LinkedIn Cashes In
In battle for online supremecy, Investors bet on niche networks.
Social networking is moving from infancy to adolescence, as the market landscape evolves and competing business models vie for superiority.
Venture capitalists are betting LinkedIn can thrive in an increasingly crowded space, as a consortium of investors are pouring new money into the company. According to The Wall Street Journal, a $53 million capital raise brings the company's total value to $1 billion.
LinkedIn targets professionals looking to keep in touch with their peers, enabling users to find past colleagues, recruit new employees and troll for potential business partners. In contrast to rivals Facebook and MySpace, LinkedIn charges for access to the site's most valuable information. The company claims it's profitable, earning money from subscription fees, online advertising and recruiting services offered to big companies.
The new investment is the latest in a trend of money being thrown at social networking sites with the hope they can turn eyeballs into dollars. News Corporation (NWS) scooped up MySpace for $580 million in 2005; in October 2007 Microsoft (MSFT) paid $240 million for a tiny stake in Facebook; and just last month Comcast (CMCSA) bought address book management site Plaxo for $175 million.
LinkedIn CEO Dan Nye claims the company plans to remain independent, but speculation is swirling about an outrigh purchase or IPO.
Meanwhile, competing networks jockey for users. Facebook and MySpace are seeking pure scale, offering everything to everyone, attracting customers with a myriad of services and products. Capitalizing on their user base is proving to be difficult, however, as the companies are struggling to turn a profit. In a slowing economy, the banner advertising business model is increasingly hard to maintain.
LinkedIn, along with other niche players like Plaxo and Minyanville's Exchange, are trying a more targeted approach. They aim to connect users with like interests and look to capitalize on productivity instead of the creation of a virtual cocktail party.
The debate then hinges on whether users prefer one catchall network, or individual memberships to a series of more exclusive clubs. Think velvet ropes versus free shots, a debate rages with no apparent end in site.
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