Analysis of LinkedIn

31th MAY 2013

2 LINKEDIN | SIX DEGREES OF SEPARATION

Index Index ................................................................................................................................................... 2

A. Introduction ................................................................................................................................... 3

1. Presentation of the company ......................................................................................................... 3

a. Basic characteristics .................................................................................................................... 3

b. History ......................................................................................................................................... 3

c. Solutions | Services ..................................................................................................................... 4

d. Overall performance | Finance ................................................................................................... 6

e. Overall performance | Website .................................................................................................. 7

2. Strategic analysis .......................................................................................................................... 11

a. Macroenvironment ................................................................................................................... 11

b. Megatrends ............................................................................................................................... 14

c. Microenvironment ..................................................................................................................... 14

i. SWOT ...................................................................................................................................... 14

ii. Porter’s five forces analysis ................................................................................................... 17

iii. Strategic group map ............................................................................................................. 20

d. Stakeholders expectations ........................................................................................................ 21

3. Strategy formulation .................................................................................................................... 21

a. Mission statement ..................................................................................................................... 21

b. Strategic goals ........................................................................................................................... 21

c. Business-level ............................................................................................................................ 23

d. Corporate level .......................................................................................................................... 23

4. Organizing for strategy ................................................................................................................ 25

a. Strategy in action ....................................................................................................................... 25

b. Key Success Factors ................................................................................................................... 29

c. Future investment plans ............................................................................................................ 31

d. Conclusions ............................................................................................................................... 31

References ........................................................................................................................................ 32

Annex - Glossary ............................................................................................................................... 33

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A. Introduction The following report aims at presenting an overview of the company LinkedIn and its strategy,

starting with a general description of the market, providing figures and analysis of the context in

which it is acting and with a final conclusion and points to consider for the future.

1. Presentation of the company

a. Basic characteristics LinkedIn [www.linkedin.com] is the world’s largest professional network service (PNS) website in

the world, with over 200 million users of more than 200 countries and territories and available in

over 15 languages, such as English, French or Spanish and over 3.700 employees around the world.

About half of the membership is from the United States (US) and 11 million are from Europe1 and

comes from over 170 different industries, including executives from all Fortune 500 companies.

Approximately two new members per second join the network, with 57 million added during

20122 and the traffic monthly is of 21,4 million visitors from U.S. and 47,6 globally.

Main competitors of LinkedIn are coming from Europe: Viadeo [www.viadeo.com], a French-

based-company, with more than 50 million users from 186 countries3 and XING [www.xing.com], a

German-based-company with 13 million users (half of them are from German-speaking countries)

from over 190 countries4 according to the company.

Individuals, enterprises and professional organizations might take different services provided from

LinkedIn in a free-of-charge basis or by paying a premium to get additional features.

b. History Founded in December 2002 and launched on 5th May 2003

by Reid Hoffman, former CEO and current Chairman of the

Board, and colleagues coming from companies related to

online business as PayPal and SocialNet (Allen Blue, Eric Ly,

Jean-Luc Vaillant, Konstantin Guericke). LinkedIn was

developed under the idea that a network focus on business can connect the world’s professionals

to make them more productive and successful and providing them with better opportunities.

1 http://blog.linkedin.com/2013/01/09/linkedin-200-million/

2 http://investors.linkedin.com/annuals.cfm | “2012 Annual Report” [Accessed on 26th May 2013]

3 http://thenextweb.com/insider/2013/01/14/pealk-viadeo/

4 http://corporate.xing.com/no_cache/english/press/press-releases/details/article/press-releasebr-xing-ag-

xing-agm-agrees-to-pay/339/58e143b724ed430c990fab8e688bcb86/

http://www.linkedin.com/

http://www.viadeo.com/

http://www.xing.com/

http://blog.linkedin.com/2013/01/09/linkedin-200-million/

http://investors.linkedin.com/annuals.cfm

http://thenextweb.com/insider/2013/01/14/pealk-viadeo/

http://corporate.xing.com/no_cache/english/press/press-releases/details/article/press-releasebr-xing-ag-xing-agm-agrees-to-pay/339/58e143b724ed430c990fab8e688bcb86/

http://corporate.xing.com/no_cache/english/press/press-releases/details/article/press-releasebr-xing-ag-xing-agm-agrees-to-pay/339/58e143b724ed430c990fab8e688bcb86/

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Additionally, it was based on the concept of Six degrees of separation, according to which

everyone is 6 or fewer steps away from any other person in the world via introduction. By that

meaning, “a friend of a friend” statements can be made, for example, to connect a fisherman from

China to a president of the United States Barack Obama.

Although LinkedIn’s growth during the first period of time was slow (6.000 users after the first

month and 37.000 after half a year of existence), after 2 years LinkedIn had a membership of

almost a million professionals worldwide. In 2005 it introduced its business lines: jobs and

subscriptions and launched a premium service for recruiters and researchers.

In January 2011 LinkedIn filed for an initial public offering and under the symbol of “LNKD” and

traded its first shares on May 19, 2011 on the New York Stock Exchange (‘‘NYSE’’).

c. Solutions | Services As mentioned before, LinkedIn has free and monetized solutions, each one providing separated

specific services.

FREE SOLUTIONS

It is the option that users get free of charge and it is focus on expanding the professional

network. Connections across the network are classified into three degrees: first degree

connections are members who agree to connect, second degree connections are members who

share one or more mutual connections, and third degree connections are related via two

connections. Members can retrieve the contact information of their first degree connections and

browse their second and third degree connections in order to find additional opportunities.

