Is there a bigger buzz word in today’s technophile economy than ‘Social Media?’ The social networking movement, spearheaded by industry giant Facebook, has taken on enormous steam and in boardrooms across the world with each asking how they can, too, get in on the movement. One social media site seems heavily steeped in this idea: The corporate network of LinkedIn.
For those who don’t know LinkedIn is a social network built solely around a business architecture designed to be used for all forms of business communication and inter-personal networking. Recently LinkedIn’s IPO started selling on the NYSE and sparked a great deal of controversy over its inherent worth. Shocking the tech world at opening price of $83 per share before hitting a high at $122 and leveling off at $93, many believe that this is the start of a new dotcom bubble with the company being valued at $8.9 billion.
The sudden interest boom in the social network value is harking many back to the initial dotcom boom a decade ago, and many are wondering if the company can retain its value, or if the foundation will be as faulty as its forebears. With the apparent success of LinkedIn’s opening numbers many have gone on to speculate what the value of other, bigger social networking sites might be. Twitter has been getting a lot of attention in the same regards, but that pales in comparison to Facebook, which has been given an speculative estimated value of $75 billion if they opened on the market today.
A large part of the draw to the LinkedIn IPO seems to be set from investors eager to grab a share of the Social Network boom but unable to get their hands on the big-name companies that refuse to sell publicly. This may have caused an artificial inflation of the market value of LinkedIn and by association the projected values of other companies.
Josh Vernoff of Forrester Research commented:
“Investors who don’t want to miss out on owning part of the social explosion are definitely buying LinkedIn for that reason. LinkedIn has a bright future, but I worry that this level of run-up – and the inevitable inability to meet these sky-high expectations – will distract the company.”
The future of the stock is still very much uncertain. There are industry experts on both sides of the argument drumming up further controversy over the volatile nature of this IPO. Founder of Silicon Alley Insider, Henry Blodget, stated:
“The bottom line is that LinkedIn is a real company with a huge opportunity, and no one knows what the stock is worth. There are scenarios in which the stock will deliver a nice return from this level. There are also (many) scenarios in which LinkedIn will deliver a lousy return from this level–or, worse, incinerate 75 percent or more of investors’ capital.”
The industry will keep an eager eye on this fresh addition to the market to see just what direction it takes and exactly what that might mean as a precedent for existing established networking giants.