4 ms·

LinkedIn Is Worth $9 Billion? The New Tech Bubble Has Arrived.

36 points by edw519 15y ago

nazgulnarsil 15y ago
aside: is there a linkedin specifically for programmers yet?
- thurn 15y ago
  Arguably github and stackoverflow serve that purpose for our community.
- yourcelf 15y ago
  Stack Overflow? They do have a "careers" section. Not really a way to express a social graph AFAIK, though.
  - miGlanz 15y ago
    But do we need one (I mean social graph)? I believe our code (ie. github) or advices (ie. SO) speaks more than social graph when it comes to programmers, doesn't it?
siglesias 15y ago
I think everyone who keeps saying that LinkedIn is evidence of a tech bubble should just stop complaining and take a short position. Put your money where your mouth is.
- thematt 15y ago
  They can't. It's not available to short yet. The underwriters who own shares from the IPO are not allowed to lend them out for short selling for 30 days. The institutional/retail investors who own shares can lend them out, but it is too soon for that to be enough volume to take any meaningful short position.
  - veyron 15y ago
    next week linkedin options start trading, and i suspect there will be demand for put options
- lsc 15y ago
  Hah. my thought was the opposite; Build a webapp quickly and flip it to investors before the bubble bursts. Of course, both your approach and mine make some assumptions about when the market will correct; mine assumes that it's further out and yours assumes that it's closer in, and timing that sort of thing is ridiculously difficult.
alanthonyc 15y ago
According to the article itself, the new tech bubble has not arrived: " But it does not mean that we are returning the big tech bubble that we had in the 1990s. LinkedIn is only one company, and one crazy IPO does not a bubble make."
ScottBurson 15y ago
I have been reluctant to use "the 'b' word", but I'm afraid this is overwhelming evidence. LinkedIn waited a long time (by late-1990s standards, anyway) before issuing this IPO. Their business is relatively mature; while I don't think they've captured the entire market, even in the US, I think it's fair to say that the size of their ultimate market can now be estimated, and it doesn't look to me like it's more than 10 or 20 times their current revenue. Does anyone have any reason to think it's bigger than that? If that's right, then yes, they are crazily overvalued at this price. Maybe I will short them at some point.
- stellar678 15y ago
  Kind of a wild guess, but I could see linkedin having a big growth path in rapidly-growing countries that are adding millions and millions of people to the professional class. (China, India, Brazil)
- nikcub 15y ago
  > Does anyone have any reason to think it's bigger than that? The revenue per paying customer is high, but their conversion rate is low. When the economy picks up again and companies start hiring I can see both of these numbers improving They currently only capture about 2-3% of the US job search market They are not yet a mature company, they are still pouring all revenue into sales and marketing, R&D and dev - I think they will only be more mature and start showing the expected 35-40% net in 3-4 years time They are still only 60% USA and 40% international - a lot of overseas growth to work out $400M this year, I can see them eventually start leveling out at ~$4-5B a year in revenue where they will have to start coming up with new streams - which is certainly possible. They could completely wipe out Monster and the others if the next few years work out well They have a very good brand and large social network and have only really focused on monetizing the job search portion of it to date - there are many other apps that they can layer onto their platform (and they should open up that platform to others who want to build out ontop - I am surprised they haven't) I think the risk of them not growing into the current price are pretty low. They can show 3 years now of double-or-more revenue growth and exceeding targets. I can't see any of their competitors grabbing the market that they currently have and the market they are moving into. The LinkedIn brand is strong and if you talk to people the experience of recruiting through it is apparently brilliant. The only problem may be Xing and others in Europe This IPO is a huge marketing event that will see a one-off big spike in numbers again. Everybody is talking about LinkedIn at the moment - I dug up my old account which I hadn't logged into for 3 years. I must assume that many others are doing the same. They have never had this much press and the marketing value of the IPO must be in the tens, if not hundreds, of millions I wouldn't short them - no way. I wouldn't buy at this point either - but I can see them becoming a ~$15B company on $500M net and $1.5B revenue company in ~3 years. Their growth and multiples will start tailing back at that point
rushabh 15y ago
With 100 million users, that makes it $90 per user. That looks a big number, but consider the cost of recruitment of a single position and look at the value of a validated network of 100 million professionals. I am sure each position filled in by recruiters would be worth a lot more. + Ad revenue. + Their paid plans average $30 a month. I would not short them yet.
- salemh 15y ago
  I would place more value on the potential of their corporate solutions, hence price raising on recruiter-styled plans (done in 2010) to drive out the third-party companies / individuals. Though, a "successful" recruiter / shouldn't blink at $74.95 / month(25 InMails). $399.95 / month (50 InMails) is a bit more steep. Corporate solutions: http://talent.linkedin.com/ http://talent.linkedin.com/ Edit: typo.
wh-uws 15y ago
Can someone please edit that inflammatory title please? If sources are weak, or only a single source is found, headline writers will hedge their bets by posing the headline as a question http://en.wikipedia.org/wiki/Betteridges_Law_of_Headlines http://en.wikipedia.org/wiki/Betteridges_Law_of_Headlines
proexploit 15y ago
Currently, I haven't seen any overwhelming proof of a bubble (the type of proof that no one can dispute). Without said proof, it's up to everyone to digest their information and make their own opinion. It's only an opinion and until you can over conclusive statistics that sway a large majority of educated people, why waste your words? If you work at LinkedIn, this article becomes only slightly relevant to you (you may be out of a job in the future etc.). If you don't, this sort of thing should be ignored and you can continue to work on your business. There is no bubble for solid (market-validated) business plans with reasonable, actionable revenue models.
switch 15y ago
It's certainly beginning to look like a Bubble. A few things - 1) Everyone is assuming that revenue will explode, and more importantly, profits will really, really explode. 2) Everyone is discounting intent. A social network for networking is very different from a site you go to to find jobs. The assumption that LinkedIn is going to destroy sites dedicated to job hunting is just that - an assumption. There is a higher chance that people will not change their intent from social networking to jobs - than there is that people will. 3) Everyone is discounting competitors. NEW The biggest warning flag to me is the assumption that all these tech companies are just waiting to hit some magical figure (say 250 million users) and then they will turn on the magic tap of unlimited profits. A company that makes a lot of profit from the get go is very different from a company that stumbles into a huge source of profit and those are both very different from a company that optimizes for customers of bad intent and thus never reaches high profitability. * NEW LinkedIn is worth $9 billion because Wall Street needs a way to get everyone's savings into their bonuses. The party will last for a couple of years. LinkedIn, Yelp, Groupon, Facebook, Zynga, etc. and every day people will be milked. The same strategy - release a small amount of shares and drive up prices - appeal to people's greed to make a quick buck. Then 90% of these companies will go down from 10 billion and $50 billion valuations to $1 billion and $5 billion valuations.

