The LinkedIn business model is a multisided platform that connects professional users that want to create their own professional network with recruiters and advertisers. Due to its large community of professionals from every line of business and everywhere on the planet, LinkedIn is known as “the professional network”. Currently, LinkedIn has more than 660 million users, from more than 200 countries.
The main goal of the people who join LinkedIn is to build a professional identity and develop useful contacts for business, with the purpose to broaden their career frontiers. The greatest benefit is the convenience: instead of having to physically move for seeking human resources, aiming for recruitment and selection, training, or networking, one can simply connect to the internet and login on to LinkedIn.
LinkedIn is a multi-sided platform, which offers several solutions for different customers. It is based on a freemium business model (there are plans for free, but the best resources are charged), but also on recruitment and advertising. So, let’s explore LinkedIn’s Business Model.
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What is LinkedIn?
LinkedIn calls itself the “largest professional network in the world”, and it is founded on its five pillars: “transformation, integrity, collaboration, humor, and results” to make people’s jobs easier. On LinkedIn, every profile stands for a kind of résumé: every person who checks one’s profile will have information such as current and former jobs and positions, education, experience, skills and abilities, courses, training, aspirations, etc.
Besides, the platform offers space to market available jobs in more than 9 million businesses all over the globe. And, like any other social network, one can connect to other LinkedIn users by sending them friend requests.
A brief history of LinkedIn
LinkedIn was officially released in 2003, by the investor Reid Hoffman (who had been on the board of Google, eBay, and PayPal before that), along with Allen Blue, Konstantin Guericke, Eric Ly, and Jean-Luc Vaillant. Less than one year later, the network would already count more than 1,200,000 members. But the bog jump would come in 2005, with over 4 million members, after the launching of the jobs and subscriptions paid options.
Two years later, LinkedIn really became seen as a business by the founders. The result: More than 17 million users at the start of 2007. The next year, the platform began its expansion to other countries and reached the mark of over 33 million members.
In 2010, the company opened offices around the world, with a team counting more than 1,000 employees. And, the following year, LinkedIn was listed on the New York Stock Exchange. When LinkedIn was celebrating its first decade, the platform lowered the age of entry and totalized 225 million users all over the globe.
The team increased to 5,400 employees, distributed in offices in 27 cities, to serve its users scattered in over 200 countries. In December 2016, it was acquired by the giant Microsoft, in a purchase of over 26.2 billion dollars! Currently, LinkedIn has over 750 million active users.
Who Owns LinkedIn
As just mentioned, LinkedIn has been acquired by Microsoft in December 2016. Even with the acquisition, the company’s founder, Reid Hoffman, remains the chairman and Jeff Weiner is still the CEO since 2008.
LinkedIn’s Mission Statement
LinkedIn’s mission statement is: To connect the world’s professionals and make them more productive and successful.
How LinkedIn makes money
According to LinkedIn’s User Agreement, its “services are designed to promote economic opportunity for our members by enabling you and millions of other professionals to meet, exchange ideas, learn, and find opportunities or employees, work, and make decisions in a network of trusted relationships”.
Some services the network provides in order to make its users achieve all their possibilities are charged. Its Paid Features include: Premium Accounts, Talent Solutions, Marketing Solutions, and Sales Solutions.
The company revenue had a steady growth in the past years. In the fiscal year of 2019, LinkedIn’s annual revenue amounted to almost $6.8 billion, up from $5.26 billion during the preceding fiscal period.
Let’s take a closer look at each of them.
Talent Solutions
These solutions encompass the resources offered to both recruiters/employers – that search for qualified candidates for their available positions — and individuals, who seek improvement through courses and training. For the ones who are selecting professionals, LinkedIn offers a portfolio of solutions, which allow employers to connect to a wide network of candidates, also by advertising their available jobs. Furthermore, there’s the Recruiter Account, which guarantees:
- Unlimited access to the whole network
- Profile management
- Available jobs management
- Collaboration and productivity resources
- Administrative tools
For the individuals, LinkedIn offers the Learning platform, a premium subscription model, that provides access to more than 15,000 video courses, with instructors from several areas of expertise. These Talent Solutions account for more than 65% of the company’s revenue, due to premium resources for both businesses and workers.
