Does The LinkedIn IPO Prove That Social Media Is Profitable?
Sometimes it can be easy for us as members of a modern society to realize that social networking portals such as MySpace, Twitter, and Facebook are only a (relatively) new concept in the world in which we live. And the fact of the matter is that as consumers and end-users we rarely ever really ponder the fact that while social networking is built to allow users to keep in touch with one another, the social networks themselves are indeed large and profitable enterprises that have their own profit-driven goals in mind.
In the world of social networking, there are currently two “big” players that the bulk of electronically connected individuals flock to; Twitter and Facebook. But just because said communities have large user-bases doesn’t mean that there aren’t other thriving social entities out there. LinkedIn, for example, is a lesser-known “social network” that offers many of the core amenities of Facebook and Twitter (that being communications and contact management) in an environment tailored to fit the needs and lifestyles of professional individuals.
I don’t doubt that you’ve heard of LinkedIn before, as it is a relatively well-known site. In retrospect to the other social media giants out there, though, LinkedIn truly is a significantly smaller network; with merely one-fifth of the 500 million users that Facebook has. For this reason LinkedIn hasn’t received all that much media attention since its launch in 2003. But today LinkedIn managed to steal the spotlight with its IPO (initial public offering) that brought the company into public trading on Wall Street.
Now trading on the New York Stock Exchange with the ticker symbol LNKD, LinkedIn closed its first day of trading with a share price of $94.20; up nearly 110% from their opening price of $45 per share. For a smaller organization like LinkedIn I am very pleased to see such great results as it ultimately shows that the company has gone far in its privately held days. More importantly, though, I think that the obvious growth that LinkedIn will see as a result of being traded on the public market will inevitably give them the working capital needed to continue and expand development to make an even better product.
Why did LinkedIn do so well today, though? Unlike other social networks that are out there today, I feel that LinkedIn has a great edge in the current economy because of the fact that users need and are looking for methods to keep in contact with and develop new contacts and associates. Be it folks who are looking to make the connections necessary to land a job or individuals and businesses who are looking to expand their current circles in order to push their products and sales, LinkedIn has a number of advantages to it right now. This, I think, is one of the reasons that it did well today.
On top of this we have to consider that LinkedIn’s staying out of the public eye has done quite a bit to help it right now. Like I touched on earlier, a lot of people have heard of and currently use LinedIn. But because the company hasn’t gained the popularity of Facebook at Twitter, they have managed to stay out of the spotlight to the point that they haven’t received significant amounts of criticism to tarnish or damage their name or reputation. With this in mind, I think investors likely saw LinkedIn as a reputable organization that didn’t have the concern of bad press to the extent of their competitors.
Nonetheless, I think that social networking as a whole is proving to be a lot more than something that teenaged girls involve themselves with after school. Look at the number of companies that are pushing their Twitter and Facebook profiles in order to communicate more directly with their target audiences. Look at the ad revenues that can be made quite easily simply to make impressions with millions upon millions of customers. Look at the invaluable information and understanding that can be gained from looking at how we as humans socialize and network, and more importantly look at our simply desire to chat and communicate with others. Social media is a huge industry right now, and is one of the few industries that are used by a bulk of civilized population. The potential is huge. And LinkedIn has all the more potential because their social network is built with a purpose instead of on the premise of creating a virtual pub.
So while I think that the folks behind LinkedIn definitely have worked hard to get the site to the point where it is at today, one cannot deny that the industry is hot right now. Now that LinkedIn has gone public – and done very well with investors thus far – I think it’s fair to say that new doors have been opened for the once second-class social network. Interestingly enough, I’m also eager to see if other social networks (e.g. Twitter and Facebook) opt to go public in the near future and how their success would compare to LinkedIn’s after yesterday’s revelation.