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It’s good that investors value Linkedin the way they do. The digital ad community sure doesn’t.
To be fair, Linkedin is solid player in the business-to-business ad space. And unlike many digital publishers, the company actually gets users to pay for some of its services. Add in a growing base of 100 million users, and the company is nothing to scoff at. But a $9 billion valuation, which is where the market landed following the company’s IPO last week? Or even a few billion less after things settled down on Monday — for a company that was recently losing money.
LinkedIn isn’t just an ad business. It has a three-legged stool of a business model that involves charging users for premium options, recruiters for services and marketing. Last year, it rang up $79 million in ad sales, more than double the amount in 2009. That’s a nice, tidy number but hardly a major player in the ad world.
Of course, whether a social media company has figured out how to make money is often besides the point — you are worth what the investment world says you are. Look at projections that put Facebook’s value at $100 billion or Twitter at maybe $10 billion.
However, those companies at least have some powerful ad momentum to justify investor confidence. Facebook is said to be nearing $4 billion in ad revenue this year globally, according to eMarketer, and is so big that it now accounts for a staggering one third of onilne ads. And according to its executives, Twitter has to turn down advertisers because of demand for its burgeoning suite of ad products.
Linkedin? It’s “really interesting,” said one digital buyer who spoke on background. “They’ve come up with some very innovative ads. Clients can almost use Linkedin as a platform as an extension of thier business. And for financial clients, it’s almost like a more grown-up Facebook. LIke a trade publication, Linkedin is able to command higher CPMs, comparable to premium content sites.”
That’s the rap on LinkedIn: it’s Facebook for the stuffy set, recruiters and disgruntled employees looking for a new gig. To be fair, that might describe the majority of Corporate America.
The question is whether that can translate into a stratospheric valuation. Linkedin just doesn’t carry that kind of heat or momentum in the ad community to justify its newfound star status. Buyers say its lucky to pull in seven-figure deals. According to Kantar Media, Linkedin’s top advertisers in 2010 included Motorola, Capital IQ and Thomson Reuters, which each spent in the neighborhood of $500,000 to $600,000 on the year.
“LinkedIn has a great advertising product, for what it does,” said David Rittenhouse, senior partner, media director at neo@Ogilvy. “B2B advertisers can buy pretty much exactly who they would like to reach because the targeting is based on user profiles, industry, job title, company size, all good.”
“But for the advertising product, I think there’s a limit to how much of this is needed by the marketplace versus other forms of news information,” he said. “I find the valuation troubling given my perception of how important LinkedIn is in the grand scheme of things. … Compare LinkedIn’s market valuation last week with how much Rupert Murdoch bought the Wall Street Journal for. Does that make any sense?”
In the financial world, it sure does. And that must be music to the ears of Facebook, Groupon, Zynga and the other digital powerhouses contemplating taking the plunge into the public markets.
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