One More Reason to Avoid LinkedIn

Erin is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Last week LinkedIn (NYSE: LNKD) admitted that roughly six million user passwords were stolen.

But users didn't go scrambling to secure their profiles and ensure their accounts were not hacked.

Why?

Because there is very little personal information on LinkedIn that could really hurt a user. In theory, a user could have personal credit card information at-risk, but so few members actually pay for services, that the hacking did not cause widespread alarm. In general, I think the company struggles to keep user's attention, so few users were concerned when the security breach was announced. Which leads me to declare, yet again, that this is social media site might be overhyped, and therefore a bad investment.

It does not matter if a company posts stellar numbers if there is absolutely no incentive for users to actually use the site!

LinkedIn continuously fails to connect with its own users- so much so that a major security breach did not cause much concern at all. The company has potential to truly be a great resource, and for that reason, it should not be ignored- for investors or potential users. From strictly a mathematical point of view, ignoring the more in-depth social aspects of the site, it appears to be a no-brainer, and every investor should want a share.

By the financial numbers, the company comes with high marks and respect. The company released its 2012 first quarter earnings May 3. Revenue for the first quarter was $188.5 million, an increase of 101% compared to $93.9 million the year previous. Net income for the first quarter was $5.0 million, compared to $2.1 million for Q1 2011.

The financial numbers are great. But the lack of attention to security and care for 107 million unique monthly visitors is disturbing. The lack of security that led to the hacking is cause for concern. Why was protection of user accounts not a higher priority? LinkedIn continues to talk about new offerings for businesses- in the form of ads, better ads, and more ways for businesses to reach the 107 million unique monthly users.

But from the point of view of a social media expert, I continue to see mounting evidence that this site is risky and will implode someday without massive restructuring and changes in its offerings to users. The password breach only adds to these concerns.

Why would you want to invest in a company that isn't trying to attract (and protect) visitors and users? The money-making model will not hold up over time if users stop coming to the site.

Again, I do not feel that LinkedIn is a safe, long-term, investment. Investors should really think the value of the site through before putting their money into it.


ErinAnnie has no positions in the stocks mentioned above. The Motley Fool owns shares of Facebook and LinkedIn. Motley Fool newsletter services recommend LinkedIn. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

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