Stepping Stone for Social Media IPOs...

One of the interviewers asked "If you have money to invest in, which stocks you buy?" And I responded "I would have said Netflix if you had asked me the same question few months ago, but now I like LinkedIn. I am waiting for their IPO." Yes, LinkedIn it is. Investors are waiting for Thursday, May 19, 2011 when LinkedIn is likely to hit NYSE.

When you have faith in a company's operations, culture, financials, policies and strategies; you will see your money being secured while investing in it. It is all about confidence factor, but not about following the herd. One of my friends said that this stock is going to make you wealthy and all variations thereof, never work in long-run. Such sort of investor confidence is provided to LinkedIn. And that is the reason why they have raised the size of their IPO twice after their announcement in January 2011. Per recent announcement of their IPO size, stock will likely to trade between $42-$45 and valuation will be around whopping $4 billions.

Why not? If company believes in their chores and realizes the lustrous confidence of investors, it should ride on it. Personally, I have faith in LinkedIn and that is why I gave that response to an interviewer. LinkedIn is a part of  bullish social media industry, but it may be the only company who is providing the professional networking. Their business model seems clearly different than what Facebook, Twitter and others have. They connect recruiters, companies and job seekers in the unique ways.

Stepping stone. LinkedIn being the first social media company in the US who is going public this week, provides some efficacious groundwork for potential future IPOs of Facebook & Groupon. LinkedIn's valuation is certainly way lower than what Facebook and Groupon are valued at. But their post-IPO stage may deliver few twists in this household industry.

... "what is LinkedIn and why is it so hyped?" I hear such questions from professionals of the industries where vacant jobs are more than number of job seekers. The only key limitation I consider in the business model.

Betting on Internet & Social Media...

A bullish social media industry

I tweet, visit Facebook on the go and network through LinkedIn almost every day. I often locate myself through Foursquare. But Groupon? I have never used it and am not planning to use it even though there is so much buzz around this 2 year old company which has given the new definition of "daily deal market". While there has been so much talk on the streets regarding social media companies going public, two of them- LinkedIn and Groupon have announced their potential IPOs in the 2011.



LinkedIn & Groupon both have different business models (please note that Groupon has not been able to explain their exact business model). LinkedIn specifically emphasizes on "professional networking" and the other is focusing on "discounted deals covering food, electronics, tickets, gifts and counting...". Though not accurate, but they have got vast difference in their valuations as well. On the personal front, I have been a big fan of LinkedIn and so I can be bias about my insight on Groupon. But certainly, Groupon's whopping valuation of $25 billions is eye-popping and dubious to me. Because:

• Daily deal market is pretty crude and fresh for valuation analysts. Immaturity of this industry is one of the impediments behind mighty valuation numbers.
• A new industry and particularly new company is often valued by venture capitalists and I believe that their perspectives are always overstating.

Here are few things I want to enunciate about Groupon's atypical growth story which is not new to anyone who knows what Groupon is:

• A year ago from now and a year after its inception, it was valued slightly over $1 billion and now it is valued as $25 billion company. 
• Hot off the press. They successfully drew around $950 millions last year in funding from venture capitalists.
• Recessionary environment and looking for discounted deals are positively correlated with each other. And that beautiful correlation helped Groupon to be a bull.
• It has been hiring employees and adding clients/ merchants all around the globe to its portfolio.
• Presence in 35 countries with immense competitive presence in China and South Korea, which is the most active daily deal market.
• Almost doubled their subscriber base in last 3-4 months.

......................... And there is "NO COUPON" for Groupon's IPO price or its valuation!!