On Mar. 10, 2000, a burst bubble provided evidence for the risks associated with investing in Internet-related companies. Many still argue that the bubble bursting was associated with the uncertainty about the value of the service delivered by the companies. Here, three companies with known services and different returns will be assessed: LinkedIn Corp (NYSE:LNKD), Akamai Technologies, Inc. (NASDAQ:AKAM), and ValueClick Inc (NASDAQ:VCLK).
A professional networking service
Social networking gave the Internet and financial market a new push. Yahoo! Inc. (NASDAQ:YHOO) and Facebook Inc (NASDAQ:FB) made some of the first offered social networking services, though neither targeted the employment market. LinkedIn Corp (NYSE:LNKD) came into existence to fill that void, by letting users create a professional networking service. The company today provides hiring and marketing solutions, and premium subscriptions. Hence, LinkedIn Corp (NYSE:LNKD) created a valuable meeting point for customers. Thanks to its innovative approach to networking, LinkedIn reached an top position within the networking market, making itself a worthy and safe investment all around.
By exploiting a niche within the market, the company has been able to establish the base rules of the game. Such ingenuity has also reflected upon the several ways in which each client develops its own professional network and hedge fund investors. To be more specific, think about how each customer can certify the professional skills of its connections. From now on, potential employers can have a better grasp about future employees’ potential and characteristics. Innovations of the kind have made LinkedIn more valuable to users, giving investors another reason to buy this stock.
The company has also been able to garner a considerable amount of cash, leaving LinkedIn Corp (NYSE:LNKD) with the opportunity to develop new features and tools to make it even more attractive to users and investors. However, as MorningStar’s bears highlight, young companies usually suffer trying to establish a balance between prudent investment and profitability and growth. LinkedIn Corp (NYSE:LNKD) has so far avoided the mistakes committed by the pre-DotCom-Crisis Internet companies. Hence, it is recommended to BUY since the company looks to be around for a while and has demonstrated responsible management, increasing demand, and continued growth maintaining an impeccable finance record at a reasonable stock price.
Akamai Technologies, Inc. (NASDAQ:AKAM) is another company which offers a real service in the internet while paying good dividends. The company holds many servers around the world to shorten the distance between a potential client and the business wanted to be reached. In other words, the company accelerates internet navigation by deviating traffic from congestion, exploiting available bandwidth, and curbing customer limitations. In an age where market liquidity makes seconds relevant, the speed at which one surfs the web is the determining difference between a placed order and a lost customer. But, in order to provide a faster navigation speed Akamai is obliged to invest heavily in hardware, therefore impacting on operational costs and giving the company a degree of uncertainty upon future prospects.