Benchmarking LinkedIn's S-1 - How 7 Key SaaS Metrics Stack Up by @ttunguz (2023)

Benchmarking LinkedIn's S-1 - How 7 Key SaaS Metrics Stack Up by @ttunguz (1)

Since LinkedIn’s IPO in 2012, the company has grown its market cap by 6x and as of this writing is worth about $27.5B. Second to Salesforce, LinkedIn is the second largest SaaS company in the world. Unlike most SaaS companies which are B2B, LinkedIn is a B2C2B company. LinkedIn attracts hundreds of millions of consumers to post resumes online and sells this data and access to its audience to advertisers and recruiters and salespeople. The intrinsic data and people network effects of the business create reinforcing feedback cycles that have helped the business achieve tremendous revenue growth.

By every measure, LinkedIn is a remarkable business. It’s one of only two SaaS companies to break the $500M in annual revenue mark and has done it with an incredible growth trajectory, tripling that number is two years, as the chart above shows.

This post is part of a continuing series evaluating the S-1s of publicly traded SaaS companies in order to better understand the core business and build a library of benchmarks that might be useful to founders.

Benchmarking LinkedIn's S-1 - How 7 Key SaaS Metrics Stack Up by @ttunguz (2)

Unlike most SaaS companies who offer a single product, LinkedIn offers three: Talent Solutions, Premium Subscriptions and Marketing Tools. Recruiters buy Talent Solutions to find, connect with and acquire talented people. Salespeople buy Premium Subscriptions to network and search on the platform. And many different types of businesses buy ads to market their products to LinkedIn’s audience.

In 2007, the Premium Subscriptions generated 53% of the revenue. Seven years later, the SaaS part of the business, the Talent Solutions part of the business brings and 56% of the revenue and has been the fastest growing part of the business. This, more than any of the data point, is why LinkedIn is a B2C2B. As the amount of profiles on the platform has grown, so has the company’s ability to monetize that data in software.

Benchmarking LinkedIn's S-1 - How 7 Key SaaS Metrics Stack Up by @ttunguz (3)

Limiting ourselves to only the Talent Solutions part of the business, we can evaluate the Average Revenue Per Customer over the same seven-year period. In 2008, the average recruiting team spent about $20,000 per year with LinkedIn, a figure that has reached $35,000 in 2013, achieving a growth rate of 16% per year. Meanwhile, the number of paying customers has grown from 900 to about 25,000 in that time.

Benchmarking LinkedIn's S-1 - How 7 Key SaaS Metrics Stack Up by @ttunguz (4)

To acquire customers, LinkedIn employs two customer acquisition mechanisms: an online acquisition team and a field sales team. In 2007, online sales generated 63% of revenue. Over the past seven years, the field sales organization has flipped that figure and now represents close to 60% of new business. The field sales teams are probably responsible for the increase in customer value, pursuing larger customers and closing larger teams if not entire recruiting departments.

This data suggests that at the beginning, LinkedIn grew primarily through self sign up and other online mechanisms, but over time has come to complement that with a terrifically successful sales team. It serves as a great model for how B2C2B companies can complement their bottoms up strategy with a sales team.

Benchmarking LinkedIn's S-1 - How 7 Key SaaS Metrics Stack Up by @ttunguz (5)

Because of the combined online and field sales acquisition channels, and because the company serves both enterprise customers and prosumer types, LinkedIn is able to achieve best in class sales efficiency. It’s a bit of an unfair comparison, considering how much of the business is self sign up, but it stands is an amazing figure.

Benchmarking LinkedIn's S-1 - How 7 Key SaaS Metrics Stack Up by @ttunguz (6)

Even more impressive, LinkedIn spent significantly less than the median publicly SaaS company in terms of sales and marketing, which both includes online acquisition and field sales efforts.

Benchmarking LinkedIn's S-1 - How 7 Key SaaS Metrics Stack Up by @ttunguz (7)

LinkedIn’s gross margin is 87%, more than 10 percentage points above the median. This is likely because LinkedIn’s infrastructure costs and customer support costs are slower than the typical SaaS company.

