I have written about LinkedIn countless times on this blog (4 pages of Lijit results). What bothers me about LinkedIn is that they had a fantastic franchise but they have done little with it in the last two years (similar to MySpace). Yes, they have user growth and are reportedly cash flow positive, but focusing on China and India does nothing but run up the numbers pre-IPO. Bloomberg announced that LinkedIn is now going to focus on acquisitions in the mobile space (via Silicon Alley Insider). This is another ho hum move by the company. Here's why:
- Opportunities in mobile have been obvious for at least five three years yet LinkedIn could not develop the internal expertise and needs to acquire the expertise to pursue opportunities;
- Their cash horde from the last capital raise is unspent so they take the "easy" way out and spend the money on acquisitions before the investors become totally irate
- These acquisitions may create a better customer experience but they do nothing to create a richer user experience (adding blogs and Twitter to LinkedIn profiles does not make a richer user experience)
In fairness the CEO was changed after the capital raise so maybe a new strategy was required, but this new direction will not create much shareholder value or improve the user experience.
Lesons to be learned from LinkedIn:
- Acquisitions rarely work (Cisco would be a notable exception)
- Focus on improving the customer experience when investing new capital
- Recognize that mobile is just a delivery mechanism and it is not a new strategy for growth; focus on the user experience and content and be platform independent
I don't have anything against LinkedIn or the management. I just become incensed when a great franchise is "squandered". It is very difficult to find and develop a great franchise and it should be treated with a care and respect similar to what you hopefully give your children. I have the same feelings about Microsoft abusing their franchise, but I will leave that to a future post or post mortem.
