The LinkedIn IPO and What it Means for Web Marketing
Unless you were hiding under a rock recently, you’ve probably heard about LinkedIn’s IPO. This was a long-awaited moment for Wall Street and the New York Stock Exchange. Many people were left wondering what this event really means in the social media landscape. The California-based company had sold a whopping 7.84 million shares priced at $45 a piece within hours. It was a big moment because the investment banking community had really been waiting for the social media industry to join the Wall Street family. In a matter of hours, the stock surged over $100, closing at over 109% over the initial offering price. Unfortunately, the stock has seen a slow and painful decline in recent weeks, siphoning off nearly half it’s value to aggressive shorters in the financial world who are willing to pay a 20 point premium to undercut this social media networking site. Wall Street thinks it’s a joke – but this is just the beginning for all of us in the web marketing space.
The Beginning of Web Marketing 3.0
By having an IPO, LinkedIn has now set the standard for other social media companies. However, it is key to understand that this social media platform is quite different than many of the others. While systems such as Facebook and Twitter run on more of a free platform, LinkedIn isn’t completely free. They have a special jobs system which helps match people up with headhunters and employment positions that meet their criteria. That service is an extra cost. People can also sign up for a premium membership. So while the system does have a free basic membership, they also have these extra services plus advertising sales.
Herein lies the paradox – Wall Street driven financials will look at a business model like this and point out all the holes, citing grossly tilted balance sheets and lackluster revenue models. The fact that LinkedIN is up to it’s eyes in debt alone is enough to deep 6 a long buy on this stock. But in the web marketing world, LinkedIN is pure gold – free, massively powerful, connective, and can leverage growth in professional searches as well as generic Google searches. Web marketing isn’t about what the revenue is right now, it’s about creating opportunity for what could be. It inflates the bubble that real life eventually pops.
Hated On, But Not Dismissed
So what does this mean for Web marketing? First of all, this legitimizes the idea that social media is a genuine business that Wall Street is willing to play with. The overall efforts have been to tank the stock, but my point here is that LinkedIN is out there, and that may be enough for now. Remember when MySpace came out? Everyone thought that was insane, especially when Murdoch dropped $580M on it, but the impact was less about MySpace and more about the directional shift of the market. So many business owners have questioned whether or not participating in social media is really beneficial to their bottom line. This IPO shows that social media has become one of the concrete pillars upon which businesses are built in the 21st century. Companies that aren’t utilizing Facebook, Twitter, YouTube and LinkedIn are destined to fall behind the eight ball. Pandora’s IPO shows another similar trend, but with a much less tumultuous aftermath. Who’s next?
It is believed that LinkedIn will also go on a buying spree to acquire other social media applications and companies that are struggling. These kinds of networks are constantly forming and folding because they don’t know how to properly run the social media platform. There is no question that the money that has come from the IPO will help the social media giant further expand and add new features to the system. This is an interesting play on what taking public money could do to these social media, open source communities, because now they need to prove real money, and they need to do it FAST. The biggest hurdle is going to be maintaining the integrity of the brand and keeping the user experience paramount, something that I see as a very hard set of goals to weave together.
We’ve Got Traffic. Who Cares About Revenue?
One of the perks of social media is that it grows organically on its own as users share information with their friends, family and acquaintances. This means that social media platforms typically don’t have to invest a whole lot of money in outside advertising sources. It’s a great business model if done correctly. The LinkedIn IPO is probably attracting a lot of other social media giants to consider the idea of going public themselves. However, just because LinkedIn has been successful so far does not mean that it will continue the upward trend. Wall Street and investors will just have to wait and see.
The past year has been peppered with comments surrounding the lack of business logic behind such social media platforms as LinkedIN and Twitter. Gone are the days of talking CPM and eyeballs and all those ridiculous numbers that corporate “marketing teams” like to talk about. The LinkedIN IPO is going to change the game in the sense that the numbers begin to take a back seat to a strategy. Mark my words – the climate will stop focusing on traffic and start focusing on conversion. Like Randy Newman says, “It’s money that matters.” Amen to that.
Some analysts believe that other companies such as Groupon and Facebook will go public within the next year or so. Whether or not this is true only remains to be seen. However, the end result of this for a business owner is that social media is now even more important for your overall marketing and business plan.
Social Media Will Be Is Big Business
No longer is social media just considered a fad that some businesses can use. Instead, every business owner should be investigating and implementing a social media strategy that will take them into the future. If you wait, you are risking your competitors will run ahead of you and take over your niche. You have to understand that social media allows things to happen in a much quicker time-frame than traditional media. Before the advent of social media, your competitor would have to invest large amounts of money in traditional advertising in order to race in front of you. Now, social media allows a business to grow and expand exponentially in a short period of time. By investing time in the process of posting and interacting on social media, companies can get huge return on their investment, especially in the long-term. Similarly, Matt Cutts, the SEO guru at Google, has publicly talked about social media rankings affecting SEO results. Take a look at Google’s new +1 button – it’s all changing right in front of us, and these cuddly, feel-good social media worlds are now being driven by the cold hand of commerce. Popularity means improvement. For better or worse, this is what’s happening.
Now that more business owners are seeing that social media has been legitimized by this IPO, they will be racing to put processes into place in order to make use of this new media. As a professional, you cannot afford to be left behind. Social media is not going anywhere. It is growing by leaps and bounds every single day. Facebook alone has more than 500 million members, half of which log into the system every day.
Get Busy Tweeting or Get Busy Crying
The LinkedIn IPO will set the standard for future social media companies and platforms. Instead of thinking of the site simply as a place to interact with friends and family, businesses will start to see the possibilities even more. The opportunities for marketing, branding and reputation management are enormous on social media sites. In addition, Wall Street and venture capitalists will also realize how profitable the social networking sites can be from a business standpoint. Just like the Internet was thought to be a fad at one point in time, social media has had the same stigma placed upon it. However, the Internet has revolutionized the way that we do business now. Social media will do much the same for those companies that embrace it and use it to its full potential.
There is no question that the LinkedIn IPO has caused quite a stir on Wall Street and in many other sectors. The very idea that social media companies could become so profitable seemed far out of reach just a couple of short years ago. Now, those companies that harness the power of social media sites like Facebook, Twitter and LinkedIn will benefit from the massive power that is going to be backing the sites. Instead of business people worrying that they are promoting their company on some small-scale social media site, they will now know that the financial world has also accepted social media as being a viable business building opportunity.