LinkedIn. A Little Bubbly?

Posted on May 20, 2011 by Tony Uphoff

The LinkedIn IPO has generated a ton of debate in Internet, investing, technology and media circles. Some like stock analyst Jim Cramer think the nearly $8B + valuation is "ridiculous" and "outrageous", and potentially a sign of another "Internet Bubble". Others like business writer and former analyst Henry Blodget think the rapid rise in LinkedIn's stock price is an example of wildly under-valued initial pricing by the bankers. These debates are what make markets. As someone who focuses on creating value in business as opposed to defining and setting value I'm not sure I can really add to the debate on whether the LinkedIn valuation is high or low. As is often the case, righteous is likely somewhere in between and ultimately the market will determine the level. I do think there are some things we can learn from the buzz and energy around the LinkedIn IPO however that are worth reflecting on:

  1. The Shift from Search to Social. The astounding growth of both LinkedIn and Facebook reflect a profound and significant shift in web behavior and traffic. This shift can best be described as the shift from search to social. People today are far more interested in what their friends, family colleagues and peers are doing, thinking, reading and talking about, than they are in "searching" the web. We think this is also driving a return to brand as more and more web users turn or return to brands they know, trust and enjoy, as opposed to searching for information that yields increasingly poor quality and or conflicting search results.
  2. LinkedIn is a Media Business. A review of LinkedIn's numbers shows revenue's of $243.1M for 2010. They have 3 categories of revenue: Hiring Solutions, Marketing Solutions and Premium Subscriptions. Hiring Solutions is their largest revenue category but they are clearly growing quickly in marketing solutions. LinkedIn has become both a platform for engagement for other media companies to leverage as well as a competitor. This type of "co-opetition" is not new in technology. It is still somewhat nascent in media however and something that the media industry is going to need to understand and ultimately harness and leverage.
  3. This Isn't an Internet Bubble. The LinkedIn IPO will be remembered as a seminal event that perhaps ushered in the next phase of the Internet economy. The largest Internet IPO since Google, LinkedIn has clearly received a tremendous amount of interest. An analysis of their current numbers would suggest that this interest is based on future potential as opposed to current revenues and profits. That being said, LinkedIn is not an example of a "build it and revenues will come" approach. Nor are Facebook or Groupon examples of non-revenue based business models. Web 2.0 is simply the acknowledgement that the web is the computational platform. As a result we are seeing companies that are building scalable and sustainable businesses online. We are now seeing a large number of B2B online media businesses that are growing and scaling. At the risk of sounding overly promotional our own UBM TechWeb chief amongst them.
  4. What Does the LinkedIn IPO Mean for B2B Media? Forbes this morning ran a post titled: "With linkedIn IPO, B2B Marketing Gets the Spotlight". The writer Russell Glass suggested that the LinkedIn IPO "...makes B2B...well sexy. Yea I said it sexy!". Couldn't have said it better myself. The LinkedIn IPO validates the power of B2B markets and marketing. The Internet economy is alive and well in business to business media. And the companies who have transformed their culture and infrastructure to become digitally centric, regardless of the platforms they work in, will be the beneficiaries.
Let me know your thoughts. How do you view LinkedIn's IPO and what impact do you think it will have on B2B media and marketing?,

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