Unless you’ve been buried doing painful and increasingly useless cold calls this last week, you know that the recruiter-paradise otherwise known as LinkedIn did their IPO with a thunderously positive responsive from Wall Street that drove the otherwise unprofitable entity to a $9 billion (yes, a billion is cool) market cap.

Now just to put that $9 billion in perspective, if you took every share of Manpower, Kelly, Spherion, and Monster.com – all companies that have been working the recruitment markets for more than a decade and some going back to the 1950s - you still wouldn’t have enough to match LinkedIn’s market value.  It’s enough to make us recruiters cry.

It should also make us think.  How did such a disproportionate financial market reaction happen?   What are the real underpinning to the gigantesque valuations given to certain social networks?  And most, important, how should commercial staffing companies respond.

In theory a stock’s price equals the current value of its future profit stream.  That’s what they taught at Wharton and that’s what makes perfect sense IF you assume that every company’s raison d’etre is making profits for stock holders.

That’s been a pretty good assumption for many centuries.  But a certain law of networks – that they increase in value exponentially with an increase in size – has undermined that assumption.  A different driver – relevancy - in the form of time-on-site, unique visitors, churn rates and other new-fangled measurements are what matter now.  If you’ve got relevancy, then Google wants you and will pay in the billions.  And Microsoft will pay even more.

Private staffing companies can look on these events in wonderment.  But they can also leverage the same business drivers that are propelling these social networks.  In fact, your staffing company has locked up in its silos otherwise known as email in boxes and databases enough contacts and interactions to make social network startup green with envy.

[originally posted on the TempWorks Software blog]

In the coming weeks will be writing here on the TempWorks blog about how to make that data come alive.  We’ll see that you can become the platform of business success for your candidates and clients and that not everything has to be a bump and grind.

Tags: Advice, Linkedin, Investments, IPO, Social Networks, Wall Street