As of early 2012, Linked generated revenue-?and profits-?from three sources: marketing solutions, hiring solutions, and premium subscriptions_ In May 2011. Linked was the iris major U. S. Social networking firm to complete an initial public offering, raising an aggregate of $270. 2 million for working capital and general corporate purposes. As Winner thought about the company’s future, he recognized the challenges in continuing to massively scale the organization. At the same time, he focused on how Linked could continue to use Its vast amount of data to provide additional products and services for Its members and customers.
Background on Linked Linked was founded in December 2002 by Reid Hoffman and a few of his former colleagues from Stanford University, Papal, and Socialist. Mom. Started out of Hoffmann apartment, Linden’s Web site was publicly launched in May 2003, not long after the massive Internet and technology stock downturns of late 2000-2002. At the time, social networking firms were In their Infancy-?Google was still privately held and Faceable was not founded until 2004. Hoffman and his team began talking with venture capital firms shortly after the site launch, and in November 2003, raised $4. Million in a Series A round led by Sequoia Capital (Sequoia). By the end of 2003, Linked had 14 employees and over 78,000 members. According to a former Linked executive, “one of the greatest hurdles when [the] company started out was expanding Professor David Wife and Senior Researcher Liz Kind prepared this case. HUBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright 0 2012, 2013 President and Fellows of Harvard College.
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Establishing small networks in cities around the country and world proved key to the eventual success of Linked. “1 By October 2004, Linked had 1. 2 million registered professionals around the world, with 370,000 in Europe and 70,000 in Asia. Linked began generating advertising and subscription revenue in 2005 and became profitable in March 2006. Hoffman noted, “The decision wasn’t that we had to be profitable and stay profitable. It was that we had to prove profitability quickly and easily. It helps on two vectors. You raise money much more easily with that capability.
If you can’t raise money, you still have a valuable thing. “3 One early Linked executive described another turning point for the company: In late 2005 or early 2006, we started to create these public profiles-? versions of your profile that were indexed into Google. It made it easier to explain why Linked was valuable. Is someone going to Google you? Of course. Don’t you care about what they find? All the Sex and the City references about Goggling people led to being able to explain to mainstream America why it was so important. 4 Dan Nee, formerly from Advent Software, replaced Hoffman as CEO in February 2007.
Hoffman remained as the company’s chairman and president of products. He explained, “l knew I needed to hire a CEO. I know I’m strong and good at product vision, business strategy, [and] trends in the Internet industry. I like to spend my time n business and product questions, rather than organizational things. “5 The company continued to add premium subscription products and corporate services, and in late 2007, introduced its Intelligent Applications platform, which enabled partners to build Linked features on their Web sites or deploy applications on Linden’s.
In early 2008, the company announced that over 5 million of its 18 million members were based in Europe, and opened its first overseas office in London. Early that year, Linked also launched company profiles (in addition to member profiles) munched the first foreign language version of Linked in Spanish. By October 2008, Linked had raised almost $100 million in four rounds with a post-money valuation of over $1 billion. At the time, the company had over 30 million members in 150 countries and was growing at a rate of half a million new members a week.
Previously, he held a variety of leadership roles in consumer Web experience at Yahoo!. Linked continued its rapid expansion, adding products and services, overseas offices, and foreign language versions of its Web site. During the summer of 2010, Linked acquired misspoke, a provider of recommendation technology, and Cohesiveness, a provider of ratings and reviews of business-to-business service providers. The company added four high profile members to its board of directors and in January 2011, filed for an initial public offering (PIP) of its stock.
During the same month, Linked also acquired Crunch, a mobile application technology discover them on Linked, and more easily add them to their network. On May 19, 2011, Linked sold approximately 9 million shares of common stock, initially priced at $45 per share. The offering was highly anticipated, and by the end of the first day of trading, the stock peaked at $123 per share. Based on the days closing price of $94. 25 a share, Linden’s implied market value of approximately $9 billion was roughly 35 times sales and 550 times earnings. 7 Industry experts attributed the demand for the stock to several factors.