Marketing Solutions
This second service is about driving advertising campaigns to LinkedIn’s audience, composed of its users. Businesses can deliver content to a targeted audience, generate leads, and, after all, measure their ROI (return on investment). Businesses can also develop sponsored content and advertisement, even though InMails, the direct messages that one can send to users they are connected.
Sales Solutions
These solutions are about creating a professional brand and engaging prospects through the network. The objective is to get sales insights, such as company and job changes or updates. Furthermore, through the Sales Navigator tool, one can find prospects, by using specific filters. According to LinkedIn, it’s a “powerful way to find and reach more decision-makers”.
Premium Accounts
Premium Career and Premium Professional accounts stand for 17% of LinkedIn’s revenue. They are paid subscriptions, which allow users to enhance their searches, get in touch with people out of their personal network, and have premium information access (such as people who have viewed their profiles, video courses, InMail messages, etc.), and many other special features. There are four different plan options, and the fees go from $30 to $100 per month. Most users, however, chose the Basic Account, which is free.
LinkedIn’s Business Model Canvas
Let’s take a look at the LinkedIn Business Model Canvas below:
LinkedIn’s Customer Segments
LinkedIn is a multi-sided platform. Thus, all three sides can be considered its customer segments: The users, who are part of the community by their profiles, the employers/recruiters, who search for candidates, and the advertisers, who want a targeted and more qualified audience for their campaigns.
LinkedIn’s Value Propositions
Again, as a multi-sided platform, there is a different value proposition for each customer:
- Users: A platform to display their talents and skills, and also build relationships and even their own brand;
- Businesses: A global candidates’ database, within reach of a click;
- Advertisers: Access to a qualified audience, with targeted and measured ads and campaigns.
LinkedIn’s Channels
The biggest distribution channels of LinkedIn are, no doubt, its website, and mobile app. Besides, some places have physical offices.
LinkedIn’s Customer Relationships
As it is a social network, the more people in the community, the more value the platform has for everyone. So, the customer relationship is, indeed, more important than the platform itself.
LinkedIn’s Revenue Streams
- Marketing solutions (CPC, CPM, or CPS)
- Talent solutions
- Pay-per-click job posting
- Premium subscriptions (monthly or annual fee)
LinkedIn’s Key Resources
LinkedIn’s key resource is the platform, the base for the business. Without it, there is no community.
LinkedIn’s Key Activities
“The one” is developing and updating the online platform. But other key activities include retaining (avoiding churn) and growing the number of users, protecting information and privacy, and building partnerships with businesses.
LinkedIn’s Key Partners
LinkedIn’s key partners are data centers (which provide the whole structure that support the online platform), employers, universities, Learning course developers, and companies that utilize LinkedIn’s APIs to connect their marketing and sales apps to the platform (e.g. Zoom, Adobe, and Oracle).
LinkedIn’s Cost Structure
LinkedIn’s cost structure is completely associated with platform development, maintenance, and growth. That encompasses employees’, developers’ and consultants’ salaries, branding and marketing expenses, legal and administrative costs, investment in infrastructure and equipment, and others.
