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A Forensic Valuation Of Social Media Company That Actually Has A Business Model, From The Top 1%

Reggie Middleton's picture




 

Two weeks ago, I continued my irradiation of common sense, math over magic/mysticism and simple truth drawing attention to the single fact that ALL of Wall Street seems to have over looked. That fact was that the most hyped IPO in the history of the world, the company that is not only a household name but also that halved the investment of those invested in the IPO, and whose share price is now increasing rapidly - is actually shrinking in terms of its user base, reference The Truth About Facebook That No Media Outlet Or Analyst Has Bothered To Notice. In addition, this company is still attempting to flesh out its business model. While it is a multi-billion dollar company (in terms of revenues), it is burning cash like a furnace in an attempt to outgrow its competition - all the while reinvesting profits and compressing margins. This behavior has been excused as it was(is) marketed as a high growth social media play.

Contrast that scenario with LinkedIn, another hi-growth social media play. I actually use social media, albeit not much for personal endeavors but for marketing and advertising. LinkedIn, where I've been a member for years, has always had a rather cumbersome, lackadaisical interface. A recent revamp and overhaul of the site has pumped new life, new vitality, and new revenue growth into this concern. It now boasts over 200 million members. My attention was recently drawn to LinkedIn after I got this notice in the mail...

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 While this 200 million may not look like much compared to Facebook's billion, LinkedIn's user base is growing rapidly at the same time that it's revenue per user is expanding as well while Facebook's base has already started shrinking. Despite this, Facebook is still being marketed as a high growth play in a hot tech space - social media.

Uh huh! Facebook is MOVING BACKWARDS! IT'S LOSING USERS! LOOK OUT BELOW!!!

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A high growth company whose userbase is already shrinking leads one to believe that the easy money has already been made...

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LinkedIn, on the other hand, is still handily outperforming on both user growth...

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 and revenue growth as well as margin expansion... The company has also successfully diversified revenues... 

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The reason for LinkedIn's apparent success in terms of business modeling is management's fruitful reinvestment into the website's social structure. Each member's profle now serves as a media rich resume or CV, or in terms of corporate pages and entrepenuers, a potentially immersive marketing platform. Most importantly, the vast community of members serves to verify the validity of assertions, awards and recommendations and endorsements - lending an air of credibility that competitive sites such as Monster.com could not come close to replicating.

Below, you can find exerpts from my profile (click here to see the live profile) where you can find video interviews, educational walkthroughs, endorsements and recommendations...

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The company has also addressed the issue of stickiness on the site by giving a handful of respected and well followed personalities a publishing platfrom from which they can espouse their ideas. This "macroblog" idea has garnered a huge following from a sufficiently broad audience, enough of a following that this is now a force in the media space to be reckoned with. It is something that Facebook should have thought of first.

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LinkedIn's considerably more concrete business model in addition to their reliable and clear paths to growth have not been lost on the market - particularly in comparison to Facebook...

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Subscribers are asked to download our LinkedIn Valuation sheet here - File Icon LinkedIn valuation overview 2-2013. Later on this week, professional and institutional subscribers will be able to access the entire LinkedIn valuation model on the web. Stay tuned, and in the meantime, please follow me...

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Wed, 02/20/2013 - 08:08 | 3258808 FearedDevil
FearedDevil's picture

not so fast... Facebook ebbs and flows always around the New Year as people realize how much wasted time was spent on it - BUT like a drug, it always surges back.

 

As for LinkedIn - it is not growing in the same way.  It is an illusion like the job market - as recruiters keep pumping that medium for all she is worth.  When the markets turn down, LinkedIn will lead the way.

Wed, 02/20/2013 - 05:45 | 3258741 falak pema
falak pema's picture

well Reggie now has two corporate fat cats he promotes : Google and Linkadinka...as opposed to Apple and Facebook, their dominant business segment leaders.

At least Reggie roots for the challengers and not for the #1 oligarchs. 

Lol, I think his contrarian analysis enrichens our knowledge of the market, whatever be his personal objectives, which are obvious and openly professed : Reggie loves Reggie. What's wrong with that if he delivers the goods, which he does as very sharp analyst.

