LinkedIn IPO: Is the Club Worth the Cover Charge?

Surpassing the most optimistic expectations, LinkedIn is currently traded at roughly 30 times revenues and 564 times earnings. In comparison, Cisco, Intel and Microsoft are trading between 2 and 3 times revenues and between 9 and 15 times earnings. Clearly, investors feel that LinkedIn has a very bright future, even if it takes years for its fundamentals to catch up to the valuation. And, the stock is likely to hold that price or even rise from here, given the fact that LNKD is the only public vehicle for investors who want to bet on “social.”

Will You Autograph My Term Sheet? The capital raised from the IPO gives LinkedIn the ability to simultaneously capitalize on two large opportunities: organic expansion and product portfolio expansion via M&A. LinkedIn has an incredible channel: there are hundreds of products that it could acquire and distribute to its clients at fantastic margins. But, what should they buy? Every entrepreneur looking for an exit is waiting in line to talk to LinkedIn now. Their corporate development folks are the Justin Bieber of the tech industry — everyone wants an autograph. And, with their stock trading where it is, they should be able to write deals that really move the needle.
Is LinkedIn Really “Social”? Not really. LinkedIn is a Swiss Army knife. It’s a professional Rolodex, a company research tool, a sales prospecting tool, a résumé database and, lastly, a job board. Remarkably, it actually does a damn fine job at these things. LinkedIn is not a communication platform. People don’t use LinkedIn the way people use Facebook and Twitter — i.e., a replacement for email and chat. Hence, LinkedIn is a professional network, not a social network.
Facebook, Now That’s Good “Social.” People spend hours logged into Facebook every day; only sales people and recruiters spend that kind of time in LinkedIn. The information Facebook knows about people - their likes, interests, contacts, friends, relationship status, vocabulary (yeah, Facebook knows you can’t spell) - is all incredibly valuable to marketers, sales people and recruiters. Facebook’s data is like raw crude: highly valuable, but you need to refine it before you put it in your tank (Bullhorn Reach is like the refinery). LinkedIn may be the best source of candidate leads for recruiters today, but Facebook has the most long term potential.
What The Hell Is Twitter? Twitter is a tool that let’s marketers shout messages at each other all day. Seriously, is any one reading what any one else is saying? That said, it is an incredible tool for content distribution. When content is compelling, relevant and timely, Twitter spreads the word faster than any thing else on the planet. The mainstream media learned that lesson on May 1st.
Time to Join The Party. For those of you hoping social was just a fad that would eventually go away, here’s the bad news: the LinkedIn IPO just paved the way for more public and private investment dollars to flood into social technologies. So, it’s time to join the party.