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LinkedIn proves not all social IPOs were bubbly

Financial results humiliate Facebook, Groupon, Zynga

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While IPO investors in Facebook, Groupon, and Zynga are still losing money on their investments, shares in LinkedIn rose nearly 20 per cent in trading after the company released good fourth quarter and year-end results.

On Thursday, LinkedIn reported that revenues were up 81 per cent to $303.6m for the last quarter, and up 86 per cent to $972.3m for the whole of 2012. Profits in the company's fourth fiscal quarter nearly doubled over the year to $11.6m, and the site now has 202 million users, up 39 per cent on the year. Non-US user growth was particularly good, with 64 per cent of the site's profiles coming from outside LinkedIn's American market.

The company isn't saying how many people are buying LinkedIn's premium-access package, payments for which accounted for 20 per cent of the firm's revenues. Looking ahead, LinkedIn predicts revenues of between $1.41bn and $1.44bn during the current year.

"2012 was a transformative year for LinkedIn," said CEO Jeff Weiner in a statement. "We exited 2011 having successfully revamped our underlying development infrastructure. The products we delivered throughout the year drove member engagement and financial results to record levels in the fourth quarter."

Wall Street responded by pushing the social networking firms shares to $150, significantly up from their IPO price of $45. By contrast, Facebook's shares still languish at around two-thirds of their IPO price, and those (un)lucky enough to buy into Groupon and Zynga have seen their holdings reduced to a fraction of their initial value.

LinkedIn's success can be attributed to a number of factors. The company pitched a low initial valuation at IPO and has retained a tight grip on business fundamentals. There have been no massive purchases, new services have been rolled out slowly to avoid antagonizing the user base, and the site offers clear value for its members.

It's a lesson others in the social-networking field could learn from. ®

The smart choice: opportunity from uncertainty

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