Thanks Reggie, for being a breath of fresh air with a bubble gum flavor of "Reggie is ze best".

Its said so blatantly that I love your naïvity. 

What I haven't quite understood is why the french banks have not yet collapsed in 2013 as you predicited back in 2011; but that's another story! 

 

Wed, 02/20/2013 - 01:28 | 3258555 Fedaykinx
Fedaykinx's picture

i opened a myspace page with a fake name a few years ago, that's about as far as i've gone with social media, and i've been on the net since the late 90's.  i prefer my mental masturbation and epenis waving activities to not be completely pointless, much less completely public.  literally the first thing i thought when i heard of twitter was "yeah that'll be a great way to get your place broken into."  as it turns out it's even worse than that, as there are even ways to get yourself raped, apparently they're called online dating services or something.  i'm not so sure that the birth of social media will be looked back upon as a great boon to society.  if we're even allowed to have opinions at that point, anyway.

Tue, 02/19/2013 - 21:47 | 3258053 williambanzai7
williambanzai7's picture

Gawker is looking for a reporter to cover industry and finance gossip.

Submit your profile link via twitter.

Tue, 02/19/2013 - 21:30 | 3258028 IamtheREALmario
IamtheREALmario's picture

LinkedIn is a perfect vehicle for a wanna-be self-absorbed self-promoter. It is not for people who have made it. I can understand why Reggie loves it.

On the other hand, LinkedIn is also a great vehicle for one company (or the government) to spy on another company and its people by locating the employees of the other company, reading what they promote about themselves and then using their connection information to find their competition's key contacts.

Isn't it great to pay a minimal amount to get your biggest competitors' electronic Rolodex's?

As for the job posting income, people will soon find that it is about as effective as print ads and the Monster board and the applicants will have the same level of quality. My guess is that after a short reshuffling of market share there will be a resurgence of interest in recruiters who actually recruit candidates.

Oh, and it will be great to see when LinkedIn starts making anything other than a insignificant profit. They have scaled revenue hugely, capitalized a large percentage of their operating costs and they still can't make more than an insigificant profit.

Tue, 02/19/2013 - 21:24 | 3258023 JuicedGamma
JuicedGamma's picture

Have a peak at insider trades, this looks like Yahoo back in the day. Reggie i am sorry, linked in is no Yahoo. Its more like hotjobs, remember them? Sold to Yahoo for a half billion, and now gone after being resold to Monster. Five years from now linked in, gone. Millions made by insiders dumping stock.

Oh and the new endorsement feature sucks wind, it makes actual endorsements cheap.

Tue, 02/19/2013 - 21:15 | 3257996 JuicedGamma
JuicedGamma's picture

P / E = 834!

Tue, 02/19/2013 - 22:24 | 3258192 nofluer
nofluer's picture

High P/E = Plunging to Earth?

Tue, 02/19/2013 - 20:04 | 3257840 billsykes
billsykes's picture

Linked in is for low level slaves looking at one another. Yes because connections and recco's really matter, slaves linking to slaves. And its typical social media, trying to tie in every single possible "connection" you had in life- is this helpful that I know the owner of the first job I had, or is it more helpful to governments? 

 

Wed, 02/20/2013 - 00:12 | 3258456 NeedtoSecede
NeedtoSecede's picture

Bsykes,

My recent experience confirms that .gov is trolling LinkedIn, and I am sure other social media.  One of the things I have found useful with Linkedin is some of the features like industry-focused forums and discussion groups.  It has been interesting when you can get people with half a brain to discuss real issues and problems.  I just happen to do work that is associated with an industry that is under fire (pun intended) from .gov as we speak.  As you can imagine, some of these message boards I belong to are really cranked up that .gov wants to shut our industry down while ignoring the Bill of Rights.

