy,” according to the August letter.
Coincidentally, Silicon Valley-based LinkedIn today is holding a “mobile day” to promote its growth among such users. Management presentation slides were uploaded into an SEC filing.
The exchange of letters between LinkedIn and the SEC shows how companies in the nascent business of online networks are still learning how to count mobile users and explain to investors why revenue may be lower from mobile or overseas members.
In the same way, the SEC pushed Facebook Inc. to disclose key data before its initial public offering. As Facebook did then, LinkedIn currently is having difficulty monetizing mobile users, according to its letters to the SEC, which arose from the regulator’s review of its annual report filed in February. It also acknowledged that making “material” money from new foreign members is a goal that’s a few years away from being achieved.
The regulator typically pushes for more future disclosure while reviewing company filings.
LinkedIn currently derives ad revenue “almost exclusively” from desktop visitors to its site, not mobile visitors, the company told the SEC in response to the regulator’s comment in June that it needed to disclose mobile metrics. Acknowledging a 10 percent fall in such revenue from the fourth quarter to the first quarter, however, LinkedIn said it couldn’t say for sure whether a rise in mobile users was responsible for the decline, as most mobile users also access the site from desktop computers.
Mobile users were valued currently because, “We believe increased engagement through mobile creates additional content and data, as well as deeper member interaction with LinkedIn,” it said. While the company is experimenting with sponsored updates on mobile devices, it doesn’t yet know if they’ll help revenue materially, it said.
Pushing for disclosure of metrics on foreign users in June, the SEC noted that India and Brazil, LinkedIn’s second- and-fourth-largest member markets totaling 15 percent of all users, brought in less than 5 percent of revenue. The U.S., with 36 percent of members, contributed 64 percent of revenue. The SEC asked the company to explain why.
LinkedIn said its strategy for making money is “built upon member growth and engagement,” not immediate revenue. It doesn’t even invest in trying to make money overseas until it has enough engaged members, it said.
“As a result, we typically experience a multi-year lag between when we first begin growing our member base through a local language offering and when we begin investing in monetization efforts,” it said.
Hani Durzy, a LinkedIn spokesman, declined to comment on the company’s communications with the SEC.