Founded in the early 2000s, LinkedIn is a social network for professionals with one mission: connect the world’s professionals to make them more productive and successful. In order to accomplish this mission, LinkedIn has developed three primary product lines that have allowed it to be a high performing company throughout the years:
- LinkedIn Talent Solutions: a suite of products designed to help enterprises and hiring organizations find and hire the right talent at the appropriate time
- LinkedIn Marketing Solutions: a suite of products designed for marketers and advertisers to reach users with relevant products and services
- LinkedIn Sales Solutions: products that allow sales people to more effectively and efficiently prospect for new customers using “social selling” techniques
Network effects and digital transformation
LinkedIn has transformed the traditional recruiting and job search industry in a number of ways. Initially, LinkedIn simply took low tech processes and made them possible to conduct online (e.g., printing and distributing resumes, head hunting on a small scale, etc.), but this has quickly evolved to extend beyond recruiting and early versions of the platform. After building one of the first online professional networks, LinkedIn quickly recognized the benefits of network effects in its business. For instance, more users on the platform make LinkedIn a more valuable database to hiring companies, and increase the chances those companies will find suitable candidates in a timely manner. As more users join, LinkedIn can continuously mine and process user data to help proactively identify promising candidates to hiring companies in an automated way. In addition, the value marketers and advertisers derive from LinkedIn is highly correlated with the number of users on the platform, as well as the amount of information those users make available (e.g., age, gender, geographic location, work experience, etc.). These network effects have created a competitive moat around LinkedIn, and allowed it to build upon its own success.
The next evolution of LinkedIn’s digital transformation of traditional recruiting and job search is what CEO Jeff Weiner calls “the economic graph.” The economic graph would be a digital representation of every economic opportunity in the world, all skills required to get those jobs, as well as detailed profiles and data on all companies, universities, and the 3 billion professional workers globally. LinkedIn acquired Lynda.com, an online education company, as a move in this direction.
I believe LinkedIn is a clear digital winner because it has surpassed talent management companies and traditional recruiting firms in terms of a scalable business model, and has also successfully expanded into other ways of creating value for users and enterprise customers.
For users, LinkedIn creates a way to build a professional network and maintain professional relationships throughout a long career. At the same time, LinkedIn provides an avenue through which users can display and communicate their experience, skills, achievements, and aspirations. Lastly, LinkedIn is a way for users to explore job opportunities and be contacted by recruiters.
For companies, LinkedIn products can be used to hire, market, and sell:
- Hire: LinkedIn helps large enterprises and SMBs alike to identify and reach out to promising candidates
- Market: LinkedIn helps marketers and advertisers target potential consumers with great accuracy, given the amount of relevant demographic and socioeconomic data that is available on the platform
- Sell: LinkedIn Sales Solutions is more of a nascent product, but it also mines the user database to help sales people find potential customers with relevant job titles and company sizes
Users can pay anywhere between $29.99-$59.99/month for a Premium subscription to LinkedIn. This allows users to access more advanced platform features (e.g., ability to message any user on LinkedIn or see all users who have viewed your profile). However, the majority of LinkedIn’s 380M users use only the free features, and Premium subscriptions account for a very small portion of LinkedIn’s revenue.
The vast majority of LinkedIn’s revenue comes from companies who pay for Talent Solutions, Marketing Solutions, and/or Sales Solutions products. Products such as Recruiter, Job Slots, Lead Accelerator, Sponsored Updates, and Sales Navigator help companies hire, market, and sell through LinkedIn.