Anyway, over about a 7 day period I posted a couple comments that were very "freedom-oriented" but where in no way threatening to anyone.  I did not advocate violence or revolution, but just urged people to use what freedoms they had left to steer their choices about where they lived and who they did business with.  I did mention that .gov did not intend to "listen" to anyone so all the petitions and phone calls and emails were a waste of time.  Again nothing subversive, nothing violent, I just urged people to recognize where there was some freedom still left, and do what you could to starve the beast. 

Shortly after this string of innocent posts on this industry-oriented forum, I was barraged with invites to link up with some dude I did not know and who worked for the Executive Office of the President of the United States.   I am a nobody, and I spend miniscule amounts of time on this social media crap, but here was a guy with the Ex Office of the POTUS inviting me to be his best LinkedIn BFF.  If that is not a sign that our .gov is too big and totally out of control I do not know what is.  And since I am sure there is some algo that will link those comments to this comment, I am now going to be on "The List" of suspected terrorists.  It would be funny if it weren't so fucking sad.

Tue, 02/19/2013 - 18:59 | 3257705 jharry
jharry's picture

There's not a whole lot to linked in that's useful.  They send me emails about new contacts, and generally I delete them without looking.

I really like Reggie's website and Jim Willie's website more.  They are useful in interpreting what's been happenin' in the world.  They're both wizards.

Dude

Tue, 02/19/2013 - 17:21 | 3257450 jtlien
jtlien's picture

As a former tech youth superstar.  Now older and not wanted.  I find LinkedIn has actually been detrimental to getting a job.   All recruiters are interested in is simple facts like what your age is.   They can found out easy on linked in and just go on to the next candidate.   No reason to look at what you can actually do.

 

Wed, 02/20/2013 - 13:03 | 3259880 donsluck
donsluck's picture

Not wanted by whom? Start your own business, especially if you are under valued by the bosses. A "superstar" should be able to figure it out!

Tue, 02/19/2013 - 17:04 | 3257408 Venerability
Venerability's picture

The only reason Linked In has been better than the others from a User's point of view is that it has had a much higher percentage of actual human beings and a much smaller percentage of Script Bots.

The Botnets are making a push there, however. (I found a rather ridiculous one today, with Faux identities which have actually managed to fool some fairly respectable journalists. Are you listening, Business Week?)

Tue, 02/19/2013 - 19:08 | 3257722 Freddie
Freddie's picture

BW has almost always been shit written by Demtards and Buffett fanboys.  Forbes many years ago was decent.

I want to be a faux identity CEO of a major widget company.

Tue, 02/19/2013 - 17:47 | 3257530 Venerability
Venerability's picture

Re the story's other assumptions:

Real humans DETEST the News Feeds, the Celebrity Bleep, and all the other extraneous "information" Linked In now puts on people's Home Pages.

All these unwanted Features do is make the site more like Facebook and Twitter - i.e. sillier and less safe.

 

Tue, 02/19/2013 - 16:46 | 3257338 lasvegaspersona
lasvegaspersona's picture

I still don't 'get' social media. Why? No real friends? What productive person has time for TV, social media or sports (al least all of them)?

One hobby (or 2), keeping in shape, working, reading important blogs and managing a family....I'm tired with just that when bedtime comes. I really am amazed that some people have or find time for things like Facebook....or LinkedIn

Tue, 02/19/2013 - 21:35 | 3258051 IamtheREALmario
IamtheREALmario's picture

Social media is for people who do not have productive work. It is a social engineering substitute for eral productivity that gives a percentage of the population a feeling of value... porbably the same people that believe Obama is the Mesiah.

Tue, 02/19/2013 - 16:42 | 3257315 devo
devo's picture

So you received a complimentary email from LinkedIn and now you love them? Yeah that's not narcissistic or anything. I bet you're tearing your shirt off right now.

Tue, 02/19/2013 - 16:28 | 3257261 11b40
11b40's picture

I have been on LinkdIn for a couple of years, and agree that things have changed, and continue to change.  Over the past 3-4 months, I have used it more than all the time prior combined.  The content has improved, and they are reaching out to me with some meaningful information with greater frequency.

