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LinkedIn - ka-ching!

I have a vague memory of my first email from LinkedIn, inviting me to join, back in 2004. I was curious – it sounded interesting, so I signed up. A virtual address book seemed like a neat idea, but hardly earth shattering. I couldn’t imagine it becoming a critical business tool. 

Here we are in 2011 and that ‘neat idea’ has just floated for $4.3 billion dollars, with its value rising to $8.5 billion on the first day of trading. Rarely since the heady days of the dotcom boom have we seen such excitement surrounding technology companies. That was exactly the comparison that a couple of my good mates made in the pub last weekend, both of whom worked in The City.

The stock price for LinkedIn, Skype’s acquisition by Microsoft for $8.5 billion, and the astronomical figures being quoted for Twitter (which has yet to earn a profit), are reminiscent of 2001’s dotcom bubble.

History, my financial friends contend, is repeating itself. 

I’m not so sure. These numbers are astronomical, but in the age of trillion dollar bank bailouts and nation state insolvency they seem paltry. Crucially, the key difference between 2011 and 2001 is that 10 years ago there was no Internet economy: the hype was about a theoretical market. Today the Internet is utterly critical to business – it’s the heart and soul. Any product or service that exploits and enhances this, such as social networking, is built on firm foundations.

As a hard-bitten journalistic cynic, I generally take the view that, if something looks like it’s too good to be true, it is. Not so in this instance. LinkedIn and Twitter are not the next wave of dotcom disasters just waiting to happen – they are accepted, proven and are here to stay. Of course, that doesn’t mean that the same can necessarily be said of bandwagon chasers like Quora, or that a few financial speculators won’t get burned along the way, but if you play with fire you can expect to get burnt.