FREE

SOLU

TIO

NS

Function Examples Manage Professional Identity

Profile

Skills/ Endorsement

Build and engage with professional networks

Invitations

People You May Know

Access to Knowledge, Insights and Opportunities

Groups

SlideShare

Multi-platform Access

Mobile

APIs5

5 API = Application Programming Interfaces. Used to build applications in the cloud computing market

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Manage Professional Identity =

| Profile | A user can create its own profile and fill it with personal information.

| Skills/Endorsement | There is an option available where members can add skills (from

hard skills such as knowledge of IT softwares to soft skills like team management) and others

can endorsed/recommend this person, assessing its veracity.

Build and engage with professional networks =

| Invitations | Members can send invitations to connect and expand their network. In

this case, 1st degree contacts can invite each other. 2nd degree contacts can be contacted

through messages, not invitations.

| People You May Know| Users receives a list of possible members they might know but

they are not in their current contact network.

Access to Knowledge, Insights and Opportunities =

| Groups |Members can join groups created with specific purposes and different topics,

such as “SGH students”, “German IT Consultants”, etc and create discussions.

| SlideShare| In SlideShare, users can upload presentations, reports or download them,

therefore, sharing files and information in general. SlideShare is a separate Webpage from

LinkedIn but it is an added service > www.slideshare.com.

Multi-platform access=

|Mobile| LinkedIn is available on cell phones through mobile applications, including iOS

for iPhone and iPad, Android, Blackberry, and Windows Mobile.

| API | It is possible to program applications that integrates services and content from

the website into another websites or platform. Additionally, the content and display of a profile

in LinkedIn can be modified using these tools.

MONETIZED SOLUTIONS

MO

NET

IZED

SOLU

TIO

NS

Solution Function Example

TALENT SOLUTIONS

Find candidates more easily

Advanced Searches

InMail

MARKETING SOLUTIONS

Promote products inside the network

Display Ads

Recommendation Ads

PREMIUM SUBSCRIPTIONS

Organize individual/company’s

profile better

Sales Navigator

Profile organizer

http://www.slideshare.com/

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Talent solutions:

Aims at companies being able to identify efficiently and acquire the right talent for their

needs. It is based on the idea that 80% of potential employees are passive job seekers. It aims at

recruiters and corporations, who want to create a corporate page, access LinkedIn’s database of

users and resumes and put ads targeted for those matching specific job profiles.

Marketing solutions:

Focuses on advertisers and it is designed to reach the most relevant audience with a

product through graphic or text link in LinkedIn.

Premium subscriptions:

Is directed to those who want to improve their profiles with more information, better

customization and gaining access to those in a company with decision-making-power as

sometimes the contact network might be very extend but not filled with the people the user needs

to address.

d. Overall performance | Finance

The following are indicators to see the performance of LinkedIn.

Net revenue | Profit

Variation from 2013 to 2014, calculated based on the Consensus Scenario of 2013.

Source: http://investing.businessweek.com/research/stocks/earnings/earnings.asp?ticker=LNKD

Overall, experts predict a prosper future for the company with net revenues climbing to $1,500

million in 2013 and $2,100 million in 2014.

http://investing.businessweek.com/research/stocks/earnings/earnings.asp?ticker=LNKD

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Share value | the highest and lowest value per quarter

Source: http://investors.linkedin.com/annuals.cfm | 2012 Annual Report

The initial value was $ 45 in May 2011 and nowadays the average is $ 1706, reflecting positive

expectations from the industry in general.

e. Overall performance | Website

Distribution of members worldwide

6 http://investing.businessweek.com/research/stocks/earnings/earnings.asp?ticker=LNKD



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As presented before, LinkedIn has a stronger presence internationally than its main

competitors but there are still raising markets which can be better explored.

Stage of development – Product Life Cycle

Market share | Market Growth

Under “Others”, Tianji was included even though it’s presence is only in China but because it is part of the Viadeo Group, it might have

impact in the future in the global market

Source: based on own calculations | Traffic and users information from corporate websites and www.alexa.com

The market share according to number of users worldwide shows a favorable position

for the company.

LinkedIn; 74,86%

Viadeo; 16,63%

3,66%

Others; 4,85%

MARKET SHARE BY APRIL 2013 | USERS-BASED

http://www.alexa.com/

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Demographic characteristics of users

Source: http://www.globalrecruitingroundtable.com/2013/01/22/linkedin-facts-figures-2013/#.UaeZk9JSjOU [Accessed

on 30th of June 2013]

More than 50 million unique visitors each week

2.6 Billion pages viewed in one month (Traffic for Dec 20 2012 – Jan 18 2013)

1% of the addicts are responsible for 26% of all traffic

The average user spends 7 minutes and 22 seconds on the website

25% of all employee profiles views are from co-workers.

Three out of four users wants to be approached for other job opportunities.

Over 2.8 million businesses have a LinkedIn Company Page

Web Traffic Sources

Source: https://www.quantcast.com/linkedin.com [Accessed on 30th of June 2013]

http://www.globalrecruitingroundtable.com/2013/01/22/linkedin-facts-figures-2013/#.UaeZk9JSjOU

https://www.quantcast.com/linkedin.com

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Traffic in the US | Social Networks + Professional Networks | To April 2013

Source: http://www.dreamgrow.com/top-10-social-networking-sites-by-market-share-of-visits-april-2013/ [Accessed on

30th of June 2013]

Although not the same category, this graph is included with the purpose of showing how overall

LinkedIn is gaining market share in the US even comparing it with more popular and massive

websites like Facebook and Youtube which have a bigger potential customer base.