 

More people are becoming users, too, whcich means the site increases in relevance and effectivness.  Just yesterday, I checked out the background of several buyers at an account I want a meeting with, and learned that someone I did business 10 years ago was a Director of the company.  I had an email response from him within 2 hours. 

LinkedIn is like a Facebook for business, and if you are in sales/marketing, it is an effective and proffitable free tool.

....and I don't own any stocke, either....yet.  Have not checked out Reggie yet, either, but plan to.  I see nothing but growth in their future.

Tue, 02/19/2013 - 22:14 | 3258156 nofluer
nofluer's picture

they are reaching out to me

Did they bring the lube? Or did you have to provide your own?

Tue, 02/19/2013 - 21:10 | 3257984 lotsoffun
lotsoffun's picture

linked in is another example of losing, losing, losing humanity in our lack of culture.  i have an account, because it's so necessary today.  i would love to close it.

i work in a large industry, and i came to realize a few years ago that if i'm hiring at say a 5year or plus experience level and need to consult linkedin or a headhunter, well, i'm a fraud and a loser because i haven't been around.  see my comments on h1b visa.  the modus is get me a warm body that lies about what they did, how many people they 'managed', not results.  because in the day of tbtf, results are negative.  people getting results don't need a lot of bodies to do so, but then they cant' say to equally ignorantant unimformed management 'look at all the people i manage, and THEY ARE CHEAP'

entry level, fine.  i don't know any of the kids out there, but again, i ask the kids who they like.

if i need somebody with experience, and i don't have them in my rolodex, then i call a friend and ask them who they recommend. 

it's propogation of losing.  and i have to admit that once the facists have their way, you need to comply.  if you don't have a linked in account in my industry, you won't get hired.  it's just too weird not to show everybody you have nothing to hide.

 

Wed, 02/20/2013 - 13:00 | 3259868 donsluck
donsluck's picture

I hate to be nitpicky, but your lack of punctuation displays your lack of "culture". You do not have enough respect to capitalize your own name. You obviously know how to capitalize, but only when you are "yelling".

Tue, 02/19/2013 - 16:34 | 3257280 adr
adr's picture

You are talking about an inside sales tool.

So it will continue to be the fraternal who knows who business and anybody outside the circle doesn't have a chance of getting a call.

LinkedIn just reinforces the broken system. The question is whether or not you could get a call if the guy you did business with was not the director of the company. Or whether or not the product is even worthy of being there, but you'll get a shot because you know the guy.

Again, how is finding out that you know a buyer at company A making LinkedIn money? You didn't pay for that information so growth in activity is irrelevant.

Tue, 02/19/2013 - 16:50 | 3257343 11b40
11b40's picture

Well, since I don't own the stock, I really don't care how much, or how little, they make.

I am an Independent Mfg Rep, dealing with multiple lines for over 30 years.  I know very well how hard it is to get an appointment, and that it is harder still to get anything new on the shelf.  Every square inch is like a fist fight these days, and I want every advantage I can muster.

LinkIn is just another tool from my perspective.  It is free, and I find it beneficial.  Whats not to like?

I am in Home Furnishings.  What categories do you sell?

Tue, 02/19/2013 - 22:19 | 3258172 nofluer
nofluer's picture

dealing with multiple lines for over 30 years.

And you're not dead yet? I bet multiple lines costs a fortune!

Tue, 02/19/2013 - 21:37 | 3258056 IamtheREALmario
IamtheREALmario's picture

Yes, but you write like a spambot ... sorry.

Tue, 02/19/2013 - 16:26 | 3257259 adr
adr's picture

LinkedIn's $40 move is based on over hyped nonsense. Wow 200 million "users". I bet they count someone receiving an email daily as an active user. Mine goes right where it belongs, in the spam folder.

LinkedIn like all other social media is bullshit. They are the new TV stations getting money from ads, nothing more. LinkedIn is trying to be the new Monster.com. Remember how Monster was going to take over the web and nobody would be able to find a job listing anywhere else. OH NO YOU MIGHT NOT GET A JOB WITHOUT A LINKEDIN PAGE!!!!! What is sad in in the new no talent bullshit world we live in, that is enough for the yes man to get a job over someone else. I'VE GOT 85K LINKEDIN BUDDIES I'M MOTHERFUCKING SPECIAL!!!!

