June 18, 2008, 3:35 PM — LinkedIn, the social-networking site for career advancement and professional interactions, closed a funding round that values it at US$1 billion, something the company considers a validation to its particular approach to this market.
Unlike MySpace and Facebook, which focus on meeting and staying in touch with friends and sharing photos, videos and personal information, LinkedIn is designed for professional networking and job-related matters.
In that sense, LinkedIn has an "all business" feature set and look-and-feel that are drastically different from conventional social-networking sites, like MySpace, Facebook, Bebo and Hi5.
While often knocked by industry observers for being boring, LinkedIn has stayed true to its niche and currently has about 23 million members, a portion of which pay a fee for premium features. The site also sells advertising.
On Tuesday, Dan Nye, LinkedIn's CEO, announced in a blog posting details of the funding round and valuation.
"LinkedIn has raised additional funding from our original investors and added another world-class investor to our team. Bain Capital Ventures joins our existing group of investors - Sequoia Capital, Greylock Partners, and Bessemer Ventures - and leads this round of investment at a total of $53 million," Nye wrote.
LinkedIn, which had previously raised $27 million and has been profitable since 2006, is now valued at "slightly over $1 billion," according to Nye.
"This significant investment is indicative of the confidence shared by our investors in our business model and our long-term growth strategy," he wrote.
Social-networking companies have attracted much attention and investment in recent years. News Corp. acquired MySpace for more than half a billion dollars in July 2005. Last year, Facebook's valuation was estimated at $15 billion. And AOL acquired Bebo this year for $850 million.
However, questions remain about these sites' ability to generate the type of revenue that their popularity and traffic should command. In May, News Corp. announced that Fox Interactive Media, MySpace's unit, will fail to meet its revenue projections for this fiscal year by about 10 percent.
Meanwhile, Facebook's attempts to leverage its users' interactions on the site to sell more and better targeted advertising have met with mixed results. In particular, its Beacon program got the company into a strident privacy controversy and led top officials to acknowledge the program could have been better designed.
One of the biggest stumbling blocks for selling advertising on social-networking sites remains companies' reluctance to promote their products in pages that are created by millions of individuals and that can feature content of an objectionable nature. Another problem: it seems that people aren't primarily interested in paying attention to ads when they're in social-networking sites.
It can be argued that these concerns may be lessened at a site like LinkedIn, due to its focus and to the type of interactions its users engage in.