LinkedIn IPO - Round 2 - What really happened?

The LinkedIn IPO has brought in lots of commentary. The Sydney Morning Herald brought in this headline:

"The old boys' network: LinkedIn reveals investment bankers up to nasty old tricks"

I have no doubt that almost everyone at LinkedIn was thrilled to see the run-up; most executives at start-ups usually are. An IPO is an important marker. And, of course, the executives themselves are suddenly rich. But, in reality, LinkedIn was scammed by its bankers.

The fact that the stock more than doubled on its first day of trading - something the investment bankers, with their fingers on the pulse of the market, absolutely must have known would happen - means that hundreds of millions of additional dollars that should have gone to LinkedIn wound up in the hands of investors that Morgan Stanley and Merrill Lynch wanted to do favours for. Most of those investors, I guarantee, sold the stock during the morning run-up. It's the easiest money you can make on Wall Street.

As Eric Tilenius, the general manager of Zynga, wrote on Facebook: ''A huge opening-day pop is not a sign of a successful IPO, but rather a massively mispriced one. Bankers are rewarding their friends and themselves instead of doing their fiduciary duty to their clients.

Reality is that LinkedIn and its Board were in control of the pricing. They clearly saw the orders before they signed off on the pricing. Long before the IPO day they chose to NOT follow the path of Google who did a "Dutch Auction" for their IPO in 2004.

In a Dutch auction, a company reveals the maximum amount of shares being sold and sometimes a potential price for those shares. Investors then state the number of shares they want and at what price. Once a minimum clearing price is determined, investors who bid at least that price are awarded shares. If there are more bids than shares available, allotment is on a pro-rata basis--awarding a percent of actual shares available based on the percent bid for--or a maximum basis, which fills the maximum amount of smaller bids by setting an allocation for the largest bids.

Google's success in pulling off a large-scale Dutch auction was due to its tremendous brand recognition and huge financial resources. LinkedIn conducted a traditional IPO in which underwriters' promotional work heats up the market for shares.

To say that LinkedIn was not in control is a little disingenuous.

Mother's Day shows there is no free lunch at Google

As a leader in Digital Investor Releations and Media, we are often presented with and seek out the latest trends and tricks to make our clients more relevant. The tricks rarely work as Google is always one step ahead. From a recent article at CNBC titled "Trying to Game Google on 'Mother's Day Flowers", the latest trick in email world is to pay for backlinking to your websites, but Google sees all:

"Google and other search services encourage these techniques, known as white hat optimization methods, because they can provide valuable information to the public. But the search services wage a nonstop battle against black hat tactics — gimmicks that can boost a site’s search ranking without making it more useful.

“Sites sometimes violate Google’s webmaster guidelines in an attempt to game our algorithms and trick their way to the top of our results,’’ said Matt Cutts, the Google engineer assigned to protect the purity of his company’s search results. “If they succeed, this hurts the search experience for people coming to Google, because high-quality information gets buried by spammers, and sites don’t get to compete on a level playing field.’’

As stated in the CNBC article:

"Google wants Web sites to earn links because the sites are relevant; paying for links is against its rules. When caught in link-buying schemes, companies are often penalized by Google, which sends the sites plunging in its search results, sometimes for months.

On Wednesday, The New York Times sent Google representatives a list of roughly 6,000 links to the flower companies that were built in the last month. After Google’s spam team studied the list, a company spokesman, Jake Hubert, sent this statement:

“None of the links shared by The New York Times had a significant impact on our rankings, due to automated systems we have in place to assess the relevance of links. As always, we investigate spam reports and take corrective action where appropriate.”

In essence, Google said that these companies tried to game its algorithm, but for the most part, their efforts failed. So what we are talking about here is not Internet subterfuge — it is attempted Internet subterfuge."

There are no shortcuts and the penalty can be significant:

"Search engines generally forbid link buying and autoblogging schemes. That’s why Google responded so harshly in February when retailer J.C. Penney Co. was found to have boosted its search engine performance by buying links. An investigation by The New York Times found that Penney had purchased links on websites on unrelated subjects, like nuclear engineering and Bulgarian real estate, in a successful effort to get higher search rankings for its clothing and furniture lines.

In response, Google took the unusual step of bypassing its indexing software and manually slashing Penney’s search ratings. In a recent Google search for living room furniture, Penney’s site appeared on the sixth page of results; relatively few shoppers will ever get that far."

Brand Journalism - The Future or the Past?

At ProActive, we say both as a blend of "old school" and "new school". Content is King and distribution is King Kong.

This is a very interesting article at Ragan.com titled, "Can journalism help establish your brand?"

Some envision a communications future in which organizations spread their messages like bread-crumb trails through Twitter, Facebook or whatever new medium emerges next week.

But a new movement sees the future in an old media institution known for bad coffee, snappish editors and storytelling prowess under pressure: the newsroom.

A growing number of organizations are embracing a communications philosophy under a hotly debated name: "brand journalism." They are hiring reporters and photographers to write articles, shoot pictures and produce videos that draw readers to their websites and heighten brand awareness.

Brand journalism is the effort by any organization—the military, corporations, rock bands, nonprofits—to position itself by creating content ranging from articles to video to white papers, says David Meerman Scott, bestselling author of Real-Time Marketing & PR.

"I think all websites in the future will look like The Wall Street Journal online or msnbc.com," Scott says. "The good ones already do."

Yes, and they all need Google juice:

The topic is current enough to merit a panel discussion this year at South by Southwest. Advocates cite examples like IBM, HBSC's Business without Borders, Imperial Sugar, and Monster.com's use of tips articles as what Scott calls "search engine fodder" that attracts people looking for information and then ropes them in as potential customers.

Full story @ Ragan.com

"The Ramson Effect" & "The Google Effect"

When I first started working with Jeff Ramson @ ProActive, he always stressed "Content is King", and has since added to that phrase by saying, "Content is King and Distribution is King Kong!"

This was back in the days of clients asking, "What are the business applications of Social Media?"

Last week there was a very interesting article in the Wall Street Journal titled "Sites Retool for Google Effect" about the value of ORIGINAL CONTENT. Let's call it "The Ramson Effect" for purposes of this Blog.

Many small businesses that rely on Google for Web traffic are taking it hard—and looking for ways to adapt. "We got caught in the fire," says Mitchell Lieberman, chief executive of One Way Furniture Inc., an online furniture retailer in Melville, N.Y., that had revenue of $17 million in 2010. His company's website saw its Web traffic from Google drop as much as 64% after the changes. Part of the problem, Mr. Lieberman suspects, is his company has relied on manufacturer descriptions for the 30,000 products it sells. He says many of his competitors buy from the same manufacturers and use the same write-ups.

Mr. Lieberman has started paying free-lance writers to create original, more detailed product descriptions. He recently added canonical tags to his website, which help search engines distinguish original from duplicated content.

The Ramson Effect was also extended in the article by this business owner:

"Improving a website's rankings requires providing informative content, says Mr. deGeyter. "You're not delivering the same thing that a hundred other people are delivering," he says. "You're presenting your products or services in a creative way. That's going to give you an advantage." The Google spokesman says the company doesn't disclose details about changes it makes to its algorithms because doing so "would give bad actors a way to game our systems."

Our content and distribution models continue to evolve at ProActive and in the coming weeks we will drill down on those models here at The ProActive Network Blog.