Social media is no different than GeoCities during DOTCOM 1.0. The novelty has worn off and people are starting not to care.

I remember all the offers for cash if you clicked on ads in 1998. People at my school programmed clickbots and made a couple thousand dollars before the sites were shut down. Farcebook and LinkedAss are running their own adbots to raise click rates to justify their bullshit valuations.

I'm on LinkedIn and all I get are spam emails from them about things I already know happening in my industry. Sure I have 1000 contacts linked. I can't sell my product to my linked buyer at Walmart through the site. If all I did was check LinkedIn, Facebook, and all the other social media garbage, I couldn't get any actual work done.

Besides, I'd rather use a little free time every now and then to check out Zero Hedge than see that one of my old lawyer friends changed to law firm X.

Tue, 02/19/2013 - 21:39 | 3258059 IamtheREALmario
IamtheREALmario's picture

Yes and thanks to LinkedIn you competitors also have your 1000 contacts.

Tue, 02/19/2013 - 21:17 | 3258003 lotsoffun
lotsoffun's picture

they also charge users to 'upgrade' their account to see the 'secret' information of who has viewed your profile.  i tried it when i was underemployed and even with in that there was a 'second' level.  so that's another ego hoax.  i'm sure it does bring in some money for them but not zuckerbergmountains 10 billions.

 

Tue, 02/19/2013 - 19:03 | 3257710 Freddie
Freddie's picture

You are on LinkedIn?  Will you friend me - friend?   I have 2 friends.  You would be number 3.

;-)

Tue, 02/19/2013 - 17:56 | 3257551 NeedleDickTheBu...
NeedleDickTheBugFucker's picture

OH NO YOU MIGHT NOT GET A JOB WITHOUT A LINKEDIN PAGE!!!!!

 

You know what, you won't get a job with a LinkedIn page!  I would like to ask senior management at LNKD how many of their 200 million "users" actually found a real job as a result of LinkedIn.  I'm not talking about responding to an adverstisement, but as a result of that individual user's network.

Per my comment below, I am not a LinkedIn user, but my wife is a member.  No one has ever contacted her about any interesting opportunities related to her current job or a new position.  As far as I can tell, LinkedIn is simply for voyeurs who want to see what happened to former friends and colleagues.

 

 

Tue, 02/19/2013 - 21:20 | 3258013 lotsoffun
lotsoffun's picture

as much as i hate all this stuff, i disagree.  i did get my job via linkedin information that somebody i knew had been promoted and had a slot.  and i know others.  it's not facebook to the degree that people can remain professional and objective.  that said, i want to close my account forever, but the job market is still too dodgy.

Wed, 02/20/2013 - 12:54 | 3259850 donsluck
donsluck's picture

Stop talking about jobs. What you want is a business.

Tue, 02/19/2013 - 16:39 | 3257305 11b40
11b40's picture

ADR, I posted my positive comment, then saw yours.  I also deal with retail/wholesale, but too bad for me, Wal-Mart's not a part of my territory.  Anyway, I find LinkedIn to be pretty informative and have gotten positive benefit from information gathered there several times.

So far, I have resisted paying up for the premium listing and priveleges, but I am curious bout how many others are signing up for enhanced service.  I know some who have, and it seems that this could be another nice revenue enhancement for them.

Like you, I don't have much ineterst in what old college buddies are doing now, but with the way the Buyers and Retail Execs move around today, I find it very helpful.

Travel Safe.

Tue, 02/19/2013 - 22:10 | 3258141 nofluer
nofluer's picture

I was trying to help out an executive recruiter one time... she was using LI, I wasn't. I was getting names and contact info that wasn't in LI, and I told her how. It was just ordinary stuff that accountants know - like if you want the name of a top exec in a publicly listed Co, just look at the 10Ks and othr public filings - they have to "sign" them!!! Viola! A high level exec's name! (Very few of the names I got were on LI.) After you get the name, the rest is easy.

