Tag: LinkedIn

Job Hunting? Reach Out and Touch Somebody

When it comes to job-hunting advice, look no further than the past. A recent Wall Street Journal story profiled several depression-era job seekers who found work the old-fashioned way: by forging personal connections. Some went looking door-to-door; others asked neighbors for job leads or had friends and relatives advocate on their behalf for open positions. 

Showing up at offices unannounced with a resume in hand would probably not fly in this age of electronic communication and lowered face-to-face interaction, and most applicants are careful to heed the “no phone calls” addendum on nearly every job posting. Still, there is something to be said for maintaining — or forging — personal connections that might give one job seeker the edge over another, less visible “virtual” applicant.

That may seem obvious, but the Journal story cites a Brookings Institution paper which found that “today’s job seekers devote little time to their networks: Only 9% of their job search is spent contacting friends and relatives to find work, while 51% is devoted to finding ads and sending out applications.”

“It is certainly the case that personal connections play a huge role in finding jobs,” says Wharton management professor Matthew Bidwell. “A classic study in the 1970s concluded that over half of professional and technical workers had found employment through personal connections. We recently surveyed Wharton MBA alumni and [learned] that when they moved jobs after graduation, around 50% of those jobs were [landed] through personal contacts.”

The Journal story points out that those connections often entail social networking tools such as Twitter and Facebook — today’s version of going door to door, only faster. “Social networking tools can help by providing a way for information to move quickly through people’s networks,” says Bidwell. “A friend of mine found her job after her sister saw a request for potential hires that someone posted on Facebook. Because people update their status regularly, sites like LinkedIn can provide an easy way to check which of your friends are in positions where they might be able to help. Indeed, LinkedIn markets itself substantially as a resource for looking for jobs and for hiring.” That said, Bidwell adds, “it remains an open question whether the ease of contacting people over these sites limits the sense of obligation people have to their contacts, or makes people less ready to help them.”

Job seekers also should not underestimate the power of their connections to get them in the door of a company that might not hire them otherwise. “Most research on hiring suggests that employee referrals are taken very seriously,” Bidwell notes. “The big problem that employers face is learning how good candidates really are. Sure, they have the resume, but it tells them little about the intangible characteristics that they really care about, such as attitude, ability to work with others, etc. Recommendations from previous employers are supposed to help provide this information, but given concerns about litigation, those recommendations are often hard to obtain and even harder to trust. Against this background, employers are likely to take employee recommendations seriously.”

And, because employees will often have to work with the new hire, they are likely to be careful about whom they recommend, Bidwell adds. “That gives employers more confidence in what [these employees] say.”

 

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Red Flags over Groupon?

On the heels of LinkedIn’s stunning debut on the stock market last month, Groupon — the popular group buying site — has thrown its hat into the tech-valuation ring by officially filing for an IPO on Thursday. According to the Wall Street Journal, the deal “could value the e-commerce company at as much as $20 billion” as well as “test the strength of a tech-investing frenzy.”

Last year, Forbes called Groupon “the fastest growing company ever.” Indeed, according to the Journal, the company’s revenues grew from $30.47 million in 2009 to $713.4 million in 2010. Revenues for the first quarter of this year alone were $644.7 million. At the end of March, Groupon’s subscriber base reached 83.1 million — up from 152,203 in June 2009.

The Journal notes that there are some red flags for potential investors — particularly that “the company has been spending a fortune” to fuel its growth. (Recorded losses were $413.4 million last year.) Meanwhile, some heavyweight competitors — notably Google and Facebook — are entering the group buying space, which clouds the company’s future.

In a recent interview with Knowledge@Wharton, marketing professor David Reibstein said that the group buying site business model itself is flawed and will ultimately leave customers and suppliers disenchanted — and it could bring ruin to investors.

Given the pitfalls, is Groupon’s IPO merely one in a series of pile-on filings from tech companies hoping to match LinkedIn’s success? (Internet radio company Pandora and online real estate evaluator Zillow both filed earlier this year as well.) According to Wharton marketing professor David Hsu, “I do think that firms pay attention to market sentiment in order to try to capitalize on the appetite for new listings. Coming off a cold IPO market over the last few years, private firms may be eager to try to tap the public markets in response to recent signals such as the LinkedIn IPO.”

Still, Hsu says, Groupon’s IPO makes sense in terms of timing — for marketing and corporate development reasons. “My perception is that the company is eager to raise public funds in order to extend its lead against the plethora of competitors in the daily deal space. In addition to funding [Groupon's] rapid growth in sales and marketing efforts, I suspect that the company is trying to develop offerings which will provide additional value to consumers and merchants. For example, the Groupon Now product, which is a mobile platform for offering on-the-fly deals, would seem to be a capital-intensive development effort, but one which might be important in keeping ahead of competitors.” He adds that international markets would be a natural place for the company to extend its efforts as well.

Although no date has been set for the IPO, all eyes are sure to be on Groupon both during and after its debut on the market. Adding fuel to the speculation that we are witnessing a new tech bubble, LinkedIn’s shares have already dropped about 18% since their initial closing price.

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All About LinkedIn

LinkedIn, the social networking site for professionals, made a stunning debut on the stock market on Thursday, when its shares more than doubled in price — from an initial public offering of $45 to a closing price of $94.25. It was the largest U.S. Internet IPO since Google debuted in 2004, when the company raised $1.67 billion.

According to the Wall Street Journal, LinkedIn’s valuation by the end of Thursday was $8.9 billion — a figure that some analysts believe is far too inflated for a company that made $243 million in revenues last year. Forbes columnist Eric Savitz points out that at one point during its opening day, LinkedIn’s shares were trading at 41 times the firm’s 2010 revenues. If Apple’s shares were trading at the same level, for example, it would be valued at $2.7 trillion, Savitz notes.

What’s behind LinkedIn’s skyrocketing value? According to Wharton management professor David Hsu, the run-up reflects “optimism about the scalability and value of the company’s business model,” but also the “scarce public access to investing in this category.” He adds that “this is great news” for Facebook, Twitter and others, “from the standpoint of understanding demand for these elite social media companies and associated valuations.”

Wharton finance professor Luke Taylor agrees. “For a long time, no one has really known how much these social media companies are really worth. The secondary markets have given us some noisy signals, but they’re just that. The market has finally told us how much LinkedIn is worth, which tells us something about how much similar companies like Facebook and Twitter are worth…. I’ll speculate that this news will make their IPOs happen sooner and happen bigger.”

In fact, Taylor notes, LinkedIn’s IPO must have surprised even its underwriters, who likely didn’t foresee the level of investor interest and therefore didn’t price the IPO as aggressively as they could have. By not pricing the stock at, say, $85 a share, instead of $45, “the underwriters ended up leaving roughly $300 million on the table during the IPO. Is that a lot of money for LinkedIn? Well, it’s more than LinkedIn’s revenue last year. However, if the company is currently worth $10 billion, then $300 million is just 3% of the company’s value.” One overriding benefit of the IPO, he adds “is that it brought LinkedIn lots of media hype, which may help them win more customers.”

Many analysts fear that LinkedIn’s current valuation is a sure sign that a second tech bubble is emerging, but Taylor doubts that is true. “It’s hard to know whether there is a bubble, even after the fact. I’m still not convinced there was a bubble in 2000.” According to Hsu, however, “a lot hinges on whether these [numbers] truly reflect the value that these companies have or will create. In the case of LinkedIn, for example, will labor and employment markets become more efficient in ways which would not otherwise take place in the absence of the company? And is the company well positioned to capture that value it has created? Time will tell.”

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