LinkedIn Going Nowhere

Posted in New by Harsha on November 29, 2007

I’ve found that LinkedIn is little more than a name generating tool. It is great to find out names and titles of people who you won’t find in the company directory. But what else? I’m flabbergasted that revenues are predicted to be “$75 million to $100 million next year” as made by the new CEO. Am I missing something here?

Paradoxically, the “power” users or LIONs as they pompously call themselves, are probably not paying a dime because they have so many people in their network that their extended networks are wide and far-reaching. So literally no need to pay to contact 3rd and 4th degree folks. If you are part of a LION’s network, then chances are you’re happy to pass on the request-for-introduction hoping to get something in return. Right?

So, the numbers are not adding up in my head. Obviously, at the current level of 17 million users, they are not even making $75 million (gleamed from the interview). They’ve doubled their user base in 2007 (9 million “earlier this year” to 17 million now). So let us assume they more than double next year same time to 50 million users.

I tried a bunch of options to see how 50 million users will translate into $100m next year. Power users are not going to pay $200/month for deal #3. I’ll agree with their claim that deal #2 is the most popular, I can see why. Deal #1 is just too uneconomical for sales folks and I think it is for comparative pricing and to also hook the stragglers and dilly-dalliers. What percentage do you think are paying? I don’t think it is more than 2% of total users. I just can’t fathom someone paying for LinkedIn, when so much of it is given away by vast access to 3rd and 4th degrees of separation through a large network. They’re probably generating $30 million today with the hope of tripling it next year. I also don’t think the advertising revenue is adding up to much, it never does for these websites.

LI is a really cool tool. I don’t buy the CEO’s assertion that they’re sticking around for the long haul. Only a damn fool would pay $1 billion to acquire what is essentially a bunch of electronic business cards or resumes. You’re better off acquiring Monster, which has the level of detail that LinkedIn can only dream to have. Having said that, LI is probably a good recruiting tool.

This is based on a Go West post on the interview with the LinkedIn CEO.