I frequent two sites for social and professional networking- Facebook and LinkedIn, and have tremendously admired both of them for the ideas that they are. While Facebook has helped me get in touch with many schoolmates and childhood friends, LinkedIn on the other hand has helped me project myself fairly well in the professional space and a large part of it helped me change jobs last year when prospective employers assessing me with an insight into the work that i had done in these years.
In a sizzling debut last month on the New York Stock Exchange, investors sent stock in LinkedIn, the social-networking site for business professionals, soaring 109 percent on its first day of trading. While the enthusiasm subsided a tad the next day, LinkedIn’s shares still closed the week at around $93, more than twice the company’s initial offering price. This put the value of the company, which made $15 million in profit last year, at more than $8 billion. whew!!
One thing that comes to mind rather frighteningly is, whether this stunning performance echoed the late 1990s, when the bubble around dot-com companies began to inflate. On its first day of trading in 1995, Netscape stock doubled in price. Yahoo shares rose 154 percent on its 1996 offering. TheGlobe.com shot up to $97 from $9 in its first day of trading in 1998, giving it a valuation of about $850 million. I read up a bit on this first-day mania and almost shockingly discovered that LinkedIn’s first-day trading gain was the fifth highest since 2001, but the top three were Chinese Internet stocks like Baidu, which zoomed 354 percent on its debut in 2005, with Nymex No. 4. And, even more surprising has been the optimism shown by the analysts.
While the business models have certainly matured and improved over the past decade, I am, like many others, hesitant to believe that the markets are on the cusp of another tech bubble or that the markets are returning to the days when unprofitable new companies could be valued at billions of dollars. In the whole aura of ecommerce and dotcoms, the tangibles again suddenly seem to be “eyeballs,” the site visitors and site stickiness. I must also confess here that being a student of brand building and marketing management. I have even now not convinced that premium be paid based on TRP ratings. I don't think one remembers every commercial during a sitcom - I just flip TV channels when there is a commercial. So much about tangibles.
In the case of LinkedIn, It is not a company you have to value on page views or visitors. This is a company that grew revenues by more than double and also turned profitable. The hottest segment of the internet market space is certainly social media companies and can sustain ventures like Groupon (remember, they raised a billion dollars and are now valued multiple times of that billion)
And the barometer for the segment, Facebook, which is widely expected to go public next year. Some experts peg the value of Facebook at 80 Billion...Whoa, My company, the Big Blue just about managed a billion dollars for every year that its been around and with atleast a couple of business school worthy case studies around redefining strategies. It is also believed that LinkedIn benefited from all of the attention Facebook has managed to garner. I shrug to imagine whether the new blue is gonna be bigger than the big blue. Personally, I hope not
Of course, the big question to which I certainly don't have an answer is whether LinkedIn is destined to become the next Google or Amazon, or whether it will go the TheGlobe.com way, which became a penny stock when the dot-com bubble burst..
LinkedIn, which has millions of subscribers with a largest country contribution being from India does have a revenue model. It offers what is called a freemium business model: users can create free profiles or they can pay a subscription fee for a premium account with special features. Good, but hard to consider it a billions raking model. I can, but, surely tell you that having an updated profile on linkedin helps. Fortune recently carried a cover story on how linkedin can fire up your career and why you should have a profile on Linkedin if you are serious about managing your career. Exchanging business cards is almost passé with "join my professional network " becoming more obligatory.
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