LinkedIn’s Competitors
- AngelList: It is the most popular LinkedIn alternative. In this fast-growing platform, recruiters and employers are connected with jobseekers. It is also the place for investing in a startup or raising funds for one, as well as hiring professionals for that;
- Meetup: This free-to-use platform aims to arrange meetings in person with like-minded people. It informs you about events that may be of your interest. It is a strong name for those who want to get hired by a startup, or if you want to broadcast yours;
- Data Connect: This platform offers the email and phone numbers of the companies it lists. So, you can get in contact with many professionals. Signing up is free, but the contacts are not (only the first two) — you give out one of your contacts and receive a contact in return, or you can buy them in bulk;
- Sumry: This network gives more than your resume — it highlights your skills, publishes testimonials from people you’ve worked with, shows certifications, and anything that will really set you apart from others in the job market. You can also add multimedia to showcase your digital work;
- The Go To Market Company: TGTMC connects senior sales professionals with small and medium companies. This way, it offers a more entrepreneurial to older Sales Professionals that earn based on their results. Besides, the platform offers expert CV reviews and business plan help;
- Jobcase: Besides showing your skills and education, this platform adds your intended salary or if you’d be willing to relocate. It has been powering over 100 job-hunt websites since 2009 before entering the networking market in 2015. So, job searchers have more access to connections than they would if they used LinkedIn;
- Bark: It is a great platform for finding local professionals. You just insert your zip code and what you’re looking for, and Bark will find you a professional. However, it is in the UK;
- Doostang: Ideal for finding a job in finance, consulting, tech, media, or entertainment. You can have your resume reviewed by an expert, and they offer job opportunities through a social network of personal and college alumni connections;
- Let’s Lunch: It is for professionals who want to meet over drinks or lunch, in a cool and casual approach. It stands as a personal assistant that lines up your coffee and lunch appointment with people you want to know. The sign-up is free.
LinkedIn’s SWOT Analysis
Below, there is a detailed swot analysis of LinkedIn:
LinkedIn’s Strengths
- New markets: LinkedIn is an expert at entering new markets, and its expansion keeps offering new revenue streams in diverse markets;
- Dealers: Besides promoting the products, its dealers invest in sales training to show the customer the advantages of the products;
- Automation: It allowed the company to scale consistently based on the demands of the market;
- Customer relationship: Customers are highly satisfied with the customer relationship department;
- Workforce: LinkedIn invests hugely in training and developing its employees, which results in a highly skilled and motivated team;
- Integration: Over the years, LinkedIn has integrated and acquired a great number of complementary firms to strengthen its supply chain and distribution network;
- Innovation: LinkedIn’s history is marked by successful developments of new products.
LinkedIn’s Weaknesses
- Other products: LinkedIn is one of the leaders in its own field, but it is not very successful at moving to other industries or product segments;
- Attrition rate: Compared to other companies, LinkedIn has to spend a lot on employee development due to its inner attrition rate;
- Forecasting opportunities: The company does not have a good history of forecasting demands, which ends up in a higher inventory;
- Investments: The investments in technology do not cover all the expansion and vision the company is targeting;
- Financial planning: Current asset ratio and liquid asset ratios suggest that LinkedIn can use its money more efficiently.
LinkedIn’s Opportunities
- Adjacent product segments: Its stable cash flow enables the company to invest in new product segments and new technologies;
- New policies: New environmental and taxation policies represent a great opportunity for LinkedIn to gain market share and increase its profitability;
- New markets: New government agreements have provided LinkedIn an opportunity to enter new emerging markets.
LinkedIn’s Threats
- Competition: The number of players has increased significantly over the last years, putting profitability at risk;
- Imitation: Low-quality similar products are also a threat to LinkedIn’s income, especially in emerging markets;
- Supply of new products: The company develops new products as a response to other players, in a very irregular standard, which can lead to highs and lows in sales. Besides, the highly profitable products’ demand is naturally seasonal, which may impact its profitability;
- Shortage of workforce: A shortage of skilled workforce in some markets can put its growth in those markets at risk.
Conclusion
LinkedIn’s business model is entirely built on job search, and network relationships and connections. Plus, they have a massive market share against their competitors. With some innovations, LinkedIn can keep its domination of the market, but also contribute to the world in a more meaningful way, such as expanding the methods of helping users — who simply cannot pay for a subscription — to find and get a job.