Market growth

According to LinkedIn data, the number of customers grew by 16 million during the first quarter of

2013. It is representing a rate of more than 2 new registered users per second. Taking into

consideration the growth trends from the first quarter 2010 until the first quarter 2013, the

average growth rate is 9,5% per quarter. Considering these trends, it is possible to predict a 28%

growth in the number of users in 2013. This represents 60 million new users by the end of the

year and 262 million users in total.

http://www.dreamgrow.com/top-10-social-networking-sites-by-market-share-of-visits-april-2013/

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0,00%

2,00%

4,00%

6,00%

8,00%

10,00%

12,00%

14,00%

Q2

'10

Q3

'10

Q4

'10

Q1

'11

Q2

'11

Q3

'11

Q4

'11

Q1

'12

Q2

'12

Q3

'12

Q4

'12

Q1

'13

Market Growth per quarter 2010-2013 | %

Source: www.slideshare.net/linkedin/q1-2013-earnings [Accessed on 31th of June 2013]

2. Strategic analysis

a. Macroenvironment

POLITICAL

Governments are expressing their concern about privacy contents which could harm the

company strategy to use user’s information for delivering effective advertising and networking.

Additionally, there is a rising concern about the use of social networking technologies for illegal

conducts, such as the unauthorized spread of national security information, money laundering or

similar, can restrict or impose additional costs upon the conduct of the business or cause users to

leave the service.

Taxation issues are also important as the unclear nature of business (legislation and online

applications) can force the payment of double fiscal obligations.

http://www.slideshare.net/linkedin/q1-2013-earnings

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ECONOMIC

Fluctuations in the economy and market in general can affect the numbers of users seeking for

jobs, companies looking for candidates and both paying or not for premium solutions. Moreover,

depending on the season as well, each solution might be affected by it. Talent Solutions, related to

recruiting, might be more common while peak trends of recruitment, for example, the second

quarter of the year and Marketing Solutions can be highly requested during winter seasons when

people spend more time on the Internet.

There is also the currency exchange fluctuation as LinkedIn is entering international markets with

more depth and higher costs of doing business globally regarding places to rent, equipment, staff,

transaction costs, etc.

The possibility of joining the Stock Market to find new investors and additional resources is also

useful as the need of investing is constant and therefore, also limits the possibility to pay dividends

to investors more frequently.

SOCIAL

Users are feeling more comfortable of using online services to look for jobs but on the other

hand, feeling worried about privacy policies and its effectiveness.

Additionally, each country and cultural aspects related to work and selection processes are

different and what in one place might be acceptable might not be in another. For example, adding

a picture is obligatory in South American countries but in European countries, that is more like an

optional option.

There is also a tendency of requesting accessibility anytime, anywhere and this is where mobile

applications are also becoming a key factor for Internet services.

Overall, the public in general is getting more used to use networking services to satisfy their needs

(for example, e-business, e-procurement, etc).

TECHNOLOGICAL

The constant development of new technologies impacts the growth of the industry, as new

solutions and opportunities appears.

In the area of information security and data protection, most states have passed laws requiring

notification to users when there is a security breach for personal data, such as the 2002

amendment to California’s Information Practices Act and any future changes might affect how the

website is or can be programmed and with which informatics infrastructure.

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As the platform is growing in its’ membership and adding new services, upgrade of systems are

required while accommodating actual and anticipated changes in the service to overcome possible

capacity constraints.

There is also a dependency on Internet search engine’s methodologies (Google, Yahoo, etc) to

direct the traffic to LinkedIn.

Finally, if there are communication shutdowns and no access to internet, which depends on third

parties, nullifies efforts from LinkedIn.

ECOLOGICAL

About the ecological aspect, the tendency from Green initiatives can lead the usage of digital tools

instead of the physical printing of CVs for example.

Additionally, natural disasters or other catastrophic occurrences could interfere the access to the

serves of LinkedIn and therefore, making it inaccessible. US corporate offices are located in San

Francisco Bay Area and Southern California, both regions known for seismic activity and although

there is a disaster recovery program, it might take time for the service to being re-established.

LEGAL

Because of the wideness and not-well-defined field of application (international and “virtual-

online”), multiple jurisdictions or yet-to-define concepts are addressed. Additionally, laws

concerning labor agreements, privacy of data, acceptable marketing has to be taken considered.

Additionally, Intellectual property rights are important considering the know-how, applications

and programs developed for the website, and how easily an invention or concept can be replicated

on the Internet.

To control access to their proprietary technology, LinkedIn uses contractual agreements.

Confidentiality and invention assignment contracts are signed with employees and contractors,

and confidentiality agreements with third parties.

As LinkedIn is subject to a number of foreign and domestic laws and regulations that affect

companies conducting businesses online, many of which are still evolving and could be interpreted

in ways that could impact the business. In US and abroad, laws relating to the liability of providers

of online services for activities of their users and other third parties are currently being tested by a

number of claims, including actions based on invasion of privacy, unfair competition, copyright

and trademark infringement.

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There is also privacy and data protection laws, and their application to the Internet is unclear and

changeable according to country, region and security breaches, investigations and litigations

around this topic can impact strongly on the business. Connected to this, payments and flow of

money is done to pay for the services and an incorrect manipulation of data can lead to frauds or

other illegal acts which can result in fines and harm of the reputation of the company.

b. Megatrends PNS adding SNS features and viceversa | Features

The addition from LinkedIn of features such as recommendations, groups, etc and on the other

hand, Facebook applications such as Branch-out (application with job-seeking-purposes) shows a

trend toward mutual “bench-marking” when applicable.

New services and options | Accesibility

PNSs are introducing mobile technology into their services in order to be accessible every time,

everywhere as a consequence of the number of people who access online services through devices

other than personal computers, including smart phones, handheld tablets and mobile telephones

has been increasing in the past few years and is projected to continue this line.

The latest purchase of the company Pulse by LinkedIn is a reflection of this.

