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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

Category: Social media
May 19, 2011 at 10:00 AM

LinkedIn parties like 1999 — Click on ‘social media bubble’

If you got in on the LinkedIn IPO, today is your lucky day: Shares opened at $83 and shot up to $112. What happens from here is another question. I’m on LinkedIn. Has it ever helped me professionally? No. Do I know anyone who has used it to do anything other than look up friends, colleagues and ex-girlfriends and -boyfriends? Nope. Have I ever bought anything because of LinkedIn or otherwise contributed to its bottom line? No again. It’s like 1999 all over again — unless enough businesses and headhunters pay to use the service, and that’s quite a leap of faith in this economy.

On the Web site Seeking Alpha, Matthew Smith writes: “In today’s world where the supposed ‘smart money’ moves in and out snatching quick and easy gains, would it be far-fetched to imagine that the VCs, hedge funds and large, sophisticated investors have already grabbed the low-hanging fruit?” Google was a rare case, where it was the market leader with a strong business model. As for LinkedIn? The upside may be now, unless the company can start pulling in real revenue and posting real profits.

It is ironic to think that although investors are waiting for social networking players to bulk up, have solid revenues and either be close to breakeven or already earning money (of course this was not the case with the previous two) they could once again get left holding the bag. The possibility exists that many of the gains have already been had in the sector before individual investors were given the chance to sink their teeth into the fruit of the social networking industry. With the likes of Facebook, Twitter and even Groupon, among others, sitting on the sidelines and anticipated to come public in the near future, it sure does look like everyone is cashing in. The question for investors is whether it is at the top or not.

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