February 14, 2011

LinkedIn’s IPO Filing: Analyzing the S-1

Note to readers: my new startup research boutique, Digital Due Diligence, performs in-depth research on dozens of companies, public and private, including LinkedIn and its key competitors. Visit our equity research page for more information.

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 »

August 4, 2010

How Platforms and APIs Debugged the Technology Labor Market

Every career has an “efficient frontier” of compensation. On one end, there’s a job that pays you what you’re worth; on the other end, there’s a job that you know will pay for next month’s rent. In some sectors, you can switch from one to the other at the same company (being a full-commission salesperson instead of a salaried “account manager”). In the technology industry, there’s not a strong tradition of pure incentive-based compensation; I don’t know any designers who will get 10% of the extra revenue from a successful A/B test.

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July 26, 2010

DuckDuckGo and Quora: Two Companies That Could Wreck Google Search

Online businesses compete by being the default. You want to connect with friends, so you default to Facebook; you want to waste five minutes, you default to Zynga; you want to talk about stocks, you default to Stocktwits.

Google is the Big Default. If you want to find something, but you’re not precisely sure what, Google is where you start. For about eight years, that’s where I’ve started, too. But recently, two sites have started to replace Google. And what’s especially dangerous about them is that they’re both encroaching on Google, starting at opposite ends of the spectrum of services that Google Search provides.

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