Tue, 02/19/2013 - 16:13 | 3257206 NuYawkFrankie
NuYawkFrankie's picture

Re Reggie, Contratulations! You had one of the Top 1% Viewed LinkedIn Profiles...

Uuughhh... Reggie.... I think we ALL got one of those messages...

Tue, 02/19/2013 - 21:14 | 3257991 JuicedGamma
JuicedGamma's picture

But Frankie, Reggie is doing what he always does, selling himself.

Tue, 02/19/2013 - 17:46 | 3257524 NeedleDickTheBu...
NeedleDickTheBugFucker's picture

+200 million!

I don't waste my time with any form of social media including LinkedIn, but my wife received the exact same message as Reggie's.  What tangible benefit did my wife receive from being among the top 1% of viewed LinkedIn profiles?  The answer to that question would be zero, nothing, nada.

Tue, 02/19/2013 - 22:01 | 3258113 nofluer
nofluer's picture

I wonder what they paid the wino who sat there all day watching the computer-generated profile views flash by and sucking down his cheap red wine? Would it still count as a viewed profile if the wino passed out but the computer kept clicking?

Of course - given the worthlessness of Linked-in, being in the top 1% could mean that about 3 people looked at your profile, while no one, no at all, looked at the other 99%.

I deleted my linked-in account when I started getting "invitations" from people I didn't know, and who had no interest in me - or knowledge of why they had supposedly "asked" me to "be their friend." Linked-in uses key words in the profiles to attempt to link complete strangers, and it is LI that sends the "invitation" for you.

It's kinda like buying friends on Farcebook... only it's Linked-in that's doing the buying.

Here's a word to the wise regarding investing in "Social Media".

Social media may be here to stay, but individual social media companies are not.

Oh.... and Re: Farcebook - At the time of the IPO, I posted that I thought the IPO for FB should have been between $6 and 10 - (it had a PE of about 100.) and in my continued opinion it should be below 6 now.

 

Tue, 02/19/2013 - 18:09 | 3257573 NuYawkFrankie
NuYawkFrankie's picture

Yeah - I take your point NeedleDick.

Errmmm...let me re-phrase that: I hear what you're saying...

It's LinkedIn's equivalent to the "No Child Left Behind" policy:  "No Profile Left Behind"

Tue, 02/19/2013 - 15:44 | 3257068 digitlman
digitlman's picture

"A high groth company"

 

Typo.

Tue, 02/19/2013 - 17:27 | 3257464 NuYawkFrankie
NuYawkFrankie's picture

"A high froth company" is more like it

Tue, 02/19/2013 - 15:43 | 3257066 azengrcat
azengrcat's picture

Annecdotal:  I actually haved clicked on advertising presented on LinkedIn.  Never in the history of my FB use (2005-present) have I wanted to click on the advertisements presented.  

Pintrest will also be a strong competitor to FB since the scheme is a natural click generator.

Tue, 02/19/2013 - 18:21 | 3257624 NuYawkFrankie
NuYawkFrankie's picture

Re I actually haved clicked on advertising presented on LinkedIn

CougarLife.com ?

Tue, 02/19/2013 - 16:28 | 3257270 adr
adr's picture

and how will Pinterest make money?

Oh yeah, that isn't important.

Companies are paying people to post their products on Pinterest and write cook comments. It really is sad. Just like the paid bloggers who write positive comments on product reviews and trash the competition.

I hate our world.

Tue, 02/19/2013 - 21:44 | 3258071 IamtheREALmario
IamtheREALmario's picture

I love our world. It is a wonderful place. Unfortunately the same cannot be said about all of the people.

Tue, 02/19/2013 - 15:40 | 3257051 Irelevant
Irelevant's picture

Own Linkedin stock Reggie?

Tue, 02/19/2013 - 15:54 | 3257114 Reggie Middleton
Reggie Middleton's picture

No, I don't.

Do NOT follow this link or you will be banned from the site!