The first of several new social media platforms went public last week – and now seems to be valued by the market somewhere in the neighborhood of $9 billion. There may be some irrational investor exuberance in that number, as LinkedIn only generates around $15 million a year in profit. It’s difficult to see how that valuation could ever be supported by actual revenue – especially as many still define social media solely in the context of entertainment, of showing off photos of one’s kids or sending entertaining one-liners to groups of friends.  How can LinkedIn possibly be worth that much? 

It could be that this is a “bubble” of investor enthusiasm.  We’ve seen these before, and it’s almost axiomatic that investors will throw money at the latest technology trend, if for no other reason, to make sure they don’t get left out.  Maybe, like Netscape sixteen years before, this spectacular start will be followed by a disappointing fall.  Maybe, this is isn’t very real.

Or maybe it is.

Perhaps social media is actually all about work.  Once one can get beyond the hype, social media works,  not because social media is fun, though it often can be, but because business depends on interaction with other businesses.  It works, not because there are cute videos on-line or real-time quips from Ashton Kutcher, but because people buy things from people they know.  It works, not because of technology, but because it encourages and guides people to build networks and regularly reach out and interact with those networks.  More than just play, social media seems to be designed for real work.

Communication and media has always been very useful for business – it’s how we sell stuff.  Whether it was telling stories in the Medieval Market Square as you sold cooking pots, or using a television commercial to create desire for a microwave oven, it has always been a central part of business success.  In the last hundred years or so, most media has been controlled by relatively few people, making it difficult and expensive to build reputations, spin stories and build desire for products and services.  Businesses have always had to pay to play – either by cozying up to and influencing the media players who could give them access, such as reporters, editors, publishers and producers – or by outright purchasing media time.  By definition, that has restricted access to the very connected, very powerful or very well capitalized.

The new Internet based mediums have fundamentally altered the playing field, however.  Although power, influence and money are still valuable assets for any company or individual wanting to influence public opinion, desires and ultimately actions – it is no longer the only way.  If a company, no matter how small or large, rich or poor, connected or unconnected is able to offer an interesting insight – they can directly influence their reputation, their brand, and the context for their product or service – all without having to buy a single ad or persuade a single  reporter.  Now, if one is able to be eloquent and unique with one’s insights, it is possible to change a market’s conversation, to influence reputation, and ultimately build a business.

John Stuart Mill argued in his 1859 essay On Liberty, that freedom of expression was essential to a successful society.  The concept of freedom of speech is baked into the constitutions of the United States as well as other democratic countries and is, rightly so, defended vociferously whenever a threat is perceived.

However, the ideal of freedom of speech, despite professed ideals and legislation has always been just that:  an ideal.  Beyond the freedom to say anything one likes, (a very important and valuable freedom), and hope that someone hears you, the freedom of large scale communications hasn’t been offered to everyone.  As long as there is a limited supply of media channels that can require large amounts of influence or money for access, true freedom of speech has been granted only to those who already have power or can afford to buy it.

The concept of social media holds the promise of giving that freedom of large scale communications – with all its power to influence and persuade – to everyone.  That in of itself is reason for people to get a little giddy, and it should come as no surprise that there is a bit of exuberance. Now that anyone can have an Internet page, now that anyone can start a regular blog, video journal or photo display, now that anyone can collect groups of people together based on their shared interest in ideas, it’s almost as if Prometheus finally got around to bringing the fire of mass communication to the people.

Some of the exuberance may be a side show. The frenzy of activity, where people spend more time on Facebook than watching television, or compulsively check on Twitter regularly, even while driving a car, may be a passing fad like the 1970’s obsession with Citizen Band (CB) two-way radios.  Our desire for communication is so overwhelming that when we are given a new way to reach out, we initially can’t control ourselves. Most likely the excitement will fade as we learn how to integrate these new tools into our lives, recover some sense of balance and find new toys to play with.

But there is a catch to this freedom of mass communication through social media.  It takes work.  Buying credibility in a market of unlimited media outlets is a bit more difficult than purchasing an advertisement.  Buying credibility in 20th century mediums turns out to have been a relatively straightforward process, but creating one’s own communication in a market of unlimited media is significantly more difficult.  Facile and self-serving communications, no matter how entertaining, don’t lead to influence.  Instead, one has to commit significant time, resources and thought.  Like the feeding of a ravenous Beast, one has to deliver coherent, compelling and valuable communications on a regular basis.  The network of potential listeners, readers or followers has to be carefully tended over time, and they cannot be betrayed with empty words.  The Beast must be served if you want it to follow you.

And if the Beast follows you, it will buy from you.  Just as companies in an old medium could persuade the Beast to buy into something by providing entertainment and news, now they can do it directly through this medium instead of paying for advertising.  Without a scarcity of outlets, advertising has far less value online and therefore new businesses have to find other sources of revenue.

LinkedIn is doing just that.  By offering the tools and environment that businesses need  participate in a world of unlimited mass media, by helping to organize groups and networks, by connecting buyers and sellers and helping them tell stories – they have become more than a medium, they are a market.  Everyone who wants to be part of that market is willing to pay to participate – far less than what they might pay for a Super Bowl commercial, but far more than nothing.  Potentially, LinkedIn is a Prometheus bringing fire to those of us who have been in the dark for so long.  Is that worth $9 billion?

Is it possibly worth more?

(This article is a reprint from The Beast Blog)