Insider Chatter by Donna Bogatin » AP On LinkedIn: Social Networking Gold Mine at $5 per User?

January 21, 2008

AP On LinkedIn: Social Networking Gold Mine at $5 per User?

Associated Press staff reporter Michael Liedtke declares unequivocally, and headlines, that Reid Hoffman has “the golden touch.” Lest a reader NOT get the AP’s message, Liedtke’s Hoffman puff piece underscores in its subhead: “LinkedIn founder’s road to riches paved with golden connections.”

Nowhere in the AP story does Liedtke provide any quantifiable confirmation that Reid Hoffman has indeed achieved “riches,” though. Liedtke asserts under the AP banner that Hoffman has “raked in one Internet jackpot after another,” but offers NO numerical illustration of a single Hoffman Internet jackpot. On the contrary, the size of Hoffman’s Internet returns are NOT deemed to be oversized:

“Three of his startup investments have been sold since 2005 for more than $1.1 billion combined, although Hoffman got only a sliver of that.”

Liedtke asserts one Hoffman “windfall,” but does not offfer any hard returns data to back up the characterization:

“A college friendship led Hoffman to PayPal and his first windfall when eBay Inc. bought the online payment service for $1.5 billion in 2002. Since then, he has become even wealthier by investing in other Internet startups he discovered through friends and former colleagues.”

How can the AP’s Liedtke be so certain of Hoffman’s wealth? It is unlikely that he is privy to Hoffman’s private financial records regarding the entrepreneur’s private angel investments in privately held startup companies. If Liedtke is basing his conclusions about Hoffman’s wealth on third party information, he ought to cite his sources, as the AP’s “Values and Principles” demand.

What’s more, the hard data that Liedtke does include about Hoffman’s signature Internet venture–LinkedIn–does NOT support a social networking gold mine hypothesis. While the AP story perpetuates the yet to be open-market tested multi billion dollar “valuation” of Facebook, a Hoffman passive investment, and cites Hoffman on aspiring towards a noteworthy IPO for his active LinkedIn investment, the actual operating worth of LinkedIn is not questioned in the AP piece.

Hoffman on his five year old LinkedIn, of which he is the founder and largest shareholder:

“I know we are going to be much more valuable in a year or two. We have had (buyout) conversations with all the usual suspects, but I think an IPO is by far and away the most likely outcome.”

Apparently his “conversations” with suitors are NOT yielding Internet gold for LinkedIn’s Hoffman!

What about an IPO? What about LinkedIn’s $5 per user monetization record! According to the disparate LinkedIn performance metrics in the AP piece, LinkedIn has a base of 18 million user profiles and 2008 estimated revenues of $75 million to $100 million. Is $5 per user really the stuff that golden IPO dreams are made of, though?

The AP story discusses Hoffman’s LinkedIn Facebook “copycat” moves, a story I broke last month. SEE: Reid Hoffman: LinkedIn About Face (book)

LinkedIn is NOT a social/business networking slam dunk. How many of the 18 million users are active? What does the typical user actually get out of ”being on LinkedIn”? Target LinkedIn “customers” want to know. SEE: Deal Maker on LinkedIn: ‘What Do I Do With It?’

Power users themselves are having second thoughts about LinkedIn. SEE: Does LinkedIn Have a Connections Fraud Problem?

“Everybody in Silicon Valley is no more than two degrees away from being connected to Reid” says Hoffman friend and co-investor Peter Thiel.

REALLY? Hoffman seems many more degrees away from connecting with his own typical LinkedIn users: He disclaims attempts at connecting with him via his own LinkedIn profile! The Reid Hoffman LinkedIn “Contact Settings” warns: