Erikka Askeland: Is 2011 to be the new 1999 for the social networkers?

THIS year it looks like we are going to party like it's 1999. That is the last time that dotcoms floated on the stock market with valuations that seemed to be dreamed up in a zero-making factory when compared to actual revenues or profits.

Now the business-oriented social networking site LinkedIn is reported to be rushing for an IPO ahead of its bigger, more fun-loving cousin Facebook, among others, making those of us who were there the last time wonder if history is repeating.

I recall the grumpy business editor I worked for at the time emerging blinking from his office, scratching his head and asking: "How is it possible that company X can be worth $100 million when it doesn't even make a profit?".

Of course, it only took a few years for that question to be answered by billions being wiped off the value of investors' portfolios in the dotcom crash. I've also since seen persuasive arguments that the vacuum created by the implosion of all that cash set US regulators on a course to reflate the flagging economy with a subprime housing boom bringing on the global banking crisis of 2008, but I digress.

We are beginning to see how much Facebook makes: about $355 million profit on revenues of $1.2 billion in the first nine months of last year. This is much more promising than those dotcom dogfood retailers with little grasp of P&L we saw last time around. But whether this adds up to a $50bn company - as the 1 per cent stake that Goldman Sachs took in the firm last week indicates - is another matter entirely.

Sure enough, once all the excitement about Facebook potentially being worth more than twice the value of Yahoo starts ebbing, look who's got a stake in both social networking sites. If it isn't that vampire squid, Goldman Sachs. So do I smell the machinations of the investment bank behind the rumours of the LinkedIn flotation?

The argument for LinkedIn going ahead with an IPO before Facebook is summed up as: "Who would give a brass toot about LinkedIn if it went afterwards?" Plus it would make sense to test the market with the smaller, more sober-minded site, providing a useful comparison.

But we haven't the foggiest idea yet whether the California-based LinkedIn makes money. Like the bad old days of dotcom mark one, the site has a list of web-savvy names as investors, and lots of reasons why it "works". But at the time of going to press the site didn't come back on questions about its financials.

Does it work? For as many people as I know who have 500+ LinkedIn "contacts", there are just as many who ask me what is the point of it all. Most of the latter, to be honest, are of a certain age. The rest are using it to scrabble for jobs or freelance work, or to boast of recent successes. Or they have forgotten they have signed up at all.

And all are using it for free. Like Facebook, LinkedIn's revenues are largely driven by advertising to their 90 million or so users, not subs.

One of the main selling points of dotcom hopefuls 12 years ago was the number of "page impressions" they had: get enough people looking at a website and you could add millions to your value.

This turned out to be so much puff, because eyeballs didn't then translate into hard cash. But the argument is now being used again as a fundamental aspect of both Facebook and LinkedIn's potential - and maybe the second time around they will be right.

Forget the bile, our banks are a necessary evil

WITH regards to the billions being paid to bailed-out bankers this year: either you have to swallow the bile-making fact of multi-millionaires pocketing more millions, or see the entire tax revenue-blessing industry stamped out of London.

Despite all of Business Secretary Vince Cable's bluster about "pinstripe Scargills", the rest of the coalition has neither the inclination nor the wherewithal to wipe out the UK banking system and build it from scratch. Because that is what would need to be done if bonuses were to be eradicated sufficiently to quell the anger.