Linked was the first big Internet company to go public since Google in 2004. It was profitable, it offered less than 10% of its shares for sale, and additional social media Ipso-?Group, Zingy, Twitter, and Faceable-?were on the horizon. Linked continued to acquire small companies in 2011, including Connected, a personal and small business social customer relationship management tool, and Indexation, an infrastructure company that provided hosted search services. Linked as of Early 2012 For the year ended December 31, 2011, Linked had revenue of $522. Million and net income was $1 1. 9 million. (See Exhibit 1 for selected data from Linden’s financial statements. ) During 2011, Linked saw a 60% increase in registered members relative to 2010, with 84. 1 million unique visitors per month and 29. 4 billion page views over the course of the year. As of early 2012, students and recent college graduates were the fastest growing segment on Linked. The company had 2,116 employees and offices in 14 countries. Linden’s Web site was available in 16 languages. In February 2012, Linked acquired the browser plug-in, Reapportion.
Mission and Vision As Winner thought about the company’s strategy going forward, he started with Linden’s mission and vision: To me, a mission is a realizable, achievable, measurable, and overarching long-term objective for an organization that, ideally, is inspirational. A vision is the dream. It’s not necessarily achievable, but it is most definitely inspirational. (See Exhibit 2 for Linden’s actual mission and vision statements. ) Some companies combine their mission and vision, but we like to draw a clear extinction between the two.
Our mission is to connect the world’s professionals to make them more productive and successful. We are growing at a rate that is faster than two new members per 7 Evelyn M. Russia, “Linked Soars on First Trading Day,” The New York Times, May 20, 2011. 3 second, to put it into context. It took us nearly 500 days to reach our first million members. Today it takes less than a week. There are 3. 3 billion people in the global workforce, and according to some estimates, as many as 640 million “knowledge workers. ” The initial goals for Linked were directly tied to the 640 million.
We wanted to connect all of those folks, and focused historically on highballs, white-collar professionals. But, the dream is to connect every professional, using a much broader definition. The 3. 3 billion people in the global workforce break down into four segments-?knowledge workers, service workers, skilled transported, and laborers. Ultimately, we want to be in the position to create economic opportunity for them all. The way we plan to do that is by connecting talent with opportunity at massive scale. That is now possible because of two convergent dynamics.
One is the technology infrastructure that enables a mindful of companies to connect hundreds of millions-?if not billions-?of people in milliseconds. The second and more important set of dynamics are the behavioral changes that are taking place as a result. The way in which people go online to represent their identities, to connect with friends, family, and colleagues, and to share information, knowledge, ideas, and opinions-?represents their identities. That is fundamentally transforming the world-?the way we live, the way we play, and the way we work.
Value Propositions Winner described how Linden’s mission and vision tied into its products, services and strategy: Our mission, to connect the world’s professionals, is something we measure ourselves on day in and day out. But, to achieve the broader dream of creating economic opportunity for every member of the workforce, we are focused on three primary value propositions: identity, insights and everywhere. Identity-?We want to enable people to represent their experiences, skills, and ambitions via their Linked profile. Our strategic objective is to become the professional profile of record.
If someone’s going to do a search to provide a Job opportunity, tap your knowledge or expertise, introduce you to someone, or talk deal low, we want them to use Linked to find, be found, and connect with you. Insights-?Part of what makes Linked unique is that people update their profile even when they’re not looking for work. Think about that. When was the last time you updated your resume when you weren’t looking for a Job? As a result, we can leverage very rich information to provide the second value proposition-?insights-?to people while they’re on Linked.
We want a user’s home page to be a professional dashboard that brings together all the business intelligence, knowledge, and information that is being distributed throughout the user’s network. The vision behind our newer products is to deliver insights based on not Just one, but all three signals such as connections, and manual curators and editors. Everywhere-? This is the notion of working wherever our members work, in a world that is increasingly driven through ubiquitous computing. We no longer expect our members to stay tethered to their desktops, or only be able to generate value from Linked. Mom. Mobile is our fastest-growing service, and we’ll continue to invest heavily there. We offer a robust set of 4 Apish (application program interfaces) that are being used by over 60,000 developers if of Linked. Products and Services Free Solutions Deep Mishear, senior vice president of products and user experience for Linked, added, “We orient the entire product development process around our key user value propositions. ” As the company’s 10-K noted: The cornerstone of our business is to focus on our members first. We provide the majority of our solutions to members at no cost.
