Credit goes to Forbes.com
LinkedIn: Professional Social Network – Today Focused on Job Seekers and Recruitment
LinkedIn is a professional network, which has monetized its connections through its tremendous power as a corporate recruitment platform. With around 160 million members (mostly professionals in their 30s and older), LinkedIn has become the “virtual rolodex” for business people. When I meet someone professionally and I don’t get their business card, the most likely way for me to locate them is to find them on LinkedIn.
Leveraging this network, LinkedIn has now built a large and fast-growing business selling data and application services to recruiters. In fact, more than 50% of the company’s revenues come from “hiring solutions” and this percentage goes up every year.
The recruiting industry is a $120 billion industry and is highly fragmented today (recruiters, recruiting systems, recruiting tools, job boards,
recruitment consultants, assessment tools, etc.). Today LinkedIn is going down a path to capture more and more of this business as the company continues to develop richer and richer data tools to help people find jobs, and jobs find people
The company’s latest acquisition of Slideshare will compliment this strategy. In order for LinkedIn to thrive, it must not only attract more people (and younger people, as I discuss below), but also more data about each person. Slideshare, which is essentially the professional sharing platform for PowerPoint, helps drive this strategy. Once we start posting our best PowerPoint on Slideshare, our LinkedIn profile becomes that much more valuable.
Over the last few years the company has been working on building out some kind of “skills” assessment system, which tries to figure out your skills based on your experience and connections. So far it hasn’t gotten very far, but it will get better as more and more content gets attached to you.
(By the way, another social company which is trying to build a similar “expertise” network is Quora, a company which recently achieved a $400 million valuation with almost no revenue at all, demonstrating the tremendous demand for this type of network.)
LinkedIn’s strength in this market is its “#1 position” as the professional network in the world and its strong data analysis skills and capabilities. The company’s weakness or risks like in the age and nature of its users. LinkedIn users tend to be in their 40s and older, they tend to be white collar professionals, and they tend to be people with college degrees. This is a great population for corporate recruiters, but it is a limited population and LinkedIn is aggressively recruiting college graduates and other bands of professionals around the world to continue its growth.
Remember that the world is rapidly getting younger (55% of the US workforce will be under the age of 35 within 3 years), and in many countries the population is even younger. These younger workers grow up on Facebook and Twitter and may not have found (or ever find) LinkedIn a useful tool. The company now has a more aggressive college recruitment program and I believe it is critical for LinkedIn to very aggressively market itself to college students in order to continue its growth.
As far as reaching out to hourly workers, blue collar workers, and non-professionals, today it’s not clear that LinkedIn can (or wants to) extend itself in these directions. The entire website is designed as an “information rich” system, not a “photo and personal sharing” system liked Facebook and other networks.
Thus LinkedIn’s business value is driven by its ability to grow, monetize, and expand this professional network. LinkedIn is a magnificently well run company, filling a huge need for professional networking and recruitment. We all change jobs on average 7 times in our lifetime, and many of us change careers many times as well. Every time we do this we undergo tremendous stress trying to find contacts, develop new friends, and open new doors. This entire process is greatly aided by LinkedIn, and we are willing to pay for this help. And recruiters, who many of us may not directly relate to, spend more than $3500 per position to fill every single job. (Bersin Talent Acquisition Factbook®)
Facebook – A True Social Platform
Facebook, while also a social network, is very different. The entire platform and system is designed to let people “share and communicate.” Its design is based on the principle that people like to communicate with each other, so all its features and capabilities are built around “hyper sharing.” Many professionals find Facebook a bit frightening, actually, because it shares so much. And I believe this “hyper sharing” aspect to Facebook is likely to be its biggest challenge in the future.
For example, in the last year there were a series of applications built called “social news” applications which let you read articles and posts by others from the Washington Post and other major media outlets. The problem is that every time you read an article all your friends could see what you were reading. A little too creepy for many people, and most of these apps are now shut down.
