The cover story for the May/June 2011 issue of ONLINE is all about digital transparency and the valuations of social media companies. Authors Enrique Bonson and Francisco Flores wrote the article before LinkedIn’s (LNKD) IPO this week, so had only one public company, XING, to evaluate for a true market valuation. LinkedIn surprised everybody with the heady valuation placed on it by the market. It had a 109% gain in just the first day of trading and is valued, as of this morning, at $10 billion. Bonson and Flores used an article from Reuters dated January 6, 2011 for their $2.2 billion valuation.
That’s a pretty amazing difference, but supports the gist of the article, that digital transparency is hard to ascertain before companies go public. It also makes many people wonder whether the LinkedIn valuation is a sign of a new dot-com bubble.