We believe this approach provides the best way to continue to build a critical mass of members, resulting in beneficial network effects that promote greater utilization of our solutions, higher levels of engagement and increased value for our members. Mike Samson, senior vice president of global solutions, commented on the company’s commitment to its members, “One of the really unique things about Linked is that we are a consumer Internet company first. We have a laser focus on members because they are the most important constituent in our whole echo-system. Mishear concurred, “Our entire goal is to make our members productive and successful. ” As a result, many of Linden’s product offerings were provided free of charge. (See Exhibit 3 a diagram depicting Linden’s network effects and Exhibit 4 for a complete list of ere solutions. ) Linden’s original core service involved enabling professionals to conduct Internet- based networking. Through Linked, users could locate service providers, subject experts, business partners, and potential customers.
They could also search for Job opportunities. From end to end, the Linked service was clearly professional, rather than social or personal, in nature. Membership in Linked was open to anyone, although more than half of all users Joined the service after receiving an invitation that summarized their educational history, career accomplishments, and professional affiliations. Once they completed their profile, they could expand their individual network by inviting both existing Linked users and new members to Join it.
A Linked member’s network consisted of their connections (first-degree contacts), their connections’ connections (secondary contacts), and so forth through third degree connections. Before two members could establish a connection, both parties had to agree. Both members were also free to sever that connection at any time. Linden’s leaders put a premium on creating protocols based on mutual trust between members. “As soon as you invite somebody, it means sooner or later you eve to make the introduction, and people don’t want to make introductions unless they think highly of them, as it reflects upon their own reputation,” Hoffman noted. A key service that Linked provided to users was the ability to find, and potentially to contact, any other Linked member. Through the site’s search function, users could pinpoint other Linked 8 David B. Wife, Michael Sling, Nathan Chaff “Linked Corp.. , 2008,” HUBS No. 709-426 (Boston: Harvard Business School Publishing, rev. 2009), p. 4. 9 Nikolas Jan Possessor, “Linked (A),” HUBS No. 707-406 (Boston: Harvard Business School Publishing, rev. 2007), p. 2. 5 members-?those within three degrees of connection-?whose profile either contained certain keywords or featured a certain company, industry, or Job title.
Users could then try to connect with a specific member in one of two ways. First, they could send a request for an introduction to that person through their chain of connections. At each degree of connection, a contacted member had to decide whether to forward the request. Second, and for an additional fee, members could connect with any other Linked member by sending an “lamina” through Linden’s integrated e-mail system. In addition, users could Join professional or alumni groups to further connect, share knowledge, and find opportunities.
As of early 2012, Linked had over one million groups. In contrast to some social networking services, Linked sought to keep its site relatively simple and its user interface largely free of nonprofessional information. (See Exhibit 5 for a screen shot of a sample user’s home page. ) In March 2012, Linked enabled members to: See updates from their network: This section of the home page provided a real-time feed of the status updates and other activity events, and member recommendations.
Stay up to date with industry news relevant to them: Linden’s new product Linked Today employed a “wisdom of crowds” approach, offering a news feed that delivered content on the basis of fellow network members’ sharing behavior. Linked Today also generated links to articles about a user’s company, and about the company’s products, its industry, and its competitors, drawn from more than 300 publishers. “We added the news feed to source professional content from the Web, targeted at topics that matter to users,” Hoffman said.
Personalize their experience: Users could tailor sections of their profile to highlight he most relevant areas of their experience. On the home page the “People You May KnoW’ section highlighted contacts that users could add to their network. “Jobs You May Be Interested In” showcased employment opportunities that users could explore through their network. Other analytically driven customized products included “Groups You May Like,” and “Companies You May Want To Follow. ” Update their status: This tool let users post brief messages about their current activities or share links to news articles or other content.
This kept them top-of-mind among their network and sparked discussions on relevant industry topics. In keeping with Linden’s desire to position itself as an “asset to corporations,” the company developed offerings that furthered the goals of corporate managers. 10 Linked had long sold products that allowed recruiters and human resource (HRS) professionals to post Job listings on the site or identify “passive” candidates (professionals who were not actively looking to change Jobs) through advanced search capabilities.