Internalization |Less Glocalization

The less glocalized strategy from websites like Viadeo and XING reflects a tendency toward

addressing the global market as one, but placing additional features for users to customize its

content in case they need it. There are also more languages available in order to make members

from different part of the globe being connected in a single platform.

c. Microenvironment

i. SWOT

STRENGTHS

Sufficient financial resources to fund projects

Nowadays with over USD 320 million revenues per quarter, LinkedIn is not a small weak startup as

it was at the beginning. This is reflected on how they spent money on acquisitions such as

SlideSharE for USD119 million and Pulse (newsreader web and mobile) for USD 90 million. The

31th MAY 2013


company has financial resources to develop project from the inside and provide its users with new

services.

LinkedIn has a good reputation among professional networking site

In a study from ROI Research, 59 per cent of respondents say LinkedIn is their most important

account on social networks. Even during the recession at the job market in many countries, it is

one of the most common places for job seekers to find opportunities and the companies to find

candidates. 87% of members trust LinkedIn as a source of information affecting their decision-

making-process. Additionally, it is founded on the “word-of-mouth” marketing, as the company is

relying on its quality to attract new users and the addition of two new members per second is a

sign that shows confidence for the future. This is reflected on the 49% of members finding

LinkedIn to be a good source for “word-of-mouth” information on brand experiences.7

Diversified revenue streams

As it was mentioned above, LinkedIn has different sources of revenue from its different. This

provides flexibility and more future options to exploit.

First mover and leader in the market

Being the first comer to the market of professional networks and current leader places LinkedIn in

a favorable position to act and establish future trends.

International presence

LinkedIn has users all over the world and not only in specific regions, such as Viadeo and XING

mainly focus in Europe.

WEAKNESSES

Security vulnerability | Privacy issues

In 2012, a security breach and passwords of more than 6,5 million users were stolen and posted

online by hackers. Although this represented only 5% of total accounts, it was a warning for the

company and members as well and a request for action from LinkedIn concerns this topic.

Connected with this, privacy and data management of users is a key topic, as people places

personal information on the webpage trusting that this information is kept safe. LinkedIn did not

present solid anti-threat-security-measures on their servers at that time.

7 Acccording to PunchMedia Marketing Agency - http://www.slideshare.net/punchmedia/linkedin-statistics-2013

http://www.slideshare.net/punchmedia/linkedin-statistics-2013

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Inadequate presentation for some industries

LinkedIn covers a wide range of professionals but it might not be adequate for some specific cases.

Niche professional networks such as DoctorsHangOut or Physpro for doctors or professions

related to art (actors, singers, etc) are examples who might not find their needs satisfied with this

service.

Cultural barriers + Weak presence outside the US specially in India and China

Each country has its cultural customs when it comes to work-related-issues. The composition of

the membership of Linkedin is a reflect of this as a half of them are from the US, then 25% of them

are from Europe, but emerging markets like India and China represent only 18% (2 million users

out of 200), a small acceptance rate comparing the population of these countries.

The website did not find the way to properly enter those markets and understand the culture.

OPPORTUNITIES

People from all over the world are potential members of PNS

Like mentioned before, two new members join the membership of LinkedIn every second and

every person who looking for a job, is a potential member.

Trend toward usage of Internet for everyday life

People are using Internet not only to search for information but also to do shopping/buy (E-

Procurement), do business (E-Business) and taking their “physical” life to virtual grounds.

Candidates are being analyzed and contacted through PNSs instead of being asked to send CVs

and Motivation Letters because of its simplicity and also the possibility of checking candidates’

background and corroborate references massively.

More active roles of companies on the Web

Companies are trying to attract users to their products and/or join their staffs by creating Brand

experiences based on both Conventional and Online Marketing. This allows PNSs to create new

opportunities and broaden its services.

Unexploited growing Asian market

Now three out of four users of LinkedIn are either from US or Europe, however by being the only

leading social media which is allowed in China company can use its potential and increase its share

in the country with a population of more than 1, 3 billion or the Indian market as well.

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THREATS

Dynamism of the industry and varied potential competitors

Online services are constantly changing and new entrants can emerge. As the area of competition

is interconnected with different markets possible rivals can include social networks, such as

Twitter, Facebook; professional networks like XING, Viadeo and Goldenline in Poland; or seemingly

unrelated companies for the IT industry, for example Microsoft. Applications such as BranchOut

(professional networking service on Facebook, founded in 2010, active in 60 counties and available

for more than 30 million users in 15 languages) presents potential threats for LinkedIn.

Those who does not use or are not interested in Online Services

Those who are outside the network, either because they are not interested in looking for a job, the

service or does not want to create profile, are potential candidates which might interest

companies in certain positions.

Possible unreliability of data

It is said that on Facebook, 83 out of 955 million social network users are fake. In LinkedIn, some

users might place references or skills which cannot be corroborated, inaccurate data or

inappropriate usage of the network by users who can use to for spamming can damage LinkedIn’s

reputation.

ii. Porter’s five forces analysis

Industry rivalry - Competition

MODERATE

Leadership among PNS | Wide variety of options | Dynamic market | Competitive

actions

Among other PNS, LinkedIn is the leader, far away from competitors like Viadeo and XING but that

leadership can rapidly change in a short period of time, because of how dynamic the market is,

and how fast customers preferences can change. Additional features, new services and the variety

of options provided by the company, both with free solutions and monetized solutions, offer users

different choices, and with that, attracts many different segments on the industry of professionals

[individuals, companies, marketing agencies, etc].

Both Viadeo and XING are planning on reformulating their strategies from “glocalization” to

“internationalization” as they realize how connected the global market is and that presence only in

Europe is acceptable but not enough in the future.

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Print Screen taken from Viadeo - www.viadeo.com [Accessed on 26th

May 2013]

It is possible to see that the available languages are less than LinkedIn, showing a less

internationalized strategy and also focus on the European market but slowly changing toward an

more expansive campaign. For example, Viadeo announced in January 2013, the acquisition of

“Pealk”, a search service engine located in the US with the idea of an worldwide expansion8.

