This isn't near as ridiculous as the $15 billion valuation for facebook. LinkedIn is projecting revenue of $100 million for 2008. Additionally, because of the demographics and main features of LinkedIn (read: job listings), the CTR and CPM of LinkedIn is substantially higher than facebook.

It is ridiculous when you consider that most businesses are valued at 3 * annual revenue when sold. I wonder what exactly makes web businesses so apparently over-evaluated. Is it the IP? The network effect? Hope someone knowledgeable pitches in.

I definitely understand what you're saying - in LinkedIn's case it's year over year user and revenue growth.

revenue != profit

how are they getting their revenue?

Their LinkedIn Recruiter package is like $10K. Posting a job is over $100. They also have paid premium accounts which I think a fair number of people have, which allow for more aggressive networking (like reaching out to people more than 2 degrees from you). There are probably more, but there's a few.