In addition, the company stepped up its engagement with corporate customers by launching products that facilitated awareness and accompanied networking. For example, a product called Company Pages enabled impasses to share information about their products and services, career opportunities, and corporate culture. Members could follow a company to get updates, or use a company profile page to see who they knew at the organization. Linked also offered workup collaboration tools such as polls, videos, and feeds in its custom group modules. 10 David B.
Wife, Michael Sling, Nathan Chaff “Linked Corp.. , 2008,” HUBS No. 6 proposition of “everywhere. ” Linked Mobile applications were offered for a variety of smartened and device platforms and languages including Android, Blackberry, Phone, and pad. As of early 2012, Linked did not generate revenue from advertising on its mobile applications. Mobile was Linden’s fastest growing service, up 400% year over year, between 2010 and 2011. 11 As of March 31, 2012, mobile devices accounted for more than 22% of total unique member visits to Linked. 2 Like many other online networking services, Linked functioned as a technology platform on which software developers could build applications that added value for those who used it. In 2007, Linked opened its own Apish to third-party developers. The move enabled developers to build their applications into Linked, or to build applications that leveraged Linked data to enrich other websites. One former executive commented, “Our ability to attract great third party applications on Linked had not developed into a great success….
Unlike Faceable, we have not found in the professional world the equivalent to a game in the consumer world. ” However, Linked had much greater success in deploying Linked Apish with which developers could create tools and applications that benefited their own users. As of early 2012, 60,000 developers were using Linden’s Apish. Revenue Generating Solutions Linked generated revenue in three categories. (See Exhibit 6 for Linden’s monitored solutions by revenue source, and Exhibit 7 for historical segment revenue data. According to Steve Sorrel, Linden’s SCOFF, “All of our revenue streams are positioned in very large addressable markets. That gives us a lot of sustainability. Even if one of those revenue streams doesn’t succeed, or doesn’t succeed as we expect, we have others. ” Hiring Solutions Linked earned revenue in this category primarily from the sale of its Linked Hiring Solutions and Linked Jobs products. Enterprises and professional organizations used Hiring Solutions to identify Job candidates using industry, Job function, geography, experience, education, and other qualifiers.
Linked had a dedicated sales force that sold this service directly to enterprise clients. “We already have a significant number of the Fortune 500 companies that are using this product, and we’ve started going to the SMB [small and mid-sized business] market,” Sorrel said.. Samson pointed out that Linked was “highly disruptive to recruiters, making the idea of a static and quickly-out-of-date Rolodex obsolete, and providing them with the world’s largest, continually- updated source of talent. At the same time, “talk to any executive recruiter, and you will find that Linked is a critical part of their business,” said David See, a Gridlock general partner and Linked board member. The hiring solutions category also included subscriptions targeted toward recruiters and hiring managers. As of early 2012, 82 of the Fortune 100 companies were using Hiring Solutions products. 13 At the end of 2011 , over 9,200 enterprise organizations were under contract for hiring solutions products. 4 The segment represented 50% of Linden’s revenue in 2011. Investors. Linked. Com, accessed March 5, 2012. 12 “About Us,” Linked Press Center, available at
Linked members had household income greater than $60,000, making Linked one of the most affluent demographics on the market. 15 Samson commented, “If you are a COM for a 401 k advisor or luxury car manufacturer, advertising on Linked is a no- brainier. ” Linden’s initial public offering prospectus noted, “… Visitors to our Web site represent more decision makers, have higher average household incomes, and are comprised of more college or post college graduates than U. S. Visitors of many leading business Web sites. “16 In 2010, Linden’s marketing solutions were used by ever 33,000 customers. 7 The segment accounted for 30% of revenue in 2011. Premium Subscriptions Premium subscriptions were primarily derived from members who used Linden’s range of subscription products. These offerings were sold online, on a monthly or annual basis, and allowed members more search, communication, organization, and customer support features than were available through the free membership. Premium subscriptions accounted for 20% of revenue Professional Network Service Market Two of Linden’s markets, talent acquisition and online advertising, were of significant size to provide substantial opportunities for the company.
DC estimated the talent acquisition and administrative services market at $85 billion in 2010, and forecast compound growth rates of approximately 5% per annum through 2015. 18 While a large portion of the market related to temporary staffing and administrative services, Linked executives believed their products and services addressed approximately $27 billion of the talent acquisition and administrative services market. 19 Morgan Stanley researchers believed Linked could be a disruptive force