Benchmarking LinkedIn's S-1 - How 7 Key SaaS Metrics Stack Up by @ttunguz (8)

However, LinkedIn does spend more on research and development than the median company (26% vs 18%). LinkedIn has huge amounts of data but more importantly, they must solve some very complex graph problems, for example, search across the social network by degrees of separation, which are very computationally complex. in addition, it’s clear that the company is broadening their product portfolio in order to build to sell more products like Sales Navigator, to increase the average revenue per customer over time.

Benchmarking LinkedIn's S-1 - How 7 Key SaaS Metrics Stack Up by @ttunguz (9)

As for net income, LinkedIn operates at break even, which makes the company’s growth that much more remarkable compared to some SaaS companies which are operating at -70%+ net income to revenue. It’s is a testament to the efficiency of the business LinkedIn has built

LinkedIn is an amazing company and the biggest B2C2B company on the planet. The sales efficiencies and the breadth of revenue streams it has created are best-in-class and they are a terrific role model for B2C2B startups.


What is SaaS benchmark? ›

A SaaS financial benchmark refers to benchmarks that are specifically focused on average performance in the SaaS world. In particular, a SaaS financial benchmark is a benchmark about something financial, such as MRR, ARR or other financial metrics that are commonly used throughout the SaaS world.

Is LinkedIn A SaaS or Paas? ›

Second to Salesforce, LinkedIn is the second largest SaaS company in the world. Unlike most SaaS companies which are B2B, LinkedIn is a B2C2B company. LinkedIn attracts hundreds of millions of consumers to post resumes online and sells this data and access to its audience to advertisers and recruiters and salespeople.

What is the average SaaS growth rate for 2022? ›

The overall median growth rate for all companies in the survey registered 40%. This is up from an overall median of just under 30% in 2020 and puts growth at the same pre-pandemic levels seen in 2019.

What is a good CAGR for SaaS companies? ›

SaaS company growth rate depends much on a company development stage. On average, the revenue increase falls into the 15% to 45% year-to-year growth range.

What are some examples of benchmarks? ›

Some of the most popular benchmarking methods include:
  • Peer benchmarking. ...
  • Best practice benchmarking. ...
  • SWOT analysis.
  • Process benchmarking. ...
  • Performance benchmarking. ...
  • Collaborative benchmarking. ...
  • Call center. ...
  • Technology.
Feb 4, 2020

What are the 4 domains of benchmarking? ›

There are four main types of benchmarking: internal, external, performance, and practice.

How to use LinkedIn for SaaS? ›

7 LinkedIn Marketing Tips for SaaS Startups
  1. Create Linkedin content.
  2. Use Linkedin ads to promote your content. ...
  3. Plan an Account based marketing strategy.
  4. Connect with Saas companies executives that meet your marketing persona profile.
  5. Used Lead gen forms.
  6. Tips to create an effective Lead generation campaign:

What is an example of a SaaS? ›

The most common types of SaaS solutions are Customer Relationship Management (CRM), Enterprise Resource Planning (ERP), Content Management System (CMS), Project Management Software, Sales, Marketing, eCommerce.

What cloud platform does LinkedIn use? ›

Existing Azure features

In addition to a few experiments, LinkedIn uses Microsoft's public cloud in three notable ways: Azure Media Services to accelerate LinkedIn video post-delivery. Microsoft Text Analytics API, an Azure Cognitive Service, to improve machine translation in LinkedIn's Feed.

What is the 40 rule of SaaS? ›

The Rule of 40 is a principle that states a software company's combined revenue growth rate and profit margin should equal or exceed 40%. SaaS companies above 40% are generating profit at a rate that's sustainable, whereas companies below 40% may face cash flow or liquidity issues.

What is a good profit margin for SaaS? ›

Understanding why gross profit margin is important and how it's calculated is good, but it means little without context. SaaS companies should achieve a gross profit margin of 75%, and anything below 70% may raise concerns for financial advisors, investors, VCs, and analysts.

What is a good monthly growth rate for a SaaS startup? ›

According to a study by Bessemer Venture Partners, the average monthly growth rate for successful SaaS startups is 7-8%. This means that a company's revenue is increasing by 7-8% each month.

