Hinrichs founded the company in 2003 and led it to an IPO three years later at the Frankfurt Stock Exchange where the market cap is currently hovering at around $182 million. (Which is a fraction of LinkedIn’s reported $1 billion private valuation). He will join Xing’s supervisory board as a consultant.
We asked about the reasons for his withdrawal, mainly bringing up Xing’s recent performance and the increasing encroachment of LinkedIn in Europe (especially in non-German speaking countries). Hinrichs responds:
Xing is performing better than expected and has built up a huge track record with the investor community. I think 40% EBIDTA margin [and] close to three digit growth speaks for itself. I am a serial entrepreneur (Xing is my third company) and and it’s different running a 180+ people company poised for growth and that goes after acquisitions.
Linkedin is rich on members but does not have the opportunities to engage & monetize them as we do. We are well prepared and they don’t get real traction around here. You have to understand Europe to win Europe – that’s what we are doing.
In fact, Xing’s numbers aren’t that bad at all. The site currently has 6.5 million members, about 510,000 of which are paying about $90 per year for a premium account to get full networking functionality. (LinkedIn claims 30 million registered users). XING has been cash flow positive 3 months after the start and boasted seven record-breaking quarters after the IPO, achieving more revenues and earnings in each quarter. Revenues from January to September this year amounted to $32 million, 28% more than in 2007 as a whole.
But apparently, this performance wasn’t enough. Xing isn’t pointing out exact reasons, but one factor might be the sluggish traffic on the site. In comparison to LinkedIn, Xing’s traffic on a worldwide basis has stalled in recent months (see the Google Trends chart above).
The share price might be one other major reason: Xing shares never really took off and now stand at about 25.50 Euros, 4.50 Euros less than the offering price two years ago.
Xing is quite strong in parts of Europe, where the company set up offices in Hamburg, Barcelona and Istanbul, but the site never gained a foothold anywhere else: Being almost unknown in the USA and Asia is a significant drawback as far as business networking in a highly globalized economy is concerned. Xing’s core markets are Germany, Austria and Turkey, while LinkedIn is winning in Great Britain, Belgium, Holland, France and Denmark, for example. Now Xing says one of the main duties of the new CEO is to pursue a more aggressive international expansion strategy and that it has a war chest of $50 million to achieve that goal.
Hinrichs, who is widely regarded as one of the few icons in Germany’s web industry, denied rumors about his withdrawal until Friday last week via his Twitter account. In his personal blog he says he now has more time to develop and implement new business ideas.