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.

Head to China and Enhance the Ubiquity

Rumors. Rumors. And more rumors. Once you are on the top of the tree, you will likely to hear all sort of rumors surrounding you. Social media is the new, intangible household material and the most bullish industry sector. Rumors follow it. Facebook rules that industry. More rumors follow it. News feed is considering Facebook deal with Baidu to reenter China as blockbuster rumor. Facebook may have dealt with some local social network to enter China again after it was banned in the July 2008. No news has been confirmed by either Facebook or Baidu. But I can see handsome & strategic implications behind this.

As of June 30, 2010

Facebook undoubtedly reigns the social networking. It has becoming more ubiquitous with every sunrise. But because of China's ban on Facebook, it is still unexposed to the biggest Internet usage market in the world. If Facebook collaborate with some local social network there as stated in the news, it may have been turnaround for them. Facebook may be household name in the market of nearly 1.5 billion people. And this Chinese Presence may help Facebook to flourish revenues and amplify its already whopping valuation. If such thing happens before Facebook's possible IPO, I   can imagine some record setting numbers for IPOs.


After these rumors, we should not be surprised to see manifold bankers to visit Mark Zuckerberg and other considerable heads of Facebook every now and then. The Chase is going to be earnest and pungent...

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!!

Unforeseen rivalry for Netflix (NASDAQ:NFLX)

Since its inception in 1997, Netflix has risen phenomenally. I still remember the stock price of NFLX was around $50 in the summer of 2009- in the midst of the great recession when I joined Netflix community as one of their over 10 million subscribers. I like this concept of movie-watching and so do the Americans. Since then it has increased fourfold and is seen as one of the bullish stock on the Wall Street.

Netflix has seen many competitors in the American market like Blockbuster Video, Movie Gallery and Hollywood Video. It is solely considered responsible for bankruptcy and shrinkage of those ubiquitous DVD rental chains. And now a days, it is successfully dominating this sector of industry despite of some substantial competition provided by Coinstar's Redbox.

The most buzzed topic on the Wall Street in recent times is bubbling and bullying "Social Networking Industry". Star bankers from everywhere are following these private companies like Facebook, Twitter to help them go public and cash in billions for their banks like it happened during Google's IPO. Netflix's business model is nothing to do with social networking industry. As we studied in ECON 101, competition lures new entrants and squeezes the mature companies. And Netflix is not an exception. But the competition it is going to face, seems unforeseen and out of theory. It has deals with a number of studios like MGM, Paramount, Lionsgate, Warner Brothers etc. to stream or rent their movies after they release DVDs. Studios have earned handsome money from Netflix's expansion. But recent deal between Warner Brothers and Facebook is eye catching to me.  Why would someone take such a cannibalizing step?

• Buzzing atmosphere around social networking industry.
• Facebook has 500 millions subscribers; the way bigger than Netflix has.
• Impetus for linking yourself with social networking giants like Facebook is skyrocketing these days.

To me, it is not clear yet. But Netflix suffered immediately after this news and justified analysts' skeptical recommendations for NFLX. I have not made any valuation for NFLX, but based on my market insight I would love to HOLD for NFLX.