It is interesting to note that to date, the share price of LinkedIn has increased by 285% as of May 2011, whereas Facebook’s share price post-IPO has dropped by 36%. And there are indeed 3 main reasons why this is so.
Firstly, LinkedIn has become a standard recruiting tool for HR practitioners, who sieve through profiles to mine for potential candidates to fill important positions and roles (this also means that it pays a great deal for you to update your profile!).
Secondly, it has a tri-part business model comprising the following revenue streams: One, selling premium services to individuals to allow them view certain locked profiles generates one stream of revenue. Two, advertising. The average time spent per user on LinkedIn (based on COMSCORE’s research), is about 20 minutes, and this drives up advertising dollars for LinkedIn. And three, HR services sold to recruiters. This provides cushioning effect off more volatile revenue streams like advertising.
Thirdly, its platform creates an ecosystem linking supply to demand instantly. This is related to point 2 of its hybrid business model. Endorsement of profiles is something that provides recruiters a basis of a “review” process set in place, albeit nothing is ever fully accurate since endorsements can be done as quid pro quos favours. However, I must personally beg to differ that although LinkedIn can open doors, personal networking and referrals for top dog positions are still the most powerful recruiting and promotional mechanisms.
There are two potential implications for you as an individual user at LinkedIn:
One – job opportunities – so update your profile!
Two – taking an equity stake now may mean big money in the next 5 years to come. However, it may be important to note George Anders forewarns that LinkedIn may be in the position for a “board tuneup” which could mean a change in direction in some ways, which could alter privacy settings, and perhaps cause a stir among users. It all remains to be seen. But till then, the share price is likely to climb.
J.CJ (MBA), Editor, BusinessLeadershipManagement
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