Facebook is really a platform, not an application. While LinkedIn is being run like a data-driven application, Facebook is really a sharing platform from which many companies can build applications. One of the more interesting applications in my industry is BranchOut, a fast growing application that essentially replicates the professional networking of LinkedIn within Facebook. BranchOut was founded by two technical innovators who sold an earlier networking business to Monster.com, so they understand the problem of job searching and job finding. (Monster.com now has a similar service called BeKnown, which is also starting to grow.)
In the last few months BranchOut has exploded with traffic. It now has more than 30 million active profiles, and it is growing at several million per month (as fast as LinkedIn). Branchout lets you shield all your personal information and create a “professional network” from all your facebook friends.
What Branchout has going for it is the enormous audience (850 million +) of people in Facebook, many of whom may or may not use LinkedIn. This includes high school kids, college grads, hourly professionals, and frankly anyone who uses Facebook and wants to connect with employers and professional friends outside of their “personal facebook” persona. I would expect its network to continue to grow at these exponential rates as the word gets out.
What Branchout has found is that Facebook connections are very different from LinkedIn connections. Where every one seems to be “connected” to business contacts on LinkedIn (I have around 3,000 connections, many from professionals in my industry I don’t know very well), Facebook friends have very strong connections. LinkedIn connections are like people in a rolodex. Facebook connections tend to be people you know quite well.
And of course this is what makes Facebook such a powerful platform. The company generates nearly 10% of its revenue from games (Zygna and others) and is likely to attract many new applications which empower sharing of the network. And this is why Facebook’s business model is focused on advertising (a $350-400 billion market). Unlike LinkedIn, Facebook appears to have no plan to offer “premium services” – so the company is highly dependent on its ability to sell and deliver compelling ads (which is a risky and highly competitive market, note that GM recently cancelled at $10M ad campaign on Facebook because it wasn’t working). LinkedIn, as a premium service to corporations, has a more traditional B2B business model.
As far as comparing professional and personal networks, the two really are different. Some of us have tried to mix professional and personal connections on Facebook, but it’s tricky. If you have a personal trip to Europe and share your family photos, do you really want all your professional acquaintenances to see them? Likely not – hence the need for professional networks like LinkedIn and BranchOut. These more “button downed” networks just play a different role in our lives.
Is BranchOut a true competitor to LinkedIn? It will be in time. Today BranchOut does not yet have nearly the sales organization, staff, data analysis, recruitment functionality, and targeted advertising of LinkedIn. But it does create a very compelling experience, including badges, great recommendations, and a fun and interesting user experience. BranchOut does have the potential to become “The LinkedIn of the Facebook Crowd.”
Remember also that Facebook’s credo is “helping people communicate, ” so the company has developed an application platform that enables many other types of business models. One potential huge opportunity, for example, would be travel applications (reservation systems, reviews, etc.). Hundreds of companies are looking for ways to monetize the Facebook social graph, and these will all drive new traffic (and revenue) to Facebook.
In corporate recruiting there are dozens of applications that help recruiters leverage Facebook to post job ads, promote positions within a company, and create career pages. (Companies like Work4Labs, for example.) Our research shows that corporate recruiters today are less trusting of Facebook as a recruiting tool, largely because Facebook recruiting tools are less mature and generally provided by smaller companies. LinkedIn’s recruiting tools are smoothly integrated, marketed and sold exceedingly well, and very powerful. But the writing is on the wall, just as LinkedIn has become “The global network” for white collar professionals, Facebook (and tools like Branchout) could easily become “the global network” for others.
Two Very Different Companies
While many of the financial analysts compare these companies against each other, they are really very different. LinkedIn is much more of a corporate business and professional tool (today) – which has proven itself in the world of corporate recruiting. The company has the potential to grow exponentially in this market, and leverage its growing “skills and content” database to become an even more valuable tool for businesses. While LinkedIn is a platform company like Facebook, its target market is different and today the company is focused on the needs of professional job seekers and recruiters.
Facebook is a communications platform for many applications, offering innovative companies like BranchOut the opportunity to create new business models in the corporate market. If you invest in Facebook you are investing in an infrastructure company like Google or AT&T – one with a great network with many new applications yet to appear.