BUSINESS INSIDER SAYS GOOGLE SHOULD ACQUIRE LINKEDIN NOW BEFORE THE IPO, BUT THIS IS REALLY A VERY BAD IDEA

Google's new CEO Larry Page is all about winning in social, tying every Googler's bonus to the success of the company's social strategy.

And he's right: Google absolutely needs to win in social because social is driving driving an ever increasing share of online traffic, and traffic is power and money.

An obvious shortcut for Google to win social is buying other successful social companies.  

The company that most often comes up as a potential target is Twitter, because it's the biggest Facebook rival and it's struggling to find a good business model, which means Google could be a long term home for it.  But Twitter doesn't want to sell.

One that gets less talked about is LinkedIn, because LinkedIn is more "niche" (albeit a huge niche). But with yesterday's news that LinkedIn is becoming a traffic firehose with its new focus on content, we should note the big reason why LinkedIn would make a very valuable social property for Google.

LinkedIn has one thing that no one else except Facebook has: REAL IDENTITIES.

The focus on real identities is one of the biggest factors in Facebook's success. At the beginning, you could only sign up with a college, and then a work email, which made people sign up with their real identities. Today Facebook still enforces its only-real-names policy.

Real identities are why people go on Facebook all the time. It makes the site feel more trustworthy. It makes sure people have their real friends on there with real photos. Being an online identity repository and system is a huge competitive advantage for Facebook, and something it's doing effortlessly despite every big company trying and failing to get people to use their real identities online. Real identities are what makes social networks "stick" and be so valuable.

With LinkedIn, Google would instantly get a database of 100 million real and valuable identities, which it can then cross-pollinate with Google Profiles, its own ho-hum effort to get people to give it their own real identities.

LinkedIn can then evolve its focus slowly and progressively away from "merely" professional networking. The barrier between personal and professional identity online is getting blurrier and blurrier anyway. Services like Twitter and About.me are already hard at work obliterating that distinction. That would be bad for LinkedIn as a standalone company, but great for a Google-owned LinkedIn.

Sharing content is another big social network activity that LinkedIn is already shifting to, and combining Google's new sharing service +1 with LinkedIn would give it that instant boost. LinkedIn would stop being a resume database but become a sharing hub for information like Facebook and Twitter. 

Integrating LinkedIn profiles and Gmail, like third-party tools like Rapportive already do, would also be a big boon: opening an email you would see not only a person's email and "name" but their real identity. Integrating LinkedIn and Gmail that way might cause privacy jitters (but again, some tools already do this using publicly available info and APIs) but it would improve Gmail and drive a huge new wave of signups to LinkedIn.

In time, LinkedIn could go from being a social network for execs, to a social network for people who have jobs, to a social network for everyone. That would be a real threat for Facebook.

If Google wants to buy LinkedIn, it had better do it soon rather than before it gets a huge IPO pop. So it's something to think about.

COMMENTARY:    Through its relatively brief 5+ year history, no other site can match the unprecedented growth of Facebook and the manner in which it has dominated the social networking scene in every internet measurement--number of registered users, monthly active users and revenues.  It would not be too far fetched to declare Facebook the winner of the social networking wars.

The idea that Google should acquire LinkedIn as a way to gain its entry into the social network space, does not make much sense strategically or in terms of shareholder value.  

• Registered Members and Active Users - As of March 2011, Facebook has an estimated 600 million registered users and according to an estimate by Quantcast has 136 million monthly US active users.  Quantcast does not report the total Facebook's global active monthly users.  However, Facebook claims 375 million monthly global active users. LinkedIn has 100 million registered users and  34.8 million monthly active U.S. users in the U.S. and 81.9 million monthly active global.
• Revenues and Net Income - Google had $29.321 billion in gross revenues and net income of $8.5 billion in 2010. LinkedIn had $243 million in gross revenues and net income of $15.4 million in 2010.  It would be a stretch to say that LinkedIn's number's will dramatically increase Google's numbers, as they respectively represent only 1% and 1.85% of Google's numbers.  
• Business Valuation - As of May 6, 2011, Google had a market cap of $172.11 billion.   According to SharesPost, a secondary market private stock broker, LinkedIn is valued at $2.51 billion or about 1.5% of Google's market cap.

The idea that LinkedIn will give Google and instant "boost" in content sharing is vague to me.  How does one make money off of content?  User's don't sell their content.  Even YouTube is making peanuts on their video content. How does sharing content provide value? I am confused.  

None of the  big three metrics: web traffic, revenues and market value, web traffic add much to Google.  

