LinkedIn Actually Not So Hot: Falling Short of Expections

Henry Blodget | December 13, 2007 10:48 AM

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LinkedIn CEO Dan Nye recently said he would only sell the company for "a lot more" than $1 billion. This set off a furious wave of LinkedIn buzz, and suddenly LinkedIn was viewed as red-hot again.

So it's worth pointing out that:
  • An offer at any price, let alone "a lot more" than $1 billion, does not appear to have emerged, despite all the world having been alerted to LinkedIn's new status as single belle of ball.
  • LinkedIn's expectations for its own growth have shrunk considerably over the past 12 months, as have its ambitions relative to companies that have blown past it. A year ago, LinkedIn was reportedly expecting $100 million in 2008 revenue and believed it was at "a tipping point." Then-CEO Reid Hoffman went so far as to tell Business 2.0 that "if we can tip successfully, we are massively more valuable than Facebook." New CEO Dan Nye's expectations for 2008 are now more modest--$75 million to $100 million--and, thankfully, Dan is not hallucinating that the company is "massively more valuable than Facebook."
  • Lesser known competitors have poached at least one senior LinkedIn employee easily: New York-based TheLadders recently grabbed LinkedIn's head of corporate sales Brendon Cassidy--a move Brendon presumably wouldn't have made had he seen huge upside for LinkedIn's future as a job-recruiting platform and stock.
All of which isn't to say that LinkedIn isn't a good business.  Just that, in a sane world, "a lot more than $1 billion" might conceivably mean $1.1 billion or $1.5 billion--but certainly not $5 or $10 billion. And only if LinkedIn can figure out a truly powerful revenue model.

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David S. said:
LinkedIn is not only losing employees... they are losing the war on features. People are beginning to realize the limitations of their platform, and others have moved in to fill the void.

To me, LinkedIn is nothing more than a glorified resume service. It does nothing to help me market my business. Whereas, sites like Fast Pitch! (www.fastpitchnetworking.com) are offering features that help everyone promote their business in a professional environments (unlike say, Facebook).

Check out this comparison chart of online networks as they relate to doing business:

http://www.fastpitchnetworking.com/compare.cfm



Pauline said:
Hey social networking is getting on to the next level day by day. There's such a huge competition amongst these networking sites. Everyone has something or the other that would attract an individual. But something different I came across recently while going through a Blog: http://buzzuka.blogspot.com/2007/12/modazzle-next-generation-mobile.html
This says facebook can be accessed without internet on a mobile.
Another Skeptic said:
Strongly disagree--sloppy analysis, no real story here, seems like you're fishing for something.

Three points made:

1-no offer) No evidence that an offer was made is *not* strong evidence no offer was made, and is even weaker evidence that no offer would be made for less than the asking price. your analysis is especially flawed because LinkedIn's claims of not being for sale for less than 'a lot more' than a billion would decrease the likelihood of receiving an offer less than 1 billion, because it wouldn't be accepted.

2-going from 100m to 75-100m is hardly 'shrinking considerably'--in fact, it could be the same amount.

3-employee leaving) This is also an extremely flawed argument because it doesn't consider the possibility that he could have been fired or demoted, or he could have received an incredible offer (eg promotion opportunity) elsewhere. Describing that as 'poaching easily' without any supporting evidence is just worthless. Beyond that, one single example hardly constitutes an exodus.

I also don't see a disclosure statement here ('Disclosure: SAI's Chairman, Kevin Ryan, is an investor in TheLadders [one of LinkedIn's competitors].') Just saying.

So, to summarize, your argument is almost completely without merit, and you've managed to leave out a potentially serious conflict of interest. Sloppy.
John C. Smith said:
Disagree.

I suspect that over time subscription will become relatively less important to overall revs and advertising (display and recruitment) more important.

The whole "Valley VCs migrating to Facebook for biz netowrking" storyline fizzled I think. Everyone's still on LinkedIn. They might be on FAcebook too but they use LinkedIn for biz and Facebook for personal/social.

I have no personal dog in this fight/discussion, however as someone who uses LinkedIn regularly, I find it invaluable as a networking tool, but more as a directory. I can see who runs M&A or BD for Company X, and how I might know them.

I've never paid a dime for subscription or InMail or whatever the "spam" feature is called. If I cold call/email I do so via good old POTS or email, never via LinkedIn (except on a few occasions when a mutual connection has asked that I use the service to send an intro).

However I think I'm still a valuable (and probably representative user) in terms of generating page views. The quality of the advertising has definitely increased in the past year, from bottom-feeder network DR to the same branded buys you see on WSJ.com and other premium publishers.

Just my two cents. I think LinkedIn is currently worth somewhere btwn 10-25% of Facebook, depending on who's setting the valuation. I think it will exist in 5 yrs. It's certainly not Pointcast.
Social Network Skeptic said:
If you ask me, Linkedin is a leaky bucket. The management team claims to be adding 1 million users per month, although their unique visits only grow by 100-200K users per month (see: http://siteanalytics.compete.com/linkedin.com/?metric=uv) It looks to me like they are losing 900,000 users for every 1 million they add.

The fundamental problem is that their business model is based on paid spam. Rather than work your network of connections, you can buy "spam credits" which allow you to directly email someone. Wouldn't you quit if membership meant you'd start receiving large quantities of spam? I've yet to find a professional, other than sales people or recruiters, who have stuck with it. Put me down as a skeptic that any of these social networks will find a place in the business world. I believe you are seeing the Pointcast of our day.

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