Is LinkedIn Really Worth More Than $100?

Professional networking site LinkedIn (LNKD.DL) has often been referred to as the adult version of Facebook (META -10.56%), but unlike social networking, LinkedIn isn't yet a "fun" place to hang out. Sure, one's for professionals, the other is social, so there will always be that dichotomy that keeps LinkedIn from allowing its 175 million members to engage in the juvenilia that passes for content over at Facebook, but that means people are less likely to spend more time on the site. So it's leaving a bit of opportunity on the table.

In the U.S., where LinkedIn has the greatest penetration, the market analysts at comScore say users spend on average 20.6 minutes a month on the site compared with 402.9 minutes at Facebook. Moreover, they make an average of just 5.4 visits per month to the site compared to 35.6 visits on the social networking site. Obviously there's a lot more engagement going on at Facebook than at the grown-ups' networking site.

Of course, it can be argued that the engagement that does occur is of a higher quality than what's happening at its peer, but the large disparity between the two sites highlights ways in which LinkedIn can still grow and further monetize its site.

Can LinkedIn avoid turning in to Facebook, yet increase engagement? Let's take a closer look.

LinkedIn snapshot

Source: FinViz.com. N/A = not applicable; LinkedIn doesn't pay a dividend. TTM = trailing 12 months.

High-falutin' honeys
It seems LinkedIn is aware that it needs to become more "sticky," because it just tweaked its profile page to move users in that direction. There's more customized content, the ability to "endorse" someone's qualifications, and Facebook-style notifications.

He who hesitates is lost
Those and other tweaks over the past two-plus years allowed it to grow from 12 million unique users the to 135 million it sees today. That may be a big improvement, but it's still not getting its members to visit more frequently or do more once they're there.

That could be because its competition has people using the more-engaging Facebook platform. Monster Worldwide (MWW) offers a Facebook app called BeKnown, as does Gannett's (GCI) CareerBuilder. BranchOut said their app has 30 million users and counting. Having waited so long and kept its site narrowly focused, LinkedIn may have missed opportunities to grow its base more and generate greater revenue.

Fish in a barrel
Right now half of LinkedIn's revenue comes from its power users, the professional organizations and recruiters who paid $121.6 million to access its hiring solutions technology. That more than doubled from the year-ago period and represents 53% of its quarterly revenues.

My Foolish colleague Rick Munarriz sees its approach as effective, as a talent-rich pool of individuals gather in one place where paying customers looking for the best qualified people can pick them off one by one. In contrast, Facebook, Twitter, and MeetMe (NYSEMKT: MEET) are still casting about for the right formula, relying primarily on advertising dollars for income, a somewhat riskier, less secure means of money-making.

Others might argue having to create the content for others to profit from might be suboptimal, though if by creating such content you land a job, it might pay dividends in the end. With its low-touch clientele however, LinkedIn not only needs to add more functionality to bring in and keep its users, it needs to do so more quickly because of the opportunities rivals are finding elsewhere, particularly on Facebook.

Price is what you pay
For that reason, I have a tough time valuing LinkedIn at seven times Facebook's trailing earnings or even two and a half times its estimates. As Facebook's earnings yesterday showed, it's on a learning curve for monetizing its huge user base and it's learning quickly. That gives it an even greater range of possibilities than LinkedIn has.

I previously rated LinkedIn to underperform the market indexes on Motley Fool CAPS, the 180,000-member investor community where informed opinion is translated into stock ratings of one to five stars. The professional networking site's lowly one-star rating suggests quite a few are yet sold on its nosebleed valuations, either.

By making either a bullish or bearish CAPScall, I hold myself accountable for the opinions I express here. Tell me in the comments section below whether you agree LinkedIn north of $100 a share is a bit much to pay for the lack of engagement it currently offers.