It's happening again.
The Feds are offering low interest rates, banks are making cheap money available and all of a sudden LinkedIn's stock originally pegged at $34 currently sits at $90+ with a market cap value of just over $8 billion dollars. LinkedIn, surely nothing spectacular, pins its future earnings on a stagnant economy where individuals and/or corporations will continue to pay a monthly subscription fee in that never ending search to find that perfect job or employee. It's Facebook minus the drunk photos and annoying updates about where people you know are eating or drinking. LinkedIn's strategy was smart and simple; use us to maintain a professional identity online and grow your professional network so large and so deep that your "digital profile" value grows each and everyday. Whether it works or not is the real question now that Wall Street has invested and will surely want to know how they grow each quarter. Where LinkedIn succeeded is where Monster.com and HotJobs failed because as we all know there is a social element to people connecting with one another and LinkedIn have figured out a very simple way to do just that.
Now the assumptions are that the US economy will take about 3-5 more years to get back to the economic engine it once was not too long ago and in that time a company like LinkedIn will be able to help companies hire back all those that it shed during the recession. But what happens when that point happens? Only time will tell but it's a business model based on an even larger global workforce expansion that hopes other countries will be able to sign up with LinkedIn and scale them even further.
Currently, there is a tech/VC/investor boom going on now that is happening in Silicon Valley. This cheap money is fueling all kinds of investments in technology based companies in the social media space. It's one thing to be funded it's another to ramp up and create a sustainable business.
Compared to the dot.com days and the ultimate bubble that deflated, valuations like the one LinkedIn sits at is a bit worrisome. The "We've Been Here Before 3.0" was recently coined by a wall street investor ( the name escapes me at the moment) due to the fact that the impending IPO's of Facebook and possibly Twitter can help fuel these valuations. I posted on my facebook page the Pets.Com reference for this very same reason.
Yes, it's an exciting time for investors in Tech/Social Media to get in on the action. Inevitably, it will be the consumer who will win because of it and business' will be more efficient with these newfound companies. The challenge will be for Wall Street not to play in to the hype, consumers actually gravitating to companies that help their life be more effiicent, save them money and ultimately make the digital platforms all of us use these days that much better experience.
