Money for Nothin and the Chicks for Free?
Linkedin announced this week that they raised $53 million from Bain Capital Ventures at a valuation of 1$Billion. Let me state up front that raising money from major venture firms is never easy. Regardless of economic cycles or market transitions these firms don’t traditionally invest irrationally. In April of 2000, in the midst of raising a $25million dollar round for the internet start up Beliefnet, I was literally presenting to the partnership team at Highland Capital Partners, while the NASDAQ melted down by nearly 400 points.
I’m proud to say that we got the round closed. Wasn’t anything easy about it however. Today we are in a credit crunch not a tech bubble so the dynamics are vastly different. This is no easy time to raise venture investment though. So what does the valuation of Linkedin suggest?
Yes we are seeing “social networks” drive vast amounts of web traffic and Linkedin and Facebook are showing signs that they can serve as business networking destinations, which “suggests” multiple opportunities for monetization. That being said, none of these revenue opportunities have yet to be demonstrated in any scalable fashion.
There are two paths here. First we are clearly in the midst of a platform war and one that is really in the very early stages. The publishing platforms for the web show signs of being able to harness both personal publishing as well as company publishing applications. Linkedin may hold significant potential in this area. As contextual marketing applications online accelerate these sites have potential to leverage advertising in myriad ways.
The other path here is career and jobs related. It could well be that Linkedin will ultimately be the Monster.com and Dice.com killer. A viral network app that drives revenue through job listing and online recruiting services.
My take is that the only way Bain makes money on this investment is the jobs and career path. And they knew that going in. As Myspace and Facebook have demonstrated advertising-regardless of how clever or contextual-is not a model that is working on social networking sites and ultimately may not. So what’s your take? Is Linkedin worth $1Billion? Or is this as the song goes “Money for Nothin…”?
Quick shout out here to the TechWeb Digital Library team. We soft launched V 2.0 of the TWDL this week and it's beautiful. Great work gang.
Tony Uphoff
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Reader Comments (2)
Hi Tony. I just found your blog. Very interesting! I agree that a $1 billion valuation for LinkedIn seems a bit inflated, but so much of this social network valuation stuff is relative, isn't it? I agree with you that LinkedIn, in its current form, will never be a major advertising platform. However, I have always believe that it could be if it added more relevant business information and context...imagine a LinkedIn + CNET combo with contacts, news, job listings and other business groups...now that would be powerful! So, I guess I am showing my hand here...I'm only bullish on the $1 billion valuation if LinkedIn can be combined with some other company/operation that gives it additional texture and dimension.
Hope you are well!!
Tony, I have yet to spend a nickel as a consumer on LinkedIn.Why? Too expensive and not enough value for me. The main benefit of the added services seems to be that I can see who looked at my profile and send emails to people whose email addresses I can find elsewhere easily enough for free. I think LinkedIn could be worth billions more if they lowered their prices and/or improved their value proposition to the free riders like me.