How LinkedIn is Riding a Wave of Big Data All the Way to the Bank

LinkedIn is valued at $8.79 billion after its first day as a public company. Founder and chairman Reid Hoffman and friends are drinking champagne tonight, that is for sure. It is the highest valuation after an IPO of a tech company since Google astonished the world in 2004.

It is mildly amazing for a social network that has never been profitable and never made more than $250 million in a year. What are investors seeing that the rest of us cannot? In a word … Jobs. This is what Job Board 2.0 has become — data rich and interactive across a social graph. Hoffman is now laughing his way to the bank, surfing his huge wave of data.

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It may seem like it, but the word “social” and a couple talented engineers do not a $9 billion company make. LinkedIn is valuable for the same reason that Facebook is valuable – it has oodles of data. Where LinkedIn’s assets lay are in the specificity of its data. Jobs are what power a capitalist economy and when it comes to employment hunting, there are not many places on the Internet that have more data than LinkedIn.

Data is like the gasoline of the Internet. The more of it that you have, the better your engine is running. LinkedIn has 100 million users that at one point or another have uploaded their basic employment information to the site. Most have uploaded full resumes, teaming with data like phone numbers and addresses, employment and education history. So what if most users on LinkedIn do not check their accounts on a monthly basis? Page views count when advertising is your main game. For LinkedIn, its primary revenue comes from its hiring solutions and premium accounts, both of which are steps to uncover more data.

Data + Jobs = Big Money

It may seem like investors have jumped the shark with LinkedIn’s IPO and to a certain extent they have. Last week it seemed like a good target valuation for the social network would be $30 a share. When it announced yesterday that it would start at $45 a share, eyeballs popped. LinkedIn opened this morning at $83 a share and went as high as $122.70 and jaws across the industry dropped.

LinkedIn has the most traction and the most data in the professional social network environment, but it is not a standout and future monopoly, the way Google was when it debuted to the public. Google’s technology was above and beyond what came before. That is not the same for LinkedIn. The traditional jobs sites – Monster, CareerBuilder – remain strong players in employment data and there are niche job boards across the Internet like JournalismJobs.com that are go-to destinations for certain industries.

There are other startups looking to gain traction by using employment data. BranchOut is a professional social network that extrapolates employment data from Facebook’s 700 million or so users and recently raised $18 million in series. Like LinkedIn, BranchOut understands the meaning of data, interaction and connections when it comes to employment. With today’s rousing success by LinkedIn, there will be more players in the employment connection space coming down the pipe.

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