Last week LinkedIn (NYSE:LNKD) announced its $59 million investment in a 23,500-square-foot data center in Jurong, Singapore to support the company’s growing traffic in the Asia Pacific region. This is the company’s sixth data center, and the first on international soil. Its other data centers are located in the United States.
In its April 6 statement, LinkedIn said the new data center will improve speed and reliability of services to more than 85 million members in the Asia Pacific area, including more than 16 million members in Southeast Asia, 34 million in India and 7 million in Australia. With 414 million total members at the end of 2015, Asia Pacific represents 21% of LinkedIn’s total membership. The data center will handle all of LinkedIn’s Asia Pacific traffic and about a third of the professional network’s global traffic.
“Asia Pacific is our fastest growing region in terms of member base outside of the U.S. We are investing to make sure we continue to provide a great experience as our business continues to grow in this region”, said Olivier Legrand, Managing Director of LinkedIn in Asia Pacific.
“Singapore is the natural choice for us to locate this new data center, as it is already our Asia Pacific Headquarters, and it offers the cutting-edge infrastructure and talent we need to continue to improve the service and global connectivity we provide to our members and clients,” he added.
LinkedIn reports that, since January 2013, the number of LinkedIn members in the Asia Pacific region has more than doubled, and its revenue in the region has more than tripled, making Singapore a good choice to support the company’s international growth.
In 2015, LinkedIn’s total Asia Pacific revenue, including Talent Solutions, Marketing Solutions and Premium Subscriptions, was $246.9 million, or 21.6% of LinkedIn’s total international revenue. Total global revenue was $2.991 billion, with Asia Pacific representing 8.3% of that total.
While $59 million sounds like a big price tag, it only represents 2.0% percent of LinkedIn’s total revenue for 2015, and LinkedIn has provided 2016 guidance of $820 million in revenue for the first quarter of the year and year-end revenue projections of $3.6 to $3.65 billion. In other words, LinkedIn can afford the investment.
As far as how the data center fits into LinkedIn’s strategic goals for the year, the company stated in its 2015 year-end financials that, in 2016, it will focus on providing greater member value in its three primary product lines: Talent Solutions, Marketing Solutions and Premium Subscriptions. Regarding Premium Subscriptions specifically, LinkedIn said “in 2016, we will continue to focus on improving the core product to become both a must-have daily-use case, and the primary system of engagement for sales professionals.”
We assume the investment in an additional data center in an area of recent growth is a crucial piece of improving the core product by ensuring that LinkedIn’s technology can support user growth in Asia Pacific and beyond.