Threat of new entrants

MODERATE

SNS’s economic of scale | Competitors from related markets | New players

Possible entrants can be from SNS such as Facebook, Twitter to job portals like Monster

(www.monster.com), customer relationship management market (www.salesforce.com) or even

companies involved in the IT market in general, for example Microsoft and its interest in Yammer

(recently launched PNS)9.

Besides this, SNSs have the advantage that they manage a wider range of users and applications

(for example, Facebook has more than 400 million users) and they have more experience on facing

higher internet traffic (which can result in lower response from the webpage, lost of data, etc).

By adding new services, those possible entrants can take a share on the market, or creating

alliances, joining efforts with smaller companies already providing additional features and

therefore, although LinkedIn is very-well-positioned, and its approach of updating functions is

accurate, preventive measure are key.

Threat of substitute products or services

MODERATE

SNS | Job Search Engine - Online Job Services

Possible substitutes can include SNSs, depending on what the user wants or Online Job Services,

like mentioned inside the point “Threat of new entrants”. Networking can be done through

8 http://thenextweb.com/insider/2013/01/14/pealk-viadeo/

9 http://www.neowin.net/news/microsoft-shows-interest-in-buying-yammer

http://www.viadeo.com/

http://www.monster.com/

http://www.salesforce.com/

http://thenextweb.com/insider/2013/01/14/pealk-viadeo/

http://www.neowin.net/news/microsoft-shows-interest-in-buying-yammer

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LinkedIn, but also professionals might refer to Facebook, Twitter if they want to know about

opportunities in a company and they do not use or know PNSs. Online Marketing features can be

used both to position a company and also to attract new candidates and promote opportunities.

Picture of Facebook promoting a Job Opportunity | Combination Job Posting + SNS

Bargaining power of customers/buyers

LOW-MODERATE

No concentration | No switching costs | Undisputed leader

Customers are individuals, enterprises and professional organizations and are not concentrated.

Therefore, their power to bargain is low.

For example, no-individual-customer represented more than 10% of the net revenue.

On the other hand, because of how dynamics and swings are possible on businesses based on

professional/social networks, a good reputation is built slowly but a downturn can create an

instant negative reputation and a massive movement from users to other options. No innovation,

no adaptation to users’ changing needs can result in lost of market share. For example, the

website Myspace (www.myspace.com) was created in 2003, was the main leader in visits until

2007 but started a decline from 2008, compare to Facebook or Twitter to quote a few, because

they stuck in their “portal strategy” and did not add features to improve the “social-networking

experience”.

Additionally there are no switching costs and users can easily join other options. Fortunately for

the company, considering being the clear leader of the market, the viral effect makes more users

join the network, and giving more reasons to users to stay.

Overall, users might switch to competitors but LinkedIn provides good quality services (and

consequently, has good reputation), adds new features and responds to market needs, plus the

current membership support available, makes it well-positioned against this force.

http://www.myspace.com/

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Bargaining power of suppliers

LOW

Many providers | Webpage programmed on Java10

On this type of industry, it is possible to find many options as service providers. Ranging from

data storage services to mobile and overall, new applications, the offer is vast. Purchase of

suppliers, for a wider range of services for users, is a common strategy and it is possible to refer to

the first acquisition of LinkedIn in 2010 of mspoke (later LinkedIn Recommendations) and

SlideShare in 2012 (still a separate webpage - www.slideshare.com) by $0.6 million and $119

million respectively. Additionally, as it is programmed on Java, it is easier to find programmers

compare to other languages such as PHP, which requires more complex maintenance.

Picture of LinkedIn Recommendations - Mspoke acquisition and it’s feature

Overall, the position of LinkedIn is solid, as it is the clear leader, there are no strong followers, it

has international presence and provides many services to attract different segments inside the

market of professionals looking for online features.

The characteristics of the industry makes difficult to differentiate competitors, substitutes and

potential new entrants as the example of SlideShare, which could have been acquired by

Facebook, Microsoft or even an Enterprise Resource Planning (ERP) company and might enter the

PNS market. Considering this, the approach of LinkedIn of buying suppliers, adding new services

and adapting the websites’ feature to each customers’ needs places then in a favorable position.

iii. Strategic group map LinkedIn provides a wider range of products (3 different solutions)

in a broader geographical scope. In the future, it is expected a more

globalized strategy for the competitors while at the same time an

even wider product range from LinkedIn.

10

http://www.thebuzzmedia.com/linkedin-is-written-in-99-java/

http://www.slideshare.com/

http://www.thebuzzmedia.com/linkedin-is-written-in-99-java/

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d. Stakeholders expectations As stakeholders, the following were identified.

LinkedIn’s employees they expect stable growth of the company and development of their

professional career within the corporation. Customers expect more useful services worth paying

for and evolution of the existing ones. They want more people in the network to talk, collaborate,

employ and be employed. Shareholders expect growth of revenues, profits, price of shares and

number of dividends they get. They expect the company to go the right way and be guided by the

leaders with clear winning strategy. Creditors want stability as well, no decline and steady growth

of the corporation. Society and community wants improvement of the job situation and the

decrease of the level of unemployment which at some point depends on LinkedIn and its clients

(companies, their employees and other officials). Governments want decline of the people

unemployed in their countries as well. Competitors want to see LinkedIn as a weaker player at the

market of social networks.

3. Strategy formulation

a. Mission statement Mission:

“Connect the world’s professionals to make them more productive and successful”

The priority is placed in current members inside the platform. Therefore, enable professionals to achieve higher levels of performance and professional success and enable companies to find and connect with the world’s best talent.

