LinkedIn – The secret formula behind the 8 billion dollar IPO

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LinkedIn is a social networking site that doesn’t get nearly as much press or attention as sites like Facebook and Twitter, but the success of the company has been unbelievable regardless. You don’t hear people talking about it on the streets because it’s not a site where kids post their pictures and chat, this is a social networking site made for business professionals and for people who are interested in business networking.

It was launched in May 2003 as a professional networking site and as of March 2011, LinkedIn has 100 million registered users from more than 200 countries and territories around the world. It is available in many different languages, including English, French, German, Italian, Portuguese and Spanish.

Globally, the site enjoys over 47 million unique visitors each month. The most recent news that has put LinkedIn in the business spotlight it that the company filed for public offering on the New York Stock Exchange at the beginning of the year and just began trading its shares about two weeks ago.

The people who run LinkedIn are not new names in the game of Internet entrepreneurs. The CEO of the company is Jeff Weiner, who was previously an executive at Yahoo! Inc. Some of the other founding team members come from huge Internet companies such as Paypal and Socialnet.com.

The company is also looking to open a European headquarters in Dublin this year as well.

Just like with every good social networking idea, there are others that try to make something similar, but with its 100 million users, LinkedIn is far ahead of competitors like Viadeo and XING, which have less than 50 million users combined. According to the most recent statistics, there is one new member joining LinkedIn each second.

How are the company’s shares doing on the market? Expectedly well. While the price per share was $45 on its first day of opening, by the end of the day shares were worth over $120. It closed up 109 percent in its first trading day, which made it the firth-largest first day gainer in the post-bubble era.

With LinkedIn’s initial success on the stock market, many are left wondering whether this will influence other private companies to enter the stock market. LinkedIn’s performance on its first day certainly had everyone’s attention. All of the financial news channels were tracking its soaring stock that was instantaneously making millionaires out of LinkedIn’s core group of supporters. Such a debut will certainly influence other private entrepreneurs and investors to make a similar leap in hopes of having similar results. The site raised $325 million from investors and then more than doubled its share prices in one day alone.

Indications show that 2011 will be a good year for companies with similar plans, and maybe, generally, the best financial year since 2000. Venture capital firms have been watching closely and they are hoping for a similar payday, and are also being encouraged to back more entrepreneurs. Investment banks are also more interested in lining up investors and taking companies public as well, after which, these companies could used the money they have made to hire more workers.

The financial crisis hurt every market in 2008 and the market for IPOs was especially bad, with only two companies going public in the first three months of 2009. This has all changed for the better in 2011. there are about 170 companies that have filed with the Securities and Exchange Commission to open their companies up to public investors, the most since 2000, and the list includes big names like Dunkin’ Donuts, Spirit Airlines and Yandex.

Of course, when people saw the initial success of the company, there were immediate comparisons with tech bubble companies like Netscape and Pets.com, but LinkedIn is not like those companies of old.

It has a market value of $8.8 billion and it is already worth almost 20 times its projected sales for the year – major Internet companies like Google for an average of five times projected sales, for example.

It is a different game now, compared to the tech bubble companies of the 1990s. Back then, 300 companies went public each year and they were all small start-ups. In 2011, there will be 170 companies going public, but all of them are large and established companies.

LinkedIn is not some small and fledgling site, it earned $3.4 million last year on top of $243 million in revenue. These companies today are actually profitable, while those of the 1990s were selling the promise of a possible profit. That is why the tech bubble companies of the 1990s lost money when they went public, whereas these companies doing it today are making money, 70 percent of them anyway.

With a large percentage of the world’s professional using LinkedIn, they must be doing something right. So why is it such a big hit all around the world? It is because professionals today are taking more responsibility for their own careers and wanting to do things on their own to secure a better future. With this recession continuing to loom, everyone is trying to be, or at least think like, an entrepreneur and make money for themselves instead of making it for others. When you are on LinkedIn, you are being proactive and building networks on your own, building your career, showing off your skills and successes, and garnering a reputation on your own for you to present to potential employers or business partners.

LinkedIn did not start off strong like, say, Facebook did. It seemed like an interesting idea, but they didn’t really light the Internet up immediately. At first it was a place to post your resume like a regular job site, but later it turned into something much more exciting and interesting. Over a couple years, the site went from being a resume service to an essential site for businesspeople that provides a one of a kind service for those that have connections in business and are looking to make even more.

One of the smartest moves that LinkedIn made was that it linked up with other social networking sites. It linked in with Twitter and allowed people to synch their profiles and have their LinkedIn statuses sent to Twitter and vice versa. Even though there are many business professional who probably would not be interested in this option, it was still a smart move because it showed that LinkedIn was a site that recognizes opportunities and understood the importance of being able to work with other important and popular social networking sites and piggy back off heir popularity. This made the site instantaneously more popular and had people spending more time on it in general, having conversations with people and talking instead of just adding them as a connection and looking at their profiles.

One thing that LinkedIn does better than any other social networking site is that it provides you a great search engine for internal searches within the site. The Facebook one is a nightmare to use and Twitter has just begun to fiddle with it. LinkedIn realized the important of the search function, especially in a more serious environment that a site involved in business networking would require. Time and money was well invested in making everything work well and their search engine is one of the best ever, making it very easy to find and build connections, but not only that, to use the site to find a job, which is what LinkedIn is being used for more and more these days, making it even more multidimensional and multifunctional. LinkedIn did a good job of not rushing and realizing that the basic parts of the site need to be perfected first before anything new is being added and new features are being dreamt up.

The changes that LinkedIn makes on their site are gradual and subtle, but they add up in the end and are very noticeable. It is not like Facebook or Twitter, where they think up a new design, test it out and then just put it out all at once for people to get used to. When they do this, you see a backlash from the users every single time, because they are used to their old format and many people do not want change if it is not absolutely necessary. LinkedIn makes changes very gradually and logically. They offer a lot of customization now both for companies and individuals and there are many applications that just seem to keep appearing and popping up gradually over time that are very popular on the site now. Now you can customize your profile the way you like it, because LinkedIn is like a virtual meeting with an employer, and you want to be looking your best when they take a peek at what you are up to and who you are in the business world.

LinkedIn can probably also thank the financial circumstances in the world for its success, and it was the right site to appear at the right time – in the middle of a recession when people were looking for the best place to find new jobs and make new business connections in order to make some money and get by. LinkedIn came out at a time of global recession, a time when everyone was looking to make themselves more attractive to professionals and, in the end, more employable. LinkedIn was the perfect site made at the perfect time that was able to offer these services to the millions who were seeking it at the time of the recession and still need it to continue making progress on the road to future success.