36 points by edw519 15y ago

nazgulnarsil 15y ago

aside: is there a linkedin specifically for programmers yet?

thurn 15y ago
Arguably github and stackoverflow serve that purpose for our community.
yourcelf 15y ago
Stack Overflow? They do have a "careers" section. Not really a way to express a social graph AFAIK, though.
- miGlanz 15y ago
  But do we need one (I mean social graph)? I believe our code (ie. github) or advices (ie. SO) speaks more than social graph when it comes to programmers, doesn't it?

siglesias 15y ago

I think everyone who keeps saying that LinkedIn is evidence of a tech bubble should just stop complaining and take a short position. Put your money where your mouth is.

thematt 15y ago
They can't. It's not available to short yet. The underwriters who own shares from the IPO are not allowed to lend them out for short selling for 30 days. The institutional/retail investors who own shares can lend them out, but it is too soon for that to be enough volume to take any meaningful short position.
- veyron 15y ago
  next week linkedin options start trading, and i suspect there will be demand for put options
lsc 15y ago
Hah. my thought was the opposite; Build a webapp quickly and flip it to investors before the bubble bursts. Of course, both your approach and mine make some assumptions about when the market will correct; mine assumes that it's further out and yours assumes that it's closer in, and timing that sort of thing is ridiculously difficult.

alanthonyc 15y ago

According to the article itself, the new tech bubble has not arrived: " But it does not mean that we are returning the big tech bubble that we had in the 1990s. LinkedIn is only one company, and one crazy IPO does not a bubble make."