Vision:

“Create economic opportunity for every professional in the world”

This vision applies not only to current members but also to every professional in the global labor force who has the ability to create economic opportunities for others as LinkedIn believes this is the main power of its’ professional network.

b. Strategic goals LinkedIn’s strategy is based on 3 main pillars11 and each is divided in 2 elements:

Simplify

Grow

Everyday

11

http://investors.linkedin.com/annuals.cfm | “2012 Annual Report” [Accessed on 26th May 2013]


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Simplify

| “Be the Essential Source of Professional Insights” | “Foster Viral Member Growth”

Making the product easier for members in order to unlock value from core products and services.

During 2012, visual changes in the section “People You May Know”, the redesign of the Homepage

or even the new version of the LinkedIn Profile, the professional record of the member.

Considering also the extensive amount of traffic on Internet, LinkedIn aims at being the essential

source for relevant shared information.

Grow

| “Expand Our International Presence” |” Increase Monetization While Creating Value for Our Member”

Comprises two priorities:

1. expanding global membership

2. extending monetization efforts to benefit both members and customers.

The website is now available in 19 languages and there is an increasing tendency of subscriptions

outside the US during the last year.

About monetization, each solution was improved and overall it can be seen an improvement in

features related to access to the page through mobile services plus clearer value-addition for

Premium Subscribers such as a Sales Navigator for the Sales Solution, which makes easier how to

contact top-managers and those with decision-making power.

Everyday

|” Serve as the Professional Profile of Record” | “Work Wherever Our Members Work”

Delivering value to members everyday by helping them build out their professional identities and

gain valuable insights. The goal is for professionals to use the platform as the main professional

profile worldwide,. The introduction of “Endorsements” allowing members to better recognize the

skills of their colleagues is an example as well as the acquisition of SlideShare, allowing users to

upload and share presentations.

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c. Business-level

CULTURE

The company culture is intended to reflect who LinkedIn and their staff are and where the

company aspires to be.

Transformation. People who work at LinkedIn are there because they seek to make a positive and

lasting impact on the world, help realize the full potential of LinkedIn and fundamentally alter the

trajectory of their careers

Integrity. LinkedIn does not believe the ends justify the means. Rather, employees are expected to

do the right thing no matter what

Collaboration. Much like the network effects inherent in LinkedIn’s business model, the company

believes that as valuable as they are as individuals, they are all exponentially more valuable when

aligned and working together

Humor. Fulfilling LinkedIn’s mission and vision requires an intense focus, so the company believes

it is important to not take themselves too seriously and try to have some fun while doing it

Results. LinkedIn set clear, actionable goals and have high expectations for the company’s

performance, counting that employees consistently deliver excellent results, seek leverage

through greater efficiency and effectiveness, and demonstrate leadership at all levels

VALUES

“Our Members Come First”

“Relationships Matter”

“Be Open, Honest and Constructive”

“Demand Excellence”

“Take Intelligent Risks”

“Act Like an Owner”

d. Corporate level

LinkedIn’s strategic model is based on 3 elements:

1) International expansion: like it was presented on the point “Strategic goals”, LinkedIn acts in a

way to promote international expansion, through building offices outside US, more variety of

language availability and international sales force.

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2) Closed platform: the website is a closed platform in the sense of no links to other networking

sites are promoted. For example, SlideShare is handled as a separate place even though it

belongs to LinkedIn, keeping its specificities along. The needed information for users is inside

the page and embedded| displayed on it when necessary.

3) Pre-empt competitors: LinkedIn provides new services to avoid competitors (actual and

potential) to try to enter the market. Wall Street Journal and the information that is available

inside LinkedIn is similar to Facebook and its’ relation with USA Today.

REVENUES

Revenues are generated from the monetized Solutions mentioned before.

Talent Solutions: Revenues from providing access to the LinkedIn Recruiter comes from the

subscription period, which consists primarily of annual subscriptions that are billed monthly,

quarterly, or annually. The placement of job postings, which generally run for 30 days, is also a

source of incomes.

Marketing Solutions: The typical duration of advertising contracts is approximately two months.

Premium Subscriptions: Revenues come from selling services to customers allowing them to have

further features. Subscriptions are monthly or annual.

NET REVENUE BY PRODUCT


Overall, there was an increase in revenues on each product, especially from the Talent Solution.

Total net revenue increased $450.1 million in 2012 compared to 2011, representing an 86% more.

Net revenue from Talent Solutions increased $262.7 million as a result of further market

penetration of the product. On the other hand, net revenue from Marketing Solutions increased


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$102.4 million due to higher sales volume by the field sales and self-service advertising solutions,

as well as, higher average advertising prices. Additionally, the increase in sales volume is driven by

higher user engagement.

Net revenue from Premium Subscriptions increased $85.0 million as a result of an increase in the

number of premium subscribers due to increases in engagement of members.


4. Organizing for strategy

a. Strategy in action

3 ASSERTIONS INSIDE THE BUSINESS MODEL

There are 3 assertions which LinkedIn uses to deploy its strategy:

1) Professional Social Network is different from Social Network: although they might share

some characteristics, the purposes are different and professional wants to have a network for

specific business purposes and not a multi-service-platform with a chat, games, etc.

2) Hold on professional users: LinkedIn believes that the model will succeed as long as they keep

their basic and original idea of working only with professional users, because their needs are


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specific and it is a niche market (inside the social media market) which can be fully and

favorably exploited.

3) Corporations’ support: considering the 2 assertions before, if LinkedIn stands for the

professionals, corporations will support the concept and will invest money on it, as the

reputation and the number of members will be good enough to provide the results that

companies desires.

STRUCTURE

By 31th December 2012, LinkedIn had 3.458 employees, most of them in Engineering, Product

development and Operations.

