Is LinkedIn The Latest To Play The Skype-Hype Valuation Bubble Game?

from the anyone-taking-bets-on-the-final-amount? dept

Tue, Dec 4th 2007 8:20am — Mike Masnick

Over the past few years, we've noticed a pretty consistent pattern among startups trying to create huge valuations for themselves in a short period of time. While other companies have done it in the past, the latest cycle really kicked off with Skype confusing people into thinking it was worth billions. Despite having relatively low revenues, there suddenly leaked rumors that Skype was for sale. Skype denied it, and then had one of its investors say the company was worth well over a billion. Then the feeding frenzy began, until eBay came out the winner -- a move it later regretted. Facebook was the next to follow the Skype Hype Strategy, but may have been a bit too early to the game. It took an extra year, but the company may have outdone Skype in its $15 billion valuation (though, unlike Skype, Facebook hasn't turned that into real cash yet). In between, YouTube used a nearly identical strategy to pump up its valuation.

Here's what you do: get a little buzz. Leak a report to the press about a buyout offer. Deny the reports of the buyout offer and then have either an exec or an investor make an offhanded remark about how the company is actually worth billions, allow the feeding frenzy to begin and eventually pick an exit opportunity. It also doesn't hurt to have some sort of PayPal connection (which both Facebook and YouTube had). The latest to test out this strategy may be LinkedIn, which also has the PayPal connection. Last week the rumor broke that News Corp was trying to buy LinkedIn. The company's CEO quickly denied the report and said that the company would need to sell for "a lot more" than a billion dollars. Now, the latest reports are that News Corp isn't buying LinkedIn, but just like those other stories, the stage has now been set. Suddenly others may start thinking that perhaps LinkedIn is a good buy for over a billion dollars, and the feeding frenzy begins again. Anyone want to take guesses on the next startup to play this game?

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Filed Under: buyout, hype, rumors
Companies: facebook, linkedin, news corp., skype, youtube

8 Comments

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Dan, 4 Dec 2007 @ 9:31am

Ugh, linkedin is ugly and terrible. at least facebook has some utility.
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Thriveal, 4 Dec 2007 @ 9:37am

Me Too...
Uhmmmm, my company is worth around a billion too.

Anyone interested?

(thanks for the funny, and unfortunately, true story). Do big companies know how to really assess the value of a company and properly pay market value for it anymore?

Thanks, Jason M. Blumer
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John, 4 Dec 2007 @ 9:40am

Wow
I'm amazed at this one. Hopefully no one buys into the hype. It has some use but it comes down to a bunch of people who add their name to each other and then really does nothing beyond that.

Relationships matter but not when it's (to borrow from the article) a feeding frenzie of people just linking to see how many connections they can get. It turns into a popularity game and I've heard comments right along those lines.

I'm sure there are people who have been successful at using this but honestly over all it's not of much use.
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Anonymous Coward, 4 Dec 2007 @ 12:31pm

PayPal connection?
What was the "PayPal connection"? Please explain.
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Anonymous Coward, 4 Dec 2007 @ 2:11pm

Re: PayPal connection?
LinkedIn was founded by ex-PayPal guys. Some of the founders, I think.
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Anonymous Coward, 4 Dec 2007 @ 2:12pm

Re:
Totally disagree. LinkedIn is useful because it is not populated by college kids. Might be hard to understand, but if you work for a living, the LinkedIn is more oriented towards your needs that Facebook.
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sean, 5 Dec 2007 @ 2:20am

Linked vs Facebook
Facebook is just bloody annoying, I don't need to let the world know about my personal business, friends, and interests.

LinkedIn is way more valuable and frankly I don't care if the world knows about my professional connections and interests.

http://www.linkedin.com/in/johncassidy
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Quinn, 13 Dec 2007 @ 10:02pm

Re:
I can see where you're coming from, but if you knew what LinkedIn is doing to turn the site into a tool for recruiters... man. If they do things right I can see them killing a large portion of Monster and Workopolis' business. Their product is much more tangible than Facebook's. Mind you, billions? Maybe not. But a lot.
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