- Umer Farooq
Linktree is the creator's economy poster child. From first glance it might seem overvalued but it is not about what Linktree is now. It is about the dreams of what it could be. The speculation of a category defining startup is an interesting thought exercise.
You can also skip to the bullet point TLDR section at the bottom.
Linktree is a 5 year old start up with a hockey stick user growth in the
link in bio space. It has been adopted by celebrities, artists, schools, charities, restaurants, etc to arrange their content.
One of the best things about Linktree is the amount of free marketing they get on social media. This comes by riding the wave of their creator's audience reach. The moment Pharrel uses Linktree, his social media followers know about Linktree. Amazing network effects!
No wonder Linktree has caught the eye of venture capital, with Linktree raising 165.7 million dollars in less than two years. The latest raise, was an extension of an earlier Series B round. That round, valued the business at 1.3 billion dollars in March 2021 when Linktree had 12 million users. 🔥
Quick back of the ✉️ calculations:
- Assuming 1% of the 12 million users are paying customers.
- Of those paying customers Linktree is generating 10 dollars on average from them.
- Being generous by assuming NO churn.
- That's an annual revenue of about 12 million dollars.
- 1.3 billion / 12 million is almost 110x multiple.
No wonder the next raise was an extension with 24 million users; the multiple goes down to ~50x. Considering, the last disclosed revenue of Linktree was 3 million ARR at 2.8 million users. I am pretty happy with my generous number, with a confidence interval around [40x-80x]. 40x might look super high but Canva was last valued at 40 billion with 1 billion ARR.
What could Linktree be:
I would like to argue that 24 million users is the wrong way of looking at Linktree. What really matters is the 1.2 billion clicks it was able to facilitate to commerce websites in the last year alone. These are users who may have never signed up to Linktree but have interacted with a Linktree website.
This is how Linktree know everything about their creators. They know which creator is popular at what sort of content on what sort of platforms. I believe it is very important for Linktree to monetize this traffic. There are few ways to go on about this:
- Build a creator rolodex for businesses to discover and hire creators. Linktree handles all the logistics of payments and tracking affiliates' ads campaigns. This is a once in a generation opportunity for Linktree to be the Google Ads of the creator economy.
- Show ads on freemium websites. Super risky on the legal side, not sure if IG,Tiktok will allow you to do this.
- Enable creator discovery for consumers on Linktree's mobile app. Second order effects of redirecting linktr.ee links to the Linktree's native app experience could be interesting.
Give us a platform:
One of the good problems, Linktree has is the long tail of user personas and use cases it has to cater to. But as the adage goes if you build for everyone it works for no one. It is impossible for it build solutions catering to all the problems without getting stretched and losing focus.
So how do you solve this problem?
You do what companies like Apple, Microsoft, Shopify have done in the past. You build a developer platform, where the developers are incentivised to build niche apps catering the long tail. This is the exact strategy followed by one of Linktree's competitor Koji with it's app store and developer platform.
The more you look at it the more you realise, Linktree is a website builder. Unless Linktree manages to scale up it's revenue streams and be the ultimate one stop shop like Shopify, it's hard to see it compete, specially with its very weak tech moat. My gut feels says it could be a good acquisition for companies like Automatic.
- From first glance it might seem overvalued. But lest we forget that investment is always forward looking.
- Recent Series B extension is a polite way of avoiding a downround.
- Linktree in the end is a website builder with a long tail of use cases. Expect companies like Wix, Hubspot, Webflow, Canva, Shopify getting into the space.
- Linktree should be judged on the 1.2 billion clicks to commerce-related websites in the last year alone.
- Prediction: Linktree will be bought out by Automatic or maybe Microsoft!