The business pages have been full in the past week of the news from business-biased social network LinkedIn that it has just raised $53million in a fourth funding round led by Bain Capital. The $1 billion value it puts on the company is obviously getting some scrutiny when LinkedIn is predicting revenues this year of just $75 - $100 million. It claims profit, but I couldn't find figures to support this.

Web 2.0 currently has the air of the crazy days of the Dot Com Boom, when anyone with an e-commerce site and a banker as a friend found themselves a paper millionaire. As a 30 year old with a small secure e-commerce company based near Cambridge, I too got engulfed and remember the day clearly when I was at dinner with bankers from a reputable US firm telling me my company was worth £4 million today, but in 9 months I would be worth £10 million, and £100 million the end of the year after that. My company turned over £1.75 million at the time. So confident were they, they offered to lend me money against my future worth. Dreams of Elton John as a neighbour and a McLaren F1 for trips to Waitrose saw me doing the deal and selling my company, although I never actually took up the personal loan. And thank heavens I didn't, as when the crash came six weeks after I signed I was left with nothing.

So the pressure is on LinkedIn -- and Facebook come to that, valued at $15 billion through Microsoft's investment of $240 million for a mere 1.6% stake last year -- to show to those of us with both feet on the ground and burnt fingers how they are really worth what people are paying. Some proof is needed that Wall Street is not believing its own hype, as it has been show to do before.

LinkedIn has always pointed to a prosperous membership as the basis of much promise, with its 23 million members having an average household income of $109,000. Easier to make money from than a bunch of teens, says Reid Hoffman, founder and CEO of LinkedIn, and I wouldn't argue. But let's not skip over the detail of exactly HOW he can make money from that enviable user base.

It's becoming accepted that there are probably only three ways to "monetize" Web 2.0 businesses: sponsorship, subscription and advertising revenue. The first means the site, or groups of pages, get branded as being presented by such-and-such and, so far, LinkedIn shows no signs of taking this route. I would say their traffic numbers are high enough to do this, but they seem keener to build their own brand than take money to promote someone else's.

LinkedIn currently charges a subscription for a premium level of membership and this has had some appeal to obessesive networkers and recruitment consultants, who get easy access to what amounts to 23 million CVs. LinkedIn is now a key tool for high-end headhunters, but these guys disappear quickly when the economy takes a squeeze and recruiting slows. Surprisingly, the near endless supply of contacts in LinkedIn seems not yet being adopted by general sales teams as a prospecting database, even though I have read a few articles recently that suggest social networking could provide a viable alternative to cold calling (see http://tinyurl.com/6fn9k3 as an example).

Advertising is probably where much of LinkedIn's revenue comes from today and I would expect it to play a big part in the future. Who wouldn't want access to the profile of average member they have?

So I read with interest an interview with LinkedIn's European MD, Kevin Eyres, on the Telegraph website this week (http://tinyurl.com/5ky3dz). There was all the normal stuff in there trying to justify a $1 billion valuation, but the REAL news was that on its way to do so, LinkedIn will be launching a rival to Time Out shortly! Yep, the way forward is a London restaurant listing, it would seem.

I have thought long and hard since I read this as to how any business could consolidate a facility for planning a night out with a careers website, when it should be proving it can dominate a market with a narrow focus (LinkedIn has strong rivals in Europe, such as Xing and Ecademy). The only reason I can think this might make sense is if it then sells advertising to restaurants, bars, clubs and shops who'd like high earners as patrons. Makes some sense I guess and I am sure the high-end brands will be fighting over each other.

But then I remembered that LinkedIn promotes itself as a business focused social networking site. Yes, it has individual members and each earns a lot, but those same members also have high powered jobs in companies that spend a whole lot more than they do individually. Is there not much more potential in giving business to business companies the facilities to engage with influencial people within the corporations they are targeting? Doesn't LinkedIn offer, say, HP or Vodafone a much higher return from being able to tap into senior executives at prospects than Thomas Pink or Waggamamma are likely to get from the same people as individuals?

To me this move suggests that LinkedIn perceive they are sitting on a big collective of individuals who happen to be in business, rather than a business networking site. I have posted on this before and this move provides further evidence that LinkedIn is missing a role as the mother of all business enablers because it can't see itself as anything other than Facebook for the wealthy.

I'd be interested in your views.

Ian Hendry
CEO, WeCanDo.BIZ
http://www.wecando.biz