ScottBurson 15y ago

I have been reluctant to use "the 'b' word", but I'm afraid this is overwhelming evidence. LinkedIn waited a long time (by late-1990s standards, anyway) before issuing this IPO. Their business is relatively mature; while I don't think they've captured the entire market, even in the US, I think it's fair to say that the size of their ultimate market can now be estimated, and it doesn't look to me like it's more than 10 or 20 times their current revenue. Does anyone have any reason to think it's bigger than that? If that's right, then yes, they are crazily overvalued at this price. Maybe I will short them at some point.

stellar678 15y ago
Kind of a wild guess, but I could see linkedin having a big growth path in rapidly-growing countries that are adding millions and millions of people to the professional class. (China, India, Brazil)
nikcub 15y ago
> Does anyone have any reason to think it's bigger than that? The revenue per paying customer is high, but their conversion rate is low. When the economy picks up again and companies start hiring I can see both of these numbers improving They currently only capture about 2-3% of the US job search market They are not yet a mature company, they are still pouring all revenue into sales and marketing, R&D and dev - I think they will only be more mature and start showing the expected 35-40% net in 3-4 years time They are still only 60% USA and 40% international - a lot of overseas growth to work out $400M this year, I can see them eventually start leveling out at ~$4-5B a year in revenue where they will have to start coming up with new streams - which is certainly possible. They could completely wipe out Monster and the others if the next few years work out well They have a very good brand and large social network and have only really focused on monetizing the job search portion of it to date - there are many other apps that they can layer onto their platform (and they should open up that platform to others who want to build out ontop - I am surprised they haven't) I think the risk of them not growing into the current price are pretty low. They can show 3 years now of double-or-more revenue growth and exceeding targets. I can't see any of their competitors grabbing the market that they currently have and the market they are moving into. The LinkedIn brand is strong and if you talk to people the experience of recruiting through it is apparently brilliant. The only problem may be Xing and others in Europe This IPO is a huge marketing event that will see a one-off big spike in numbers again. Everybody is talking about LinkedIn at the moment - I dug up my old account which I hadn't logged into for 3 years. I must assume that many others are doing the same. They have never had this much press and the marketing value of the IPO must be in the tens, if not hundreds, of millions I wouldn't short them - no way. I wouldn't buy at this point either - but I can see them becoming a ~$15B company on $500M net and $1.5B revenue company in ~3 years. Their growth and multiples will start tailing back at that point

rushabh 15y ago

With 100 million users, that makes it $90 per user. That looks a big number, but consider the cost of recruitment of a single position and look at the value of a validated network of 100 million professionals. I am sure each position filled in by recruiters would be worth a lot more. + Ad revenue. + Their paid plans average $30 a month. I would not short them yet.

salemh 15y ago
I would place more value on the potential of their corporate solutions, hence price raising on recruiter-styled plans (done in 2010) to drive out the third-party companies / individuals. Though, a "successful" recruiter / shouldn't blink at $74.95 / month(25 InMails). $399.95 / month (50 InMails) is a bit more steep. Corporate solutions: http://talent.linkedin.com/ http://talent.linkedin.com/ Edit: typo.

wh-uws 15y ago

Can someone please edit that inflammatory title please? If sources are weak, or only a single source is found, headline writers will hedge their bets by posing the headline as a question http://en.wikipedia.org/wiki/Betteridges_Law_of_Headlines http://en.wikipedia.org/wiki/Betteridges_Law_of_Headlines

proexploit 15y ago

Currently, I haven't seen any overwhelming proof of a bubble (the type of proof that no one can dispute). Without said proof, it's up to everyone to digest their information and make their own opinion. It's only an opinion and until you can over conclusive statistics that sway a large majority of educated people, why waste your words? If you work at LinkedIn, this article becomes only slightly relevant to you (you may be out of a job in the future etc.). If you don't, this sort of thing should be ignored and you can continue to work on your business. There is no bubble for solid (market-validated) business plans with reasonable, actionable revenue models.

switch 15y ago

It's certainly beginning to look like a Bubble. A few things - 1) Everyone is assuming that revenue will explode, and more importantly, profits will really, really explode. 2) Everyone is discounting intent. A social network for networking is very different from a site you go to to find jobs. The assumption that LinkedIn is going to destroy sites dedicated to job hunting is just that - an assumption. There is a higher chance that people will not change their intent from social networking to jobs - than there is that people will. 3) Everyone is discounting competitors. NEW The biggest warning flag to me is the assumption that all these tech companies are just waiting to hit some magical figure (say 250 million users) and then they will turn on the magic tap of unlimited profits. A company that makes a lot of profit from the get go is very different from a company that stumbles into a huge source of profit and those are both very different from a company that optimizes for customers of bad intent and thus never reaches high profitability. * NEW LinkedIn is worth $9 billion because Wall Street needs a way to get everyone's savings into their bonuses. The party will last for a couple of years. LinkedIn, Yelp, Groupon, Facebook, Zynga, etc. and every day people will be milked. The same strategy - release a small amount of shares and drive up prices - appeal to people's greed to make a quick buck. Then 90% of these companies will go down from 10 billion and $50 billion valuations to $1 billion and $5 billion valuations.