Is LinkedIn a Social Network or a Job Site?

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linkedin
LinkedIn is a social network for search and establishment of business contacts. It is founded in 2002.
linkedin
LinkedIn is a social network for search and establishment of business contacts. It is founded in 2002.

There’s a lot of money riding on whether the market defines LinkedIn.com (NYSE:LNKD) as a job site or a social network. After all, if Wall Street looks at you as a technology stock, you get the benefits of a technology stock. What benefits are these? You don’t have to make money for your stock to be worth billions. That’s one hell of a benefit I say. It’s no surprise that LinkedIn is somewhat consistent in trying to brand and market itself as a social networking site.

However, it also benefits from the fundamental market realities of a job site. When you run a job site, recruiters pay good money to advertise on your site. This is a recurring stream of income.

Unfortunately, job sites aren’t as sexy as technology sites. I hope you see what’s going on here. It appears that LinkedIn is trying to have its cake and eat it too. On the one hand, it wants the stability and sustainability of human resources advertising placements and other advertising revenues. On the other hand, it wants the hype and growth-powered stock pricing features of a technology company. So far, this strategy is paying off and the market is under the impression that it is a social networking website and that there are enough social media bells and whistles with LinkedIn to safely categorize it as a tech stock. Add to this its decent cash flow from its job placements, and you can see why this company is worth over $200. The question is whether LinkedIn can continue this juggling act.

I would like to jump in and defend LinkedIn’s positioning as a social network. A lot of its critics are saying that LinkedIn should drop the social network element because it’s valuable enough as it is as a job site. I don’t think so. I don’t think it is that cut and dried. It does have a lot of social networking features. If you have a lot of connections, when you share content, those connections see your content. In this way, LinkedIn performs and behaves just like Facebook and Twitter. If enough of your followers or connections reshare the content that you shared, you can explode your reach. This is precisely how social media companies work.

Regardless of how much people like to hate LinkedIn; a lot of this really are sour grapes. They would love to get LinkedIn’s market valuation. Moreover, they would love to get LinkedIn’s sustainable and reliable revenue. LinkedIn is in a great spot.

Is it worth buying? That’s another story entirely. After all, the fortunes of LinkedIn, no pun intended, is linked to the health of human resources industry and the need of industry to find employees. So far, it’s looking good; however, the economy might tank tomorrow, and LinkedIn might not look as hot.

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