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Analysis of LinkedIn

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Analysis of LinkedIn Corporation for Strategic Management class at SGH (Warsaw School of Economics) prepared by Cristian Cafure and Aleksey Narko

Analysis of LinkedIn Corporation for Strategic Management class at SGH (Warsaw School of Economics) prepared by Cristian Cafure and Aleksey Narko


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  • 1. 31th MAY 20132 LINKEDIN | SIX DEGREES OF SEPARATIONIndexIndex ................................................................................................................................................... 2A. Introduction ................................................................................................................................... 31. Presentation of the company......................................................................................................... 3a. Basic characteristics .................................................................................................................... 3b. History......................................................................................................................................... 3c. Solutions | Services ..................................................................................................................... 4d. Overall performance | Finance................................................................................................... 6e. Overall performance | Website .................................................................................................. 72. Strategic analysis.......................................................................................................................... 11a. Macroenvironment ................................................................................................................... 11b. Megatrends............................................................................................................................... 14c. Microenvironment..................................................................................................................... 14i. SWOT...................................................................................................................................... 14ii. Porter’s five forces analysis................................................................................................... 17iii. Strategic group map ............................................................................................................. 20d. Stakeholders expectations........................................................................................................ 213. Strategy formulation.................................................................................................................... 21a. Mission statement..................................................................................................................... 21b. Strategic goals ........................................................................................................................... 21c. Business-level ............................................................................................................................ 23d. Corporate level.......................................................................................................................... 234. Organizing for strategy................................................................................................................ 25a. Strategy in action....................................................................................................................... 25b. Key Success Factors................................................................................................................... 29c. Future investment plans............................................................................................................ 31d. Conclusions ............................................................................................................................... 31References........................................................................................................................................ 32Annex - Glossary............................................................................................................................... 33
  • 2. 31th MAY 20133 LINKEDIN | SIX DEGREES OF SEPARATIONA. IntroductionThe 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 inwhich it is acting and with a final conclusion and points to consider for the future.1. Presentation of the companya. Basic characteristicsLinkedIn [www.linkedin.com] is the world’s largest professional network service (PNS) website inthe world, with over 200 million users of more than 200 countries and territories and available inover 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 Europe1andcomes 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 during20122and 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 countries3and XING [www.xing.com], aGerman-based-company with 13 million users (half of them are from German-speaking countries)from over 190 countries4according to the company.Individuals, enterprises and professional organizations might take different services provided fromLinkedIn in a free-of-charge basis or by paying a premium to get additional features.b. HistoryFounded in December 2002 and launched on 5th May 2003by Reid Hoffman, former CEO and current Chairman of theBoard, and colleagues coming from companies related toonline business as PayPal and SocialNet (Allen Blue, Eric Ly,Jean-Luc Vaillant, Konstantin Guericke). LinkedIn wasdeveloped under the idea that a network focus on business can connect the world’s professionalsto make them more productive and successful and providing them with better opportunities.1http://blog.linkedin.com/2013/01/09/linkedin-200-million/2http://investors.linkedin.com/annuals.cfm | “2012 Annual Report” [Accessed on 26th May 2013]3http://thenextweb.com/insider/2013/01/14/pealk-viadeo/4http://corporate.xing.com/no_cache/english/press/press-releases/details/article/press-releasebr-xing-ag-xing-agm-agrees-to-pay/339/58e143b724ed430c990fab8e688bcb86/
  • 3. 31th MAY 20134 LINKEDIN | SIX DEGREES OF SEPARATIONAdditionally, it was based on the concept of Six degrees of separation, according to whicheveryone is 6 or fewer steps away from any other person in the world via introduction. By thatmeaning, “a friend of a friend” statements can be made, for example, to connect a fisherman fromChina 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 firstmonth and 37.000 after half a year of existence), after 2 years LinkedIn had a membership ofalmost a million professionals worldwide. In 2005