LinkedIn IPO goes through the ceiling

Several years ago now, on a Study Tour led by the Leading Edge Forum, I visited LinkedIn in Silicon Valley. Still very much in the startup phase, twenty or more of us were crammed into a small meeting room with the archetypal drinks machine in the corner.

The connectedness of the human community was one of the tech vogues at that time: apparently no two people on the planet are more than six relationships away from each other. LinkedIn explicitly capitalises on the those links between business people. And we also visited Six Apart, at the time a leader among blogging platforms: their story was that Six Apart wasn’t intended to refer to that connectedness; but it worked as an idea anyway.

I’d come across LinkedIn and been sceptical. But hearing the story at first hand, it made sense and I’ve been a LinkedIn user ever since (I’m a First Million member in the UK). Explicitly professional, LinkedIn builds not just on the connectedness of individuals but on the network of trust that’s implicit in personal relationships. LinkedIn holds much of my professional network, and although I’m still only a free-service member I’ve been able to use it for real, useful business – not just finding out about individuals whose names I come across in various contexts, but locating experts in particular topics and making new useful connections; using group memberships to develop both my knowledge and my influence, and so on. It’s a mass-market tool, but explicitly for business use; the genius is in the blend of those two aspects.

If we were unsure about one thing on that visit, it was the financial model. How could something whose primary business was a free service, offered to millions of people and therefore needing substantial infrastructure investment, make money? The founders had their answer and, though it’s taken a long while, they’ve been proved right. Critical mass, built on the free service, enables premium members (paying customers) to research more deeply, develop a wider range of contacts, and undertake some population analyses. It’s become a standard business question: Are you on LinkedIn?

There are other similar services, of course. I’m registered on a couple of them (Plaxo and Naymz) but don’t really see the value in having pretty much the same group of people in my network in more than one place. So I’m a passive member there, but an active one on LinkedIn.

Well, the company finally went public. And the mark-up on the IPO price has been substantial, to the point that commentators are wondering whether this is the start of the next tech-led stock market bubble, and what it might presage for Facebook if/when it follows suite. Maybe it even makes Microsoft’s valuation of Skype less out on a limb.

Good luck to them!

Links:
• About LinkedIn
• LinkedIn Corporation prices initial public offering, LinkedIn Press Release, 18 May 2011
• LinkedIn value bubbles up, The Guardian, 19 May 2011
• LinkedIn’s wild ride prompts puzzlement, raises expectations, Computerworld, 19 May 2011
• Here’s my LinkedIn profile

Plaxo
Naymz
Six Apart

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