LinkedIn’s spectacular debut as a publicly-traded company last week also delivered a lot of other food for thought, including whether the IPO market is ready to come back to life after being dormant for a long time.

Another interesting topic is the impact LinkedIn’s IPO could have on the social media landscape. For the past few years, the story has been the strong growth in the number of users, while revenue generated by social media players has taken a back seat.

Part of this focus has to do with the fact these companies are privately-owned, which means their financial results are not disclosed. In the absence of this information, the spotlight has been on the number of users as a metric for success.

But LinkedIn’s IPO is going to change things. With LinkedIn disclosing its sales and profits, investors will have a way of establishing valuations of other social media companies that offer details of their sales. Suddenly, the valuations of many companies will be measurable, at least on paper.

For social media companies that have any kind of revenue, there will be a growing temptation to either do an IPO or sell because LinkedIn investors have established valuations that can be benchmarked against. Do not be surprised to see a growing number of IPOs, aside from usual suspects: Facebook, Twitter and GroupOn.

The other major issue that will likely emerge as a result of LinkedIn’s IPO is how companies with revenue can demand high valuations. It could encourage social media companies to drive more revenue growth as opposed to focusing on attracting more users. The more revenue a company has generate, the higher its valuation.

For consumers, this might mean the buffet of free services might start to disappear as social media players start to focus on revenue.

For the past few years, consumers have enjoyed an amazing social media “party” with no lack of choice. LinkedIn’s IPO, however, could signal a major shift in the market’s dynamic as valuations and revenue move into the spotlight.

Tags: IPO, linkedin, Social Media, valuations

This entry was posted on Monday, May 23rd, 2011 at 7:30 am and is filed under Social Media. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.