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22 May  2011 ~

 I find myself in a bit of unique position.  I have no affiliation whatsoever with LinkedIn but I’ve spent the better part of the last 5 years focusing on LinkedIn.  During this time, I co-wrote the Amazon best-selling book – 42 Rules for 24 Hour Success on LinkedIn.  From the publishing of that book, I’ve had the opportunity to speak to thousands of current and potential LinkedIn users and learn about their usage or lack thereof.  So given this insight, what is my take on LinkedIn’s IPO?

 

LinkedIn Dominates its Position

It is crystal clear that LinkedIn dominates as the professional social network and is changing the way job searches/hiring processes are performed.   It is plausible to consider that this dominant position will continue to expand as defined within these two functions.  The challenge is for LinkedIn to grow its dominance in functions beyond these two.  Here’s what I mean in plain English, Linkedin can certainly be helpful in many ways IF(a) the person using it knows what they are doing, and (b) are able to sustain their level of LinkedIn activity. 

 

For Better or Worse, LinkedIn is “Business Social Media”

LinkedIn is “business social media”, which has characteristics similar to a simple conversation.  If you and I are having a conversation and there is an exchange of value, we will continue to converse over time and a relationship will begin to develop and grow.  As our relationship grows, trust will develop and… who do we do business with… people we trust.  So clearly, it takes time to grow trust, which is the very subtle benefit most users actually want to achieve through using LinkedIn.  The challenge is, most users don’t realize this or the fact that it requires a sustained effort.  With the exception of recruiters who get immediate gratification by sourcing candidates, the typical user does not get immediate gratification and they get very frustrated (with many walking away from doing much more than accepting or sending general invitations).

Now contrast this with the “social side of social media” which has exploded.  It has exploded because it provides immediate gratification.  This is accomplished through simply checking updates, pictures, etc., from friends or others the user already has a relationship with.  Why is Facebook 6x the size of LinkedIn and why are people so addicted to it?   Answer– it is simpler to use and provides instant gratification to a larger pool of potential users.   Would Mom or Granny use LinkedIn?  Probably not but they are using Facebook.

 

Justifying the Valuation

Let’s review operational impacts on revenue and earnings.  One question I’m asked a lot is “should I have a free or paid LinkedIn account”?  From my perspective, there is very limited value for a paid LinkedIn account unless you are a recruiter.  What is LinkedIn going to do to make this paid account more valuable?  Pending that answer, the only other major revenue streams are going to be job search listings and text based ads.  For that to be effective, they need a massively growing and engaged user base. Based on the Granny example above, they have a smaller potential demographic to tap into and their site requires significant effort for its users to stay engaged (while providing minimal instant gratification to the user)

To be 100% clear, I am not knocking LinkedIn.  They are clearly leading the business niche, but that also offers them a more challenging path.  It is somewhat ironic that LinkedIn, in this social media age where user decisions are based on whims in 3 seconds or less, requires a long and sustained effort for the typical user to receive benefit.

It’s clear that LinkedIn has generated a tremendous amount of momentum, but are they capable of maintaining and growing it vs going the way of Friendster or MySpace?  LinkedIn’s answers to the questions posed above should go a long way to deciding their future.  What do you think?

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