LinkedIn IPO: what could it mean for the enterprise?

As the social media company with the most discernible business model to date, LinkedIn's decision to float came as little surprise.

As the social media company with the most discernible business model to date, LinkedIn's decision to float came as little surprise.

It has now filed for an initial public offering (IPO), which is thought likely to happen within the next few months and will involve the sale of at least $175m of new shares. But what will this mean for LinkedIn and its users now the company has finally decided to take the plunge?

Andy McLoughlin, co-founder of collaboration technology supplier Huddle, is familiar with LinkedIn's business model, having acted as a launch partner on an application with the company in 2008. He says LinkedIn's IPO is a smart move, particularly as Facebook is now turning its sights on the business world as a means of enhancing revenue.

"LinkedIn's focus has to be on delivering tools for business, but I don't think the IPO will make anything different for the end customers," he says.

Besides fees from recruiters, the company also makes money from ad revenue, so it may look to refining the tools it offers different sectors. "It's MO will be to get people to stay on the site for as long as possible," he says.

"I imagine it will be looking to flesh out its other services and will be looking to build tools for other verticals. For example, it already has a legal updates app, a real estate app and a creative portfolio for designers."

Augie Ray, California-based analyst at Forrester, agrees. "LinkedIn has been innovating more recently, rolling out new features such as company pages, product ratings and Signal, its new product for gathering intelligence out of social data. I anticipate LinkedIn will continue to focus on innovation in 2011," he says.

International expansion could well be another aspect to the company's growth strategy, with an acquisition of German and French LinkeIn equivalents Xing and Viadeo a possibility, says McLoughlin . "It may be looking to add more languages as it's only running in Spanish and English at the moment. Perhaps it will be looking at the BRIC countries (Brazil, Russia, India and China) or the European market."

Risk and rewards

However, the IPO could transform LinkedIn from being one of the bright young social media darlings, into a results-driven corporation, says Mike Davies, senior analyst at Ovum.

"When companies take out IPOs there is an immediate expectation of a big dividend return for investors, so more business strategy will be required. The downside is that it will have to sit down every quarter and look through financials, which could distract from it concentrating on technology and development," he says.

LinkedIn could itself become the target of acquisitive companies. "There is now more potential for someone else to buy it, which could be appealing for companies looking to get into the social media space," he adds.

But Richard Holway, analyst at Techmarketview, says it is important to make a distinction between LinkedIn and other social media platforms. "LinkedIn's only real value is as a massive recruitment jobs board - there's nothing wrong with that, we also use it - but the value outside that is extremely limited.

"If it sticks to its niche, there's no reason why it will grow. Whether it will justify investment [from shareholders] will remain to be seen," he says.

But for enterprises using LinkedIn's services, the injection of more capital and focus to drive business revenues for the moment at least could well be a beneficial move.

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