LinkedIn CEO: We’d only sell for “a helluva lot”

I sat down Tuesday afternoon in Mountain View, Calif., with Dan Nye, the newish CEO (he joined earlier this year) of LinkedIn. That’s the company that is like Facebook for grownups, a businessperson’s social networking site. Nye’s looking for press because LinkedIn plans to unveil some nifty new features on Dec. 10. (I got a look, but agreed not to divulge anything yet.) I was interested in hearing what he had to say, in part because of the rumors flying around that LinkedIn plans to sell the company early next year to News Corp. (NWS)

The buyout gossip began with an item last week in the UK version of TechCrunch. Never mind that LinkedIn founder Reid Hoffman (a made man in the PayPal mafia and a buddy of mine) categorically denied the rumor in the Daily Telegraph. Anything that suggests that Rupert Murdoch would expand his social-networking empire is sure to set tongues wagging. Breakingviews.com wrote an intelligent summary of why a LinkedIn acquisition would make sense, largely because of the opportunities to leverage LinkedIn’s tools with the Wall Street Journal readership.

Not surprisingly, Nye didn’t deny that News Corp. made an offer for his company. Instead, he said that when he joined the company he told the board — comprised of Hoffman, Sequoia’s Mark Kvamme and Greylock’s David Sze — that he was only interested in taking the job if the goal was to “go long.” But is he selling out anyway? “We’re excited about building this company,” said Nye. “It would take a helluva lot to get us off that path.” Does that mean $1 billion? “A lot more than that,” said Nye, who worked at Procter & Gamble (PG), Intuit (INTU) and Advent Software (ADVS) before joining LinkedIn.

LinkedIn clearly is playing to win. The company has mushroomed from 60 employees when Nye joined in February to almost 200 today. At the time, LinkedIn had 9 million members; today it has nearly 17 million. Nye predicted revenues will range from $75 million to $100 million next year.

LinkedIn has the virtue of having survived adversity. Before Facebook and MySpace existed — back when Friendster was hot — LinkedIn was just getting going. It’s still going. Independent or part of News Corp., it’s fun watching this plucky company succeed.

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Rumour: News Corp to buy LinkedIn

An unconfirmed rumour has reached me via a reliable source that LinkedIn is in talks with media giant News Corporation over a possible buyout in January 2008. The reason I am running with this, is that the source is very well-placed. Furthermore, the rumour has the fundamental ring of truth about it. Consider the following.

LinkedIn is firmly in the mainstream. Most of its users are mature professionals and it has a healthy number of early adopters. These people are gradually abandoning recruitment advertising in newspapers. Instead they use LinkedIn and sites like it - even, increasingly, Facebook - to build their professional network and advance their careers. In particular, LinkedIn appeals to the top of the professional market because older business people have a tougher time seeing the value of Facebook’s wackiness. News Corporation, headed by the shrewd Rupert Murdoch, owns some of the premier advertising properties aimed at top-tier professionals including The Wall Street Journal and (in the UK) The Times and The Sunday Times. (Murdoch was smart enough to buy MySpace when it was ‘just’ $580m in 2005, long before the billions associated with Facebook).

In the new environment of professional online networking Newspaper classified advertising is becoming an anachronism (as I have argued in the distant past), and this trend is reflected in the decline of the advertising market in the newspaper sector.
Newspaper advertising is plummeting in the US, down 7.4 per cent year on year. In the UK classified advertising was down 8 per cent in 2006 and will decrease further this year, according to a forecast by media-buying network Zenith Optimedia. Meanwhile online spending grew by more than 41 per cent in 2006 to just over £2 billion, according to figures released by the Internet Advertising Bureau.

However, while online revenue is growing it isn’t offsetting the declines in print revenue. So newspapers need another way to monetise their online operations, and social networking - which is eating into classified revenues - is the natural route to take.

LinkedIn is also on an upward growth path which makes it a good acquisition target. It has more than 16 million registered users globally, spanning 150 industries in more than 400 economic regions and in the last year it experienced 189% growth. It is now the largest professional networking site in the UK, with over 1m users. It has a high calibre of members too - senior executives for 96 of the FTSE 100 companies have their own LinkedIn profile pages. In the US, all of the Fortune 500 companies have an executive level presence.

In January LinkedIn, which has been profitable since March 2006, announced a $12.8 million round of financing led by Bessemer and the European Founders Fund, bringing the total raised since launch to$26 million. The company had something over $10 million in revenue in 2006, and said they’ll do substantially more than that in 2007.

In the UK LinkedIn competes to some extent with with Ecademy, and in Xing in Europe/Asia, though its biggest competitor globally is Facebook. But the latter is too expensive a prize for News Corporation, even allowing for the tactical errors it’s made in recent weeks, which will have downgraded it from its $15 billion valuation, and the launch of Google’s competing OpenSocial platform for social applications.

There’s a further reason that LinkedIn could be in talks with News Corporation. Chairman and founder Reid Hoffman was this week in London to speak at MediaTech and an Oxford University event, affording him ample opportunity to visit News Corp executives here.

Although Hoffman hired a new CEO and became chairman in February he is still deeply involved in the business. Interestingly, in an interview with the Daily Telegraph this week, he was quoted as saying: “I would make LinkedIn a public company – but not until we’ve finished innovating. I find companies are more innovative when they’re private.”

This may indicate that LinkedIn will spend the remainder of this year working on the OpenSocial integration, prior to a sale. With Facebook snapping at its heels, it’s hard to see another route for it to take.

Link to TechCrunch Article