The LinkedIn Bet: $1 Billion Social Valuation
June 18, 2008
The chatter about the Linked In valuation of $1 billion is choking my trusty RSS readers. The voice that reached me was Om Malik’s comments here. The essay is “Is LinkedIn worth $1 Billion.” Mr. Malik makes two points that warrant highlighting in the midst of the cacophony:
- The notion that smart money has picked a winner may be suspect.
- The per subscriber valuation is generous.
Mr. Malik nails this financial optimism as out of step with the company’s performance.
There are three other factors that Mr. Malik’s must-read essay surfaced in my mind:
- Social networks can be gamed. My experience with Linked In suggests that the controls on abuse are not as fine-grained as they should be
- The layers of fees are annoying to me, and I suspect that others will find that invitations often carry along obligations I don’t want
- In a deteriorating economy, referrals are indeed important. However, LinkedIn often wobbles into probes for intelligence in the form of questions from people whom I don’t know and marketing in the form of thinly disguised marketing pitches.
These three factors when combined with Mr. Malik’s analysis suggest an optimistic valuation. “Social” is hot. I am not convinced that today’s flag carriers will be tomorrow’s winners.
Stephen Arnold, June 17, 2008
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Great post! I’m sure Bain has a great plan to monetize LinkedIn. However, even with LinkedIn likely being easier to monetize than Facebook I don’t think they’re worth $1B. Simple calculations based on revenues of $100 million (with zero costs) LinkedIn is valued (according to Bizak Calculator) at $399,999,984 – 40% lower than their recent valuation of $1 billion.