What is rule of 70 SaaS? ›

The rule of 70 is a calculation to determine how many years it'll take for your money or an investment to double given a specified rate of return. Investors can use this metric to evaluate various investments including mutual fund returns and the growth rate for a retirement portfolio.

What is the SaaS magic number? ›

The SaaS Magic Number is a ratio showing yearly recurring revenue growth gained for every sales and marketing dollar spent. It indicates the level of operational efficiency of a company, as well as the sustainability of sales and marketing expenditure.

What is rule of 40 negative EBITDA? ›

Simply put, you take you growth rate and subtract your EBITDA margin. If it's above 40%, you're in good shape. If it's below 40%, you should start figuring out how to cut costs.

What are the 4 steps of benchmarking? ›

The Four Phases Of Successful Benchmarking
  • Phase 1: Current State Assessment.
  • Phase 2: Benchmarking Participant Identification.
  • Phase 3: Comparative Analysis.
  • Phase 4: Strategic Prognosis.
Nov 17, 2017

What are the 10 elements of benchmarking? ›

The following 10 steps will keep any organization on track in its benchmarking endeavors.
  • Step 1-Determine processes. to be benchmarked. ...
  • Step 2-Determine organizations. ...
  • Step 3-Gather data. ...
  • Step 4-Analyze for gaps. ...
  • Step 5-Determine future trends. ...
  • Step 6-Reveal results. ...
  • Step 7-Achieve consensus. ...
  • Step 8-Establish action plans.
Feb 22, 2016

What are 4 of benchmarking best practices? ›

6 Benchmarking best practices
  1. Start early. If you want to be the best, it's never too early to start benchmarking. ...
  2. Have a timeline. ...
  3. Choose an appropriate peer group. ...
  4. Look outside your industry. ...
  5. Stick to meaningful metrics. ...
  6. Focus on improving operations.
Sep 21, 2021

What are the 5 types of benchmarking? ›

  • Internal benchmarking. Internal benchmarking is pretty straightforward. ...
  • External benchmarking. External benchmarking is comparing an internal process to that of a competitor or even several other organizations. ...
  • Competitive benchmarking. ...
  • Performance benchmarking. ...
  • Strategic benchmarking. ...
  • Practice benchmarking.
Oct 14, 2020

What are the 8 benchmark criteria social marketing? ›

'Our benchmark criteria are explained under the eight categories of: Behaviour, Customer Orientation, Theory, Insight, Exchange, Competition, Segmentation and Methods Mix.

What are benchmark techniques? ›

Benchmarking is a technique for looking outside where at the practices of the own company are compared with the external practices. Comparison means that there must be a basis line of similarities. Only similar things can be compared each other. Therefore it is necessary to recognize one's own operations and processes.

What are the 5 characteristics or features of SaaS? ›

5 Common Characteristics of SaaS Applications
  • #1 - Configuration and Customization in SaaS Applications. ...
  • #2 - Open Integration Protocols. ...
  • #3 - Accelerated Feature Delivery. ...
  • #4 - OpenSaaS. ...
  • #5 - Collaboration and Sharing. ...
  • VEXXHOST Cloud Services for SaaS Applications.
Apr 13, 2021

What are the top 3 most important aspects of SaaS? ›

Some of the must have or nice to have features and key characteristics of SaaS applications are the following:
  • - Multi-tenancy model.
  • - Automated provisioning.
  • - Single Sign On.
  • - Subscription based billing.
  • - High availability.
  • - Elastic Infrastructure.
  • - Data Security.
  • - Application Security.
Dec 21, 2022

What are the 3 benefits of SaaS? ›

Advantages of SaaS Technology
  • Accessibility: Ability to run via an internet browser 24/7 from any device.
  • Operational Management: No installation, equipment updates or traditional licensing management.
  • Cost Effective: No upfront hardware costs and flexible payment methods such as pay-as-you-go models.

What are the 2 basic components of SaaS? ›

The essential SaaS components are: CRM system. Marketing automation.