• LinkedIn Users Less Active - Facebook's US monthly active users are  much more active online than LinkedIn's--Facebook has 136 million US monthly active users (154 million US users and 600 million global users) while LinkedIn has 34.8 million US monthly active users (100 million global users).  LinkedIn has a total of 81.9 million global active users.  The ratio of US monthly active users to registered users for Facebook and LinkedIn are 88.3 and 34.8 respectively.  If you use Facebook's 375 million monthly active users, then the ratio is only 62.5, but this is still higher than LinkedIn's. Facebook's US users are more engaged.  Advertiser's pay for impressions, and LinkedIn's ad impressions are not attractive as Google or Facebook.  
• Data For Monthly Global Users Missing - According to Quantcast, Google has 149.1 million active monthly users in the U.S. alone.  No global numbers are available.  When you combine these with LinkedIn's  34.8 million monthly US active users, this works out to 183.1 monthly US active users.  Facebook has 136 million US monthly active users, so Google stands to gain something from an acquisiton. However, neither Google or Facebook publish their global monthly active users, making a comparison between Google and Facebook difficult at best.      
• LinkedIn's Soft Advertising Platform - One of LinkedIn's conumdrum's is that its business model depends a lot less on advertising than does Google or Facebook.  Advertising represents only about 32% (Jan through Sep 2010) of total revenues.  Job listings and premium subscriptions were 41% and 27% of total revenues for the same period respectively.  LinkedIn's advertising revenues were estimated at $77.8 million out of a total of $243 million in 2010.   Google had $28 billion in advertising revenues out of a total of $29.1 billion in revenues for the year 2010.   If LinkedIn's ratio of ad revenues to total revenues (32%) remain the same, this will only increase Google's ad revenues about 2.7%.
• LinkedIn No Longer Growing Exponentially - LinkedIn has already reached saturation in the U.S. with 44 million members, and like Facebook reached a critical inflection point, so will experience slower growth in users and advertising revenues.  Since 27% of its revenues are premium subscriptions, this could have a very negative impact on LinkedIn's future revenues.  In February 2011, China banned LinkedIn from operating there.  This provides no advantage to Google.  

All of this leaves you wondering whether it is worth it for Google to acquire LinkedIn. It took LinkedIn an attorney to reach 100 million registered users, and an acquisition of LinkedIn hardly makes a dent in the three major metrics (registered users and active users, revenues and income and business valuation).  

I also find issue with the idea that once Google acquires LinkedIn it could expand out of its profesisonal business niche, a strategy that would destroy LinkedIn's major point of differentiation versus other social networks.  Google does not want to fiddle with LinkedIn's niche-driven business model to compete against a general purpose social network like Facebook.  That strategy is doomed to fail.

LinkedIn is generating only $0.778 in revenues per registered user and $0.94 per active user.   Facebook had 2010 revenues of $1.865 billion, of which about 250 million was commissions from the sale of Facebook Credits. This means that Facebook's advertising revenues were about $1.615 billion, an average of $2.69 per registered user and $4.30 per active user.  According to eMarketer, Google' U.S. advertising revenues were $10.1 billion or about one-third of total revenues.  It's U.S. monthly active users is 149.1 million users (no figures for global).   This means Google's average ad revenues per US monthly active user is only about $0.07.  LinkedIn's advertising revenues are going to make an unnoticeable effect on Google's total revenues and its average ad revenues per US monthly active user.

I have sliced and diced Google, LinkedIn and Facebook, to find some benefit for Google to acquire LinkedIn, and the only one that I could find is that it allows Google to enter the social network country club, and not much more.  And to join that club Goggle will be paying quite a premium--166 times earnings, based on SharesPost pre-IPO valuation of $2.51 billion.   

If Google is serious about entering the social network space, I would recommend that they acquire Badoo, a 120 million dating social network which I profiled in a blog post dated April 27, 2011. Badoo is huge outside the U.S., especially in Europe, Brazil and Mexico, but it recently entered the U.S. market, and is making tremendous headway in a relatively short period of time.   Badoo is profitable, and has been valued at $300 million, but talks of an IPO are looming, with some social media experts placing Badoo's pre-ipo valuation at $2 billion.  That is an acquisition that makes sense to me.  I hope Larry, Sergey and Eric are reading this and taking note.   

Courtesy of an article dated May 3, 2011 appearing in SAI Business Insider, and blog update dated March 22, 2011 appearing in the LinkedIn Blog and an article dated January 28, 2011 appearing in Mashable