The Digital Age has revolutionized the traditional way of reaching qualified job candidates. Within the sea of recruiting tools on the internet (Monster, CareerBuilder etc.), LinkedIn has emerged as a winner in the industry because of its unique ability to create and capture value.
As a dual-sided network, LinkedIn relies on carefully crafted value creation on both sides of the funnel.
For professionals, LinkedIn provides a reliable repository for your profile with the added benefit of being low risk – you can have your resume online without the risk of your employer finding out you are job searching. The low friction platform allows users to track their profile quality, seeing how many viewers search your profile and ways to improve. Unique from other services, LinkedIn also helps professionals reach a credible network of colleagues to identify potential job opportunities and make introductions. The quality networking with friends and colleagues has made LinkedIn the top professional networking community. This large number of quality professionals in turn attracts headhunters and enterprise recruiters, bolstering the other side of the network.
Professional recruiters and enterprises are able to access a large number of geographically dispersed candidates at all levels of their career. This provides so much value over the traditional headhunter approach which relied on a close network of individual contacts, generally within narrow industries, experience levels, or locations. In addition, LinkedIn helps companies identify candidates that aren’t even job searching and wouldn’t normally apply to roles at a company. This opens up a large range of potential candidates at a very low cost. Companies are able to reduce recruiting expenses that were previously dedicated to headhunters and professional search firms. This is all made possible because of a sophisticated search tools available on the company’s platform.
LinkedIn captures value through multiple revenue streams by exploiting their strong community. While the access for professionals is free, users can upgrade to premium subscriptions starting at $30. This provides a solid recurring revenue base of ~18% of revenue in the last quarter. Further, providing advertising access to these users can be valuable – with 20% of revenues attributed to advertisers and marketers trying to spread brand content.
However, the clear majority of LinkedIn revenues is derived from “Talent Solutions” – the bevy of tools provided to enterprise users/recruiters to access professionals. These tools help them market positions, identify candidates, and manage the hiring process. As an example, LinkedIn uses Big Data analytics to suggest potential candidates based on previous work experience or profile similarity to other employees. They can also add value to enterprise clients by identifying other insights regarding employment trends.
Not only do these tools help save companies millions on recruiting expenses, they can actually make the hiring process smarter and better than it ever was before. It drives efficiency and allows for more creative hiring practices in an increasingly competitive job market. Because of these sophisticated tools and LinkedIn’s large network, they were able to capture over $2.2B in annual revenue last year.