February 14, 2011

LinkedIn’s IPO Filing: Analyzing the S-1

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Last month, LinkedIn filed a prospectus with the SEC. It’s a great case study: LinkedIn is one of the largest social networks, and it may be the most mature of the major social networking businesses. Like Facebook, LinkedIn has turned a profit; unlike Facebook, LinkedIn’s profit is dependent on several known business models.

The filing itself was a better read than most. Among other risks, it cited the possibility that:

[O]ur initial public offering could create disparities of wealth among our employees, which could adversely impact relations among employees and our culture in general.

I guess that’s what you get when your Chairman is an avowed “free-market socialist.”

The hurdle LinkedIn’s IPO faces is that the easy comparisons are completely wrong. LinkedIn shouldn’t be valued like a job board: for a variety of reasons, it’s a much more defensible model; LinkedIn is likely to stomp all over the traditional job boards (not so much traditional recruiters). But it’s not a “social network” that can be valued like Facebook and Twitter. LinkedIn’s business model is already in place, and its potential is a matter of execution, not innovation. Read the rest of this entry »