The social networking site for professionals and job seekers, LinkedIn.com, has valued itself at $3 billion in the run-up to its IPO. That’s about 12 times 2010 revenue (per Reuters), and that makes it a bargain compared to some of the Chinese tech IPOs we’ve seen of late. RenRen, for instance, is trading at 76 times revenue. The relatively low valuation for LinkedIn has some investors second guessing big bets on the company’s prospects for growth. Here are three reasons why it might be a good idea to park your cash somewhere other than in the LinkedIn IPO:

1) Niche audience. LinkedIn caters to a very specific subset of the population: job seekers and professionals eager to network. While that makes the site a great marketing tool for recruiters and companies eager to fill white collar jobs, it also automatically puts a cap on the site’s potential audience. Since companies like Twitter, Facebook and RenRen don’t target specific niches, their long-term growth prospects aren’t nearly as limited.

2) Not profitable yet. Don’t look for LinkedIn to start posting profits this year. The company’s said as much in its IPO filing: “We expect revenue growth rate to decline, and as we continue to invest for future growth, we do not expect to be profitable on a GAAP basis in 2011.” LinkedIn plans to ramp up hiring and re-invest in rolling out new features on the site instead. If those features are successful in substantially boosting traffic and membership on the site, profits could be just around the corner … That is, however, a big “if” (just as it is for Facebook, Twitter and RenRen). Albert Babayev as SeekingAlpha believes the company’s revenue multiple will fall below where it is today (to 7x or maybe even 5x) in the coming years. That means it’ll be worth less than what it’s trading for even now on private exchanges.

3) Plateauing growth. Pageviews at LinkedIn appear to have flat-lined since the start of the year:

Babayev actually points out an even more damning fact: the vast majority of LinkedIn’s members rarely ever visit the site. “LinkedIn has 1% of total Facebook visits, while boasting to have an equivalent of 16% of Facebook users,” he writes based on stats from Compete.com. It’s clear then that LinkedIn is far less sticky (about 15 percent less) than Facebook. Squeezing more dollars our of the same audience is a daunting task.

Despite these arguments against investing in a LinkedIn IPO, I’m still fairly bullish on the company. It’s model isn’t nearly as reliant on advertising as that of rivals like Facebook and Twitter. Last year, LinkedIn generated the bulk of its revenue (41 percent) by selling job listings on the site. The rest came from a mix advertising (32 percent) and premium subscriptions (27 percent). Multiple revenue streams ensure the company will have cashflow to fund new features and grow it’s membership base. In the end, though, investors will have the last say, and I imagine they’ll welcome the stock with open arms. A year or two down the road, LinkedIn’s future looks a lot more murky.

LinkedIn IPO Date: A specific date has not yet been set, but it will likely be within two weeks.

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Tags: Facebook, Facebook IPO, LinkedIn, RENN, RenRen IPO, social networking stocks

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