LinkedIn's External Competition Strategy

     LinkedIn, as a professional networking service, offers a variation on the SNS model. A PNS, built around business rather than personal relationships, provided a virtual platform for professional interaction. A PNS’s development strategy differs from a SNS in content, in communication style, and in the nature of its users.

    Differentiation: I define the value propositions for LinkedIn as:

①The Professional User and the Corporate Customer: LinkedIn established itself as “professional” networking to differentiate from the likes of MySpace and Facebook. Its original core service involved enabling professionals to conduct Internet-based networking. Professional users appreciate the model of SNS-PNS differentiation. LinkedIn would remain a hold on professional users positively and negatively. Companies leverage LinkedIn to raise productivity in their workforces.

②Business Model: Advertising, subscriptions, job-postings and corporate solutions are the four sources of revenue streams that provide a balanced and sustainable business.

Industry-based Success Factors: a winner-take-all outcome in SNS or PNS

Since we recognize the presence of network effects in SNS/PNS, the most popular network company would therefore carry the most value, in the sense that it holds the most users as well as third-party application developers and advertisers, relies on special business model to generate large revenue and has funding advantage to some extent. According to what I illustrate of LinkedIn’s value propositions, its main strategy remains true to its founding purpose to “more professionals more effective” so as to succeed in the niche market, which has helped LinkedIn to grow at a healthy rate while maintaining its position and identity as the key player in PNS.

Comparison: 

As we can see, such winner-take-all outcome is not necessarily the case because of the competition within the market and the overlap of users. Here, I mainly address the challenge posed by SNS in the PNS area as well as other PNS competitors.

Division between social and professional activities is becoming less and less sharp, especially among key demographic group (younger generations).

①SNS

·MySpace: owner also owning Wall Street Journal gives it a professional edge should it choose to branch out into PNS.

·Facebook: huge user base; also platform for professional applications such as one created by CareerBuilder.com; corporate pages available; possibility of redesigning user interface to allow both SNS and PNS.

·Google+: Based on the integration of all the Google products and service, Google Plus shares less spam information and more free-users engagement.

Growth Rate: LinkedIn-1.2 million per month; MySpace-9 million per month; Facebook-7.5 million per moth

Extensiveness of Usage: 6.5 minutes per visit at LinkedIn; 21 minutes per visit at Facebook

User Overlap: 41% of LinkedIn unique visitors also use Facebook. (See Appendix 1)

②Other PNS

·XING: “the LinkedIn of Europe”; dominant in Germany, Austria and Switzerland; Its expansion into other regional markets depends on acquisition.

·Monster: the world’s largest job-search engine, which has 63+ million job seekers each month, 95+ million resumes in database, 1 million+ job postings.

Is the differentiation sustainable?

SNS such as Facebook have a much larger user bases and a platform that made it a potentially serious competitor in the PNS market. However, the conversion of cost among different social networks is huge, making it a great limit for SNS to make inroads into PNS. By increasing LinkedIn’s membership and improving user experience could help LinkedIn stay focused in the professional sphere and maintain dominance in PNS.

Competition Strategy

① To market share of SNS: Should we broaden the scope of LinkedIn to include elements of social networking, or stay clearly focused on the professional market?

Improving the service in professional interaction is still the key solution. The professional service is what distinguishes LinkedIn from other SNS.

Introducing certain kinds of social networking elements could enrich its user experience and attract new users, such as choosing some popular SNS applications (See Appendix 3 of LinkedIn’s strategy to date).

② To market share of other PNS: Would you use newfound wealth to acquire emerging competitors in foreign markets, or just focus on organic growth?

The existing facts include success in Europe market without any active presence or sustained investment in marketing and relative cultural conflicts in Asian market. In general, I favor the organic approach because it best utilizes LinkedIn’s competitive advantage in providing professional service, and the image of doing so. Furthermore, I realize that the professional world of today is a more integrated marketplace where connections are not limited by physical boarders; therefore, professionals would have the incentive to adapt to this broader environment and become part of the global network as opposed to just a regional network. Even in markets such as China and Japan, it is likely to foresee an involving trend for professionals to change their Internet use habits, especially with increased connections with the West.

③ To the existing market share of LinkedIn: Should LinkedIn open its platform to the public?

LinkedIn used to use “Walled Garden” to retain substantial control over how members and the third-party providers used its service, thus helping to maintain “professional” as one of its main selling points. While compared to other SNS, an open platform could be an easier approach which allows more users to get in.

Personally, opening the platform could have certain difficulties since the profile require authentic professional experience which is not common in other SNS. Though opening the platform may benefit on the revenue (some in advertising), it could potentially hurt the professional image of LinkedIn. A company built on the professional market, the more important issue should be how to better engage and serve business professionals to enhance the “attraction” and turn that “attraction” into “addiction”.

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[1] http://hbr.org/product/linkedin-corp-2008/an/709426-PDF-ENG