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Portland social networking companies stand to benefit from LinkedIn fervor

The bubbly froth surrounding LinkedIn's public stock offering Thursday sloshed over into Portland, where a cluster of small social-networking companies celebrated Wall Street's embrace of their technology.

"We haven't seen enthusiasm like this for a while," said Larry Drebes, chief executive of Janrain, a downtown startup that connects websites to social networks.


Thomas Boyd/The Oregonian

Software engineers Peter White, left, and Jason Cowley work at Janrain's downtown Portland offices Thursday. The fast-growing social networking company is among those who stand to benefit from fervent enthusiasm for the technology.

"There's no way to look at it other than good news for the industry," he said.

Social networking was an established cultural phenomenon, of course, long before investors swooned over LinkedIn's IPO.

But all the big social networking companies -- Facebook, Twitter and Groupon among them -- are privately held.

Most ordinary investors, therefore, haven't had an opportunity to buy in. And there's been no way to gauge just how much ardor there is for these businesses.

LinkedIn's IPO suggests the zeal is nearly boundless. Its stock -- priced at $45 for the offering -- finished its first day of trading at $94.25, more than doubling in value and giving the company a market capitalization of nearly $9 billion.

LinkedIn is an online clearinghouse for resumes, professional networks and business conversations. Its headquarters are in the Silicon Valley, but social networking companies are everywhere -- including Portland.

Just last week, Austin, Texas-based HomeAway snapped up Second Porch, a Portland startup which markets vacation rentals over Facebook and other social networks. HomeAway filed papers for its own IPO earlier this year.

Thursday's fervor immediately invited comparisons to the dot-com era, when investors created a speculative bubble around Internet stocks, buying into businesses with little revenues and no profits. The collapse of that bubble helped usher in a dreadful recession at the beginning of the last decade.

In some ways, LinkedIn fits the bubble profile. It's relatively small (just $243 million in revenue last year).

By dot-com era standards, though, Thursday's valuation is actually rather modest.

"This would have been middle-of-the road, or even disappointing, in the late '90s time frame," said Matt Compton, a former Yahoo vice president who now runs a Portland social commerce startup called ShopIgniter.

And LinkedIn has something many of those companies didn't -- real revenues, and real profits. Professional networking and recruitment are valuable markets, Compton said, noting that LinkedIn has a diversified revenue stream among advertising, premium subscriptions and job-hunting services. Its revenues doubled last year.

ShopIgniter, whose tools help companies market their products over social networks, is enjoying more interest from prospective clients and prospective investors, according to Compton.

Some of that is due to the excitement around social networking, he said, but some is also due to growing evidence of the marketing power of social media.

While Oregon doesn't have any big social networking companies based here, the region has a very enthusiastic social networking community. As LinkedIn shares began trading Thursday morning, a few hundred people were gathering in downtown Vancouver for the 140 Characters Conference, trading tips and techniques for connecting online.

No one in this area stands to benefit more from LinkedIn's IPO success than Jive Software, which helped create a new category of social media tools for collaboration within businesses. The company moved its headquarters to Palo Alto, Calif., last year, but some executives and 160 of its employees remain in downtown Portland.

"It's great to see this story playing well," said chief financial officer Bryan LeBlanc. The investors on Wall Street have been hungry for a new story, in an untapped space."

Jive has indicated it hopes to hold its own IPO this year. The company isn't commenting on its plans now, but LeBlanc said his colleagues greeted LinkedIn's success enthusiastically.

"For Jive and its employees, it's exciting to see this space getting validated," LeBlanc said.

IPOs are rare in Oregon, which hasn't had one since 2004. A week ago, the Portland network security company Tripwire dropped its IPO plans and sold itself to a private equity firm.

Tripwire was more profitable than LinkedIn, but its growth had slowed and its market isn't as hot.

From investment bankers to venture capitalists to entrepreneurs, everyone is taking note of LinkedIn's success, said Justin Kistner, , social product marketing manager for Portland-based Webtrends, which analyzes online activity -- and, increasingly, social networking behavior.

Social media enables marketers to target their advertisements to individuals based on their network profiles, he said. That's a big part of what's made them more appealing, and more valuable.

Webtrends, which once held an IPO itself, is now privately held and isn't discussing its plans. But Kistner said that Webtrends stands to profit from LinkedIn's results if the Portland company's social media efforts bear fruit.

And, he said, the same goes for Portland's small but active cluster of social networking businesses.

"There's a number of companies here that I think are going to benefit from a rising tide," he said.

Mike Rogoway; twitter: @rogoway; phone: 503-294-7699