

LinkedIn Is Worth $9 Billion? The New Tech Bubble Has Arrived. - edw519
http://www.slate.com/id/2295189/

======
switch
It's certainly beginning to look like a Bubble.

A few things -

1) Everyone is assuming that revenue will explode, and more importantly,
profits will really, really explode.

2) Everyone is discounting intent. A social network for networking is very
different from a site you go to to find jobs.

The assumption that LinkedIn is going to destroy sites dedicated to job
hunting is just that - an assumption.

There is a higher chance that people will not change their intent from social
networking to jobs - than there is that people will.

3) Everyone is discounting competitors.

 __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __

 _NEW

The biggest warning flag to me is the assumption that all these tech companies
are just waiting to hit some magical figure (say 250 million users) and then
they will turn on the magic tap of unlimited profits.

A company that makes a lot of profit from the get go is very different from a
company that stumbles into a huge source of profit and those are both very
different from a company that optimizes for customers of bad intent and thus
never reaches high profitability.

_ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __
__ __*

 _NEW

LinkedIn is worth $9 billion because Wall Street needs a way to get everyone's
savings into their bonuses. The party will last for a couple of years.
LinkedIn, Yelp, Groupon, Facebook, Zynga, etc. and every day people will be
milked.

The same strategy - release a small amount of shares and drive up prices -
appeal to people's greed to make a quick buck.

Then 90% of these companies will go down from 10 billion and $50 billion
valuations to $1 billion and $5 billion valuations.

_ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ _

------
proexploit
Currently, I haven't seen any overwhelming proof of a bubble (the type of
proof that no one can dispute). Without said proof, it's up to everyone to
digest their information and make their own opinion. It's only an opinion and
until you can over conclusive statistics that sway a large majority of
educated people, why waste your words? If you work at LinkedIn, this article
becomes only slightly relevant to you (you may be out of a job in the future
etc.). If you don't, this sort of thing should be ignored and you can continue
to work on your business.

There is no bubble for solid (market-validated) business plans with
reasonable, actionable revenue models.

------
ScottBurson
I have been reluctant to use "the 'b' word", but I'm afraid this is
overwhelming evidence. LinkedIn waited a long time (by late-1990s standards,
anyway) before issuing this IPO. Their business is relatively mature; while I
don't think they've captured the entire market, even in the US, I think it's
fair to say that the size of their ultimate market can now be estimated, and
it doesn't look to me like it's more than 10 or 20 times their current
revenue. Does anyone have any reason to think it's bigger than that?

If that's right, then yes, they are crazily overvalued at this price. Maybe I
will short them at some point.

~~~
nikcub
> Does anyone have any reason to think it's bigger than that?

The revenue per paying customer is high, but their conversion rate is low.
When the economy picks up again and companies start hiring I can see both of
these numbers improving

They currently only capture about 2-3% of the US job search market

They are not yet a mature company, they are still pouring all revenue into
sales and marketing, R&D and dev - I think they will only be more mature and
start showing the expected 35-40% net in 3-4 years time

They are still only 60% USA and 40% international - a lot of overseas growth
to work out

$400M this year, I can see them eventually start leveling out at ~$4-5B a year
in revenue where they will have to start coming up with new streams - which is
certainly possible.

They could completely wipe out Monster and the others if the next few years
work out well

They have a very good brand and large social network and have only really
focused on monetizing the job search portion of it to date - there are many
other apps that they can layer onto their platform (and they should open up
that platform to others who want to build out ontop - I am surprised they
haven't)

I think the risk of them not growing into the current price are pretty low.
They can show 3 years now of double-or-more revenue growth and exceeding
targets.

I can't see any of their competitors grabbing the market that they currently
have and the market they are moving into. The LinkedIn brand is strong and if
you talk to people the experience of recruiting through it is apparently
brilliant. The only problem may be Xing and others in Europe

This IPO is a huge marketing event that will see a one-off big spike in
numbers again. Everybody is talking about LinkedIn at the moment - I dug up my
old account which I hadn't logged into for 3 years. I must assume that many
others are doing the same. They have never had this much press and the
marketing value of the IPO must be in the tens, if not hundreds, of millions

I wouldn't short them - no way. I wouldn't buy at this point either - but I
can see them becoming a ~$15B company on $500M net and $1.5B revenue company
in ~3 years. Their growth and multiples will start tailing back at that point

------
siglesias
I think everyone who keeps saying that LinkedIn is evidence of a tech bubble
should just stop complaining and take a short position. Put your money where
your mouth is.

~~~
thematt
They can't. It's not available to short yet.

The underwriters who own shares from the IPO are not allowed to lend them out
for short selling for 30 days. The institutional/retail investors who own
shares can lend them out, but it is too soon for that to be enough volume to
take any meaningful short position.

~~~
veyron
next week linkedin options start trading, and i suspect there will be demand
for put options

------
rushabh
With 100 million users, that makes it $90 per user. That looks a big number,
but consider the cost of recruitment of a single position and look at the
value of a validated network of 100 million professionals. I am sure each
position filled in by recruiters would be worth a lot more.

\+ Ad revenue. \+ Their paid plans average $30 a month.

I would not short them yet.

~~~
salemh
I would place more value on the potential of their corporate solutions, hence
price raising on recruiter-styled plans (done in 2010) to drive out the third-
party companies / individuals. Though, a "successful" recruiter / shouldn't
blink at $74.95 / month(25 InMails). $399.95 / month (50 InMails) is a bit
more steep.

Corporate solutions: <http://talent.linkedin.com/>

Edit: typo.

------
wh-uws
Can someone please edit that inflammatory title please?

 _If sources are weak, or only a single source is found, headline writers will
hedge their bets by posing the headline as a question_

<http://en.wikipedia.org/wiki/Betteridges_Law_of_Headlines>

------
alanthonyc
According to the article itself, the new tech bubble has not arrived:

 _" But it does not mean that we are returning the big tech bubble that we had
in the 1990s. LinkedIn is only one company, and one crazy IPO does not a
bubble make."_

------
nazgulnarsil
aside: is there a linkedin specifically for programmers yet?

~~~
yourcelf
Stack Overflow? They do have a "careers" section. Not really a way to express
a social graph AFAIK, though.

~~~
miGlanz
But do we need one (I mean social graph)? I believe our code (ie. github) or
advices (ie. SO) speaks more than social graph when it comes to programmers,
doesn't it?

