Is LinkedIn the online leader in a $30 billion and growing industry, or the most overpriced stock in America? It's both.
The public offering of LinkedIn, the business social network, means the first of the social media wunderkinds are out of the kiddie pool and into the New York Stock Exchange. LinkedIn's $45* [see Update at bottom] share price puts its valuation above $4 billion, a staggeringly high number for a company with $16 million in profit over the last four quarters.
Before we listen in to the chorus of skeptics, let's take a looked at LinkedIn's business model and learn why early investors are so hot for the company.
First, the basics. LinkedIn has been called the professional's Facebook. If Mark Zuckerberg's online yearbook-turned-global e-salon is all about staying connected for fun, Reid Hoffman's resume warehouse-turned-international career fair is all about staying connected for work. The company boasts 100 million users, half of which are outside the United States, and it's growing rapidly. In November, the company claimed it was adding a user every second. Annual revenue has basically doubled every year for the last four years.
LinkedIn's revenue by product (graph via Business Insider) breaks down into three categories. Premium subscriptions are power users paying to see expanded profiles of potential hires and a complete list of users who've searched their own profiles, among other features. Marketing solutions include targeted Web ads from firms hungry for talent. Within hiring solutions, the largest category of revenue, LinkedIn offers premium search filters, matching talent and companies.