What is SaaS for dummies? ›

SaaS (Software-as-a-Service) is a software licensing and delivery model in which software is licensed on a subscription basis and is centrally hosted (Wikipedia). It's a method of software delivery where applications are hosted remotely by a vendor or service provider and are made available to customers over a network.

What are the 2 main varieties of SaaS? ›

There are two different types of Software as a Service model, horizontal SaaS and vertical SaaS. A horizontal SaaS is a structure well used by established cloud services such as Salesforce, Microsoft, Slack, Hubspot etc.

Does Bill Gates use LinkedIn? ›

Bill Gates, used LinkedIn to share his 'impressive' resume from when he was 18 years old. Of all the things that you can find on social media and other platforms, finding Bill Gates' resume is difficult to find, however, not when Gates himself shares it with whole the world.

Is there an API for LinkedIn? ›

The APIs are currently provided for free, but LinkedIn reserves the right to charge for the APIs in the future. If we do charge a fee for use of the APIs or any developer tools and features, you do not have any obligation to continue to use the APIs.

Who are the Big 3 cloud providers? ›

Dominating the Cloud Service Provider (CSP) market are three hyperscalers: Amazon Web Services (AWS), Microsoft Azure, and Google Cloud Platform (GCP). They consume an impressive 34%, 21%, and 10% respectively of the global cloud infrastructure market (as at June 2022), which is worth a staggering $203 billion.

What are the three types of benchmarks? ›

Three different types of benchmarking can be defined in this way: process, performance and strategic. Process benchmarking is about comparing the steps in your operation versus the ones that others have mapped out.

What is benchmark in cloud computing? ›

Benchmarks are often used to measure performance of computing resources and have previously been applied to cloud resources [2]. Benchmarking is usually performed independently of an application and does not take into account any bespoke requirements an application might have.

What is a benchmark vs a standard? ›

The term benchmark has essentially the same meaning as standard, but nevertheless is most often used in relation to the dynamic process of making relative comparisons – a process frequently referred to as benchmarking (see section 5 for UK examples).

What is a benchmark in SLA? ›

Each benchmark corresponds to a set of metrics that determine if your teams are meeting the target response and resolution times. The percentage indicators beside each metric determine whether you achieved (green) or missed (red) the target performance for that SLA plan over a period of time.

What are the key elements of benchmarking? ›

8 steps in the benchmarking process
  • Select a subject to benchmark. ...
  • Decide which organizations or companies you want to benchmark. ...
  • Document your current processes. ...
  • Collect and analyze data. ...
  • Measure your performance against the data you've collected. ...
  • Create a plan. ...
  • Implement the changes. ...
  • Repeat the process.

What are the most commonly used benchmarks? ›

Some widely used benchmarks in the stock market are the Wilson 5000, Dow Jones Industrial Average, and the Russel 2000.

What is the main purpose of benchmark? ›

The goal of benchmarking is to create new methods or improve current processes to meet that higher standard. It's not a one-time effort. Rather, it's another part of continuous process improvement that the best organizations commit to if they want to stay competitive.

What is a benchmark and why is it important? ›

Benchmarking is the practice of comparing a company's metrics to other businesses to analyze what's effective in their respective industries. Implementing this process can lead to various benefits, including improved efficiency and increased sales.

How does benchmarking work? ›

Benchmarking is a process of measuring the performance of a company's products, services, or processes against those of another business considered to be the best in the industry, aka “best in class.” The point of benchmarking is to identify internal opportunities for improvement.

What is an example of benchmarking process? ›

Benchmarking examples are instances of companies or departments measuring their results against other departments or others in their industry, a practice that can help them understand how they're performing compared to their competitors.

What is an example of benchmark assessment? ›

An example of a benchmark assessment is a weekly spelling test given to all students. This is a benchmark assessment because it can be used to measure how well students are meeting the learning goal of learning how to spell.

What are the six steps in benchmarking? ›

The Six Benchmarking Steps You Need
  1. Introduction.
  2. Step One: Select the process and build support.
  3. Step Two: Determine current performance.
  4. Step Three: Determine where performance should be.
  5. Step Four: Determine the performance gap.
  6. Step Five: Design an action plan.
  7. Step Six and Beyond: Continuously improve.

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