NEW YORK ( TheStreet) -- I appreciate well-written work. If it makes me react and rethink my position, I have nothing but love and respect for the author. With that in mind, I suggest you read Chris Laudani's LinkedIn is a Glorified Rolodex. Not only do you get to read a bear case on LinkedIn ( LNKD), but you get a free preview of TheStreet's excellent Real Money premium service.
I take exception, however, with two points at the core of Laudani's argument. First, he claims LinkedIn is merely an online knockoff of Robert Half ( RHI). Fair enough. But does that make Coinstar ( CSTR) and Netflix ( NFLX) cheap imitations of video rental stores and movie theaters? Is Stamps.com ( STMP) a pointless endeavor because we have the U.S. Postal Service? Are social media sites merely glorified email and coked-up message boards? Large swaths of investors completely misunderstand what the alleged "bubble" of "Web 2.0" is all about. The entrepreneurs who start companies such as LinkedIn are not merely looking to make a splash, go public and cash out. They are intent on changing the world by connecting people and making life's daily processes -- for business and pleasure -- more efficient. We live in extraordinary times, yet, at every turn, somebody stands by ready to shoot down the zeitgeist. Over the course of the past decade or two, Apple's ( AAPL) Steve Jobs reshaped computing as he invented iPod, iPhone and iPad. Tim Westergren came up with the groundbreaking idea for Pandora ( P) and ended up disrupting entire industries. Mark Zuckerberg built Facebook ( FB) in his dorm room and effectively spawned Twitter. And let's not forget about the man who, at the end of the day, started all of the madness in the mid-1990s: Jeff Bezos turned retail and a handful of other spaces on their ears as he pioneered what we take for granted as e-commerce. Laudani's second point of contention against LinkedIn focuses on an oft-repeated argument: It spends too much money (he's not sure on exactly what or why; he should consult Bezos on this) and the firm's revenues have slowed. To the latter point, Laudani directs us to LinkedIn's conference call slideshow and notes:
On slide five, revenue growth peaked during the third quarter of last year. It's on the chart. You can't miss it. I didn't listen to the conference call, so I didn't hear what management said about the slowdown in revenue growth, but I would think they would blame seasonality.
I looked at "slide five" and here's what I saw: Year-over-year revenue growth between Q3 2010 and Q3 2011 increased by 124.2%. Revenues grew sequentially 21% between Q3 2011 and Q4 2011 and by 11.9% between Q4 2011 and Q1 2012. If LinkedIn hits the midpoint of its revenue guidance for Q2 2012 ($212.5 million), sequential growth between Q1 2012 and Q2 20012 will come in at 13%. If the company keeps the same pace between Q2 2012 and Q3 2012, it will put up $240.125 million in revenue in Q3, which would represent year-over-year growth of 72.8%. Clearly, that's a slowdown, but it's inevitable in any rapidly growing business and its one that I will take. Peek at quarter-to-quarter revenues at almost any hyper-growth company --Apple, Amazon, you name it -- and you'll see a similar dynamic. It's next to impossible and actually unhealthy business to see only straight lines pointing upward. That's not always sustainable growth. Businesses change, adapt and evolve. That's what's happening at LinkedIn. If you did listen to the company's conference call, you heard management discuss this. For example, LinkedIn CEO Jeff Weiner addressed a concern raised with regard to growth prospects at other perpetual start-ups such as Facebook and Pandora. Here's the question followed by the meat of Weiner's response:
Question: First, on the mobile, it looks like you are not seeing any deterioration of pressure on your revenues from mobile usage. How are you able to monetize that, and are you worried that it could eventually pressure usage if that percentage keeps increasing? Weiner: I think it depends on the business line. So our intention is to bring all of our business lines into the mobile environment, and of course it will depend on the channel. Smartphone and the iPadThat's why you cannot make a complete analysis unless you listen to the conference call. That was not spin; that was a CEO discussing candidly an issue that sits at the forefront of any discussion involving so-called Web 2.0: How will companies monetize users and subscribers in the mobile environment? While I am more than optimistic with regard to LinkedIn and, even more so, Facebook and Pandora'sprospects in this regard, it's an open question that warrants critical treatment. At day's end, you can place LinkedIn in the dustbin of already- or soon-to-be dead start-ups. It seems to me, however, that that's the easy answer that ignores the weight of transformational times across business and society.
andiPod are different in that respect ... We can create more value by virtue of enabling our paying customers and subscribers to get access to those products and services regardless of where they are, and that's a core value proposition for us ... With regard to the iPad, I think there are going to be very natural locations and placements within our application that will nicely mirror the website in terms of the ... models that we are already have. In terms of the smartphones with less real estate, we're going to be testing some different ways of monetizing that from asales perspective.