LinkedIn is planning to debut its shares for $45 apiece, which values the entire company at ~$4.2B. The historic offering would make LinkedIn the largest internet IPO since Google’s in 2004. Shares will begin trading on the New York Stock Exchange under the symbol $LNKD.
Launched in 2003, LinkedIn calls itself the ”World’s Largest Professional Network”. LinkedIn is an online rolodex of the business community where users can upload their resume, build their profile, connect with co-workers, and share contacts. With over 100 million users strong and growing, LinkedIn is already one of the largest social networking sites and its user base is much more sophisticated than other social media sites.
LinkedIn Corp (LKND) also offers job posting and recruiting services, which is already a stable revenue stream and should continue to grow in the years ahead. Social leverage is a key differentiator that should allow LinkedIn to compete with other mainstream job sites like Monster.com. Naturally, LinkedIn is already a “go-to” platform for both job seekers and recruiters alike. Job stability is not exactly at an all time high, which leads to people changing jobs more frequently. A platform liked LinkedIn provides tremendous value for individuals looking to gain a edge in their job search.
Advertising is another key revenue source and differentiator for LinkedIn. If you told a marketer you had an advertising platform that could reach everyone in the business community, they would think you are joking! LinkedIn has just that.
With over 37 million visits a month, the platform is already the 26th most visited website in the United States. Of all the popular social networking sites, LinkedIn has arguably the most appealing demographics to marketers, since their user base mainly consists of white collar professionals with above-average incomes. More marketing budgets are shifting towards online ads as opposed to traditional TV and radio ads. Advertising will definitely be a consistent and lucrative revenue stream for the company.
As far as financials, in Q1 2011 the company generated revenues of $94M and they were profitable during 2010. Although the financial picture is important, the real value is derived from the actual LinkedIn platform itself. The company has cultivated a great social media platform that continues to grow at a fast pace. Generating revenue and profits is important, but at this stage building a solid platform and a dedicated userbase is much more critical.
Most Web 2.0 companies liked LinkedIn are not concerned with maximizing short-term profits, instead they are more focused on positioning themselves for long-term growth. I think this is the right approach and this model has worked out well for companies like Amazon.com.
Some investors have lingering concerns about LinkedIn’s ability to generate profits. The same concerns about monetization arose with Google, Facebook, Amazon, and just about every high tech startup out there.
I certainly think that LinkedIn provides a great opportunity for investors who are looking to gain exposure to social media. I would never pass up an opportunity to buy Facebook stock or Twitter stock or even Sina stock… so why would I pass up this golden opportunity?
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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