Source: http://investors.linkedin.com/annuals.cfm | 2012 Annual Report

Therefore, the structure is focus on developing and maintenance of services and sales (although

Sales and Marketing are presented together, the main focus is on expanding sales internationally

with a stronger sales team).

INTERNAL POLICIES

LinkedIn encourages collaboration but at the same time embraces individual thinking and

creativity. As an example, one of the key approaches to attracting and retaining technical talent

and fostering continued innovation is through sponsored events like ‘‘InDays’’ and ‘hackdays’’

where employees are encouraged to create and implement new ideas. Participants then present

their ideas in front of the whole company with prizes awarded for the best ideas.

Engineering | Product

development | Operations

44% Sales and Marketing

42%

Administrative 14%

SHARE OF EMPLOYEES BY FUNCTION


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SALES FORCE

Field sales organization uses a direct sales force to solicit customers and agencies. This offline

channel, mainly used for Talent and Marketing solutions, allows a longer sales cycle where price

can be negotiated, higher relative average selling prices and longer contract terms.

Online channels (through the website) are available mainly for Premium Subscriptions and

occasionally, for Marketing solutions.

MARKETING: Word-of-mouth advertising

The member grew virally based on members inviting other members to join the network and

therefore, marketing costs are low. Based on trusting the quality and services provides, the

company expects this raising tendency to continue, as the dynamism of the Internet allows so.

CUSTOMER’S SUPPORT [“Post-sales-service”]

Self-service support is available on the website and customers can also make enquiries via e-mail.

There is also a specific premium support for monetized users.

OPERATIONS

The main characteristic of the platform is being available constantly and for that, the website and

related infrastructure are hosted in multiple third-party facilities. In this way, in case of

technological problems (for example, slow-response, server maintenance issues, inaccessibility,

and threat to the database) it is possible to resource to back-ups. Equinix Operating Co., Inc is the

company responsible for this service since 2008.

WEBSITE PERFORMER AS A DRIVER

LinkedIn understands “Website performance” as the ability of users (regardless they are members

or not), enterprises and professional organizations in all geographies to access the website, service

and solutions within acceptable load times.

The company realizes that in some instances, they might not be able to identify the causes of

problems for accessing the website or it might become difficult to maintain and improve the

overall performance, especially peak usage times and when the solutions and services become

more complex. In case the service are unavailable when users need it, they may seek other

websites or services and that might affect the reputation of the company.

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Considering this scenario, LinkedIn aims at making investments to maintain and improve Website

performance while releasing new features. Because of this, a disaster recovery program was

implemented allowing moving production to a back-up data center.

TRADE SECRECY | Intellectual Property Rights

As mentioned in the Legal aspect in the PESTEL analysis, the importance of keeping inventions safe

and possible infringements of intellectual property, makes very important to keep track of this

issue.

It was already mentioned contract agreements with employees, contractors and third-parties.

Additionally, and under the US law, the trademark ‘‘LinkedIn’’ and the ‘‘in’’ design mark, as well

as others, and as of December 31, 2012, are under licenses issued in US patents related to online

networking, which expire between 2017 and 2029,and 124 patent applications on file in the

United States and internationally12.

TECHNOLOGICAL INFRASTRUCTURE

Technological innovations are placed to make the service more efficient. The key technological

pillars are the following:

Professional Graph: graph engines are used in the webpage where nodes can represent

individuals, companies, schools and other entities and connect, follow another member, based

on the concept of Six-Degrees-of-Separation. The professional graph holds an individual’s real-

time network and enables establishing the degree by which two nodes are connected (for

example, 2nd degree vs. 3rd degree).

Open Sourced Technologies: the open source community is contacted to promote ideas and

help increase the speed at which the technology can mature. The combination of open source

and proprietary technologies used increases the speed at which productions of scale can be

achieved. To quote a case, Hadoop is an open source project used to batch compute data for

different features from the website and that enables massive calculations.

Search: multiple searches on real time based on key words in many languages is available to

allow interconnections among members.

Customized Content, Matching, Targeting and Recommendations. LinkedIn developed its own

recommendation engine by combining the technologies coming from Professional Graphs and

12

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Search engines. Based on a member’s profile, their 2nd and 3rd degree connections, their

viewing and clicking history, and a host of other criteria, our algorithms can provide intelligence

and recommendations around People You May Know, Groups You May Like, etc.

POSITION IN THE MARKET

GRAND STRATEGY MATRIX ANSOFF MATRIX

LinkedIn is ahead of its competitors as it is providing new services, reaching more users

internationally and creating a bigger professional network than the rest. It is also understanding

the importance of being available everywhere, especially with the raising of usage from users of

mobile applications and also differentiating customers inside the PNS market as a whole, with the

Talent Solutions, Marketing Solutions and Premium Subscriptions and making profits based on

them while at the same time attracting users with free services which, on the other hand,

represents a bigger membership and stronger presence on the Web.

b. Key Success Factors The following are Key Success Factors from LinkedIn:

Number of Registered Members: number of individual users who have created a member

profile on the website. The company believes is a key indicator of the growth of the

network and reflects how successfully services and solutions offered to professionals have

attracted new members. LinkedIn realizes than registered members are different from

actual members (due to falsification, etc) but still considers it a valid metric.

2012 2011 2010

Number of registered members* 201.912 144.974 90.437

*in thousands

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Change in % 2011-2012 = 39%

Change in % 2010-2011 = 60%

Unique visitors: users who have visited the website at least once during a month

regardless of whether they are a member, based on data provided by comScore, (provider

of digital marketing intelligence). For the company, this measure shows the growth in

brand awareness among users and whether useful products and services are provided,

thereby increasing engagement of members and that increasing the sales of the

monetized Solutions.

2012 2011 2010

Unique visitors* 126 84 52

*in millions

| SlideShare is also considered in these numbers

Change in % 2011-2012 = 50% Change in % 2010-2011 = 62%

Page views: number of pages on the website that users view. Similar to unique visitors, it

is an indicator for gaining insight about members engagement and effective-value-delivery

of the services provided.

2012 2011 2010

Page views* 38.258 29.420 18.059

*in millions

| SlideShare is also considered in these numbers


Number of LinkedIn Corporate Solutions Customers: number of enterprises and

professional organizations that are under active contracts for Talent Solutions. This

indicator shows the market penetration in the online recruiting market, the productivity of

the field sales organization and the value that these products bring to large and small

enterprises and professional organizations.

2012 2011 2010

Number of LinkedIn Corporate Solutions Customers 16.409 9.236 3.865


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Sales Channel Mix: Talent and Marketing Solutions can be sold offline through LinkedIn’s

field sales organization or online through the website. The majority of Premium

Subscriptions are sold online. The offline channel is characterized by a longer sales cycle

where price can be negotiated, higher relative average selling prices, longer contract

terms and higher selling expenses.

In USD 2012 2011 2010

Field sales / offline 552.459 287.634 135.691

Online sales 419.850 234.555 107.408

c. Future investment plans Resources and future investment plans will be focused on:

technology infrastructure: architecture, availability, performance, security, as well as disaster

recovery measures

product development, to provide new features for members

sales and marketing, including an expansion of the field of sales organization

international expansion in an effort to increase members base, engagement and sales

general administration, including legal and accounting expenses related to being a public

company with an expanding global presence

d. Conclusions As it is in a newly and developing market, LinkedIn has the chance of keeping a rate of growth but

for that, they should consider the following points while operation:

Ability to increase member base and member engagement

Adaptation to user’s needs and accessibility issues (for example, Mobile accessibility)

Ability to deal with changes in the availability of the website (how it is called by LinkedIn

“Website Performance”)

Protection against security breaches and how to deal with personal information

In % 2012 2011 2010

Field sales / offline 57% 55% 56%

Online sales 43% 45% 44%

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The unproven nature of the market and how fast the company can reach to it

Seasonability and fluctuations in demand, related to industries around each Solution

The entrance of new competitors, joint ventures, alliances, etc

Macroeconomic changes such as the deterioration of the labor market

Strong management of legal issues (Intellectual Property Rights | Interpretation of laws

concerning fields related to LinkedIn’s activities)

LinkedIn is currently placed in a favorable position, and its strategy of international expansion,

plus the addition of new services through acquisitions and investments in internal projects is the

appropriate one as the market is rapidly changing and users are always requesting more features

from this type of services.

References

Angwin D., Cummings S., Smith C. (2007). The Strategy Pathfinder, Blackwell Publishing.

Grant R. M. (2005). Contemporary Strategy Analysis, Blackwell Publishing.

Faulkner D., Campbell A. (2006).The Oxford Handbook of Strategy, Oxford University Press.

Porter M., Competitive Advantage, The Free Press, 1985 http://files.shareholder.com/downloads/ABEA-69T44N/2497626622x0x665814/6F886EB6-

2C01-4284-B43D-8684D46046FE/LinkedIn_2012_10-K_Annual_Report_bannerless_PDF_for_posting_.PDF

http://investors.linkedin.com/annuals.cfm | “2012 Annual Report” [Accessed on 26th May 2013]

http://thenextweb.com/insider/2013/05/05/linkedin-10-years-social-network/

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features#btnPrevious

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releasebrXING-passes-6-million-member-mar/

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http://theundercoverrecruiter.com/why-linkedin-more-important-facebook-or-twitter/

http://news.cnet.com/8301-1009_3-57448079-83/millions-of-linkedin-passwords-reportedly-

leaked-online/

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linkedins-top-line-but-stock-is-still-rich/2011-11-28

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2013/#.UaeZk9JSjOU

http://venturebeat.com/2013/04/17/linkedin-mobile-web-breakup/


http://files.shareholder.com/downloads/ABEA-69T44N/2497626622x0x665814/6F886EB6-2C01-4284-B43D-8684D46046FE/LinkedIn_2012_10-K_Annual_Report_bannerless_PDF_for_posting_.PDF




http://thenextweb.com/insider/2013/05/05/linkedin-10-years-social-network/

http://www.slideshare.net/ctnconsulting/linkedins-history-present-and-recent-features#btnPrevious

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http://corporate.xing.com/no_cache/english/press/press-releases/details/article/press-releasebrxing-passes-6-million-member-mar/

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http://www.reuters.com/article/2013/05/02/us-linkedin-results-idUSBRE94114K20130502

http://theundercoverrecruiter.com/why-linkedin-more-important-facebook-or-twitter/

http://news.cnet.com/8301-1009_3-57448079-83/millions-of-linkedin-passwords-reportedly-leaked-online/

http://news.cnet.com/8301-1009_3-57448079-83/millions-of-linkedin-passwords-reportedly-leaked-online/

http://www.trefis.com/stock/lnkd/articles/82455/growing-small-businesses-can-boost-linkedins-top-line-but-stock-is-still-rich/2011-11-28

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http://en.wikipedia.org/wiki/LinkedIn



http://venturebeat.com/2013/04/17/linkedin-mobile-web-breakup/


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Annex - Glossary App: applications; services which provides new features

Embedded: a display of webpage inside another, so there is no need to go to the original site

Mobile: any device that allow users to access Internet (Tablet, cell phone, etc)

PNS: Professional Network Service. Social Network with business-orientated-goals

SNS: Social Network Service. A social network. For example, Facebook

Traffic: number of users, frequency, etc of a webpage

Analysis of LinkedIn

Education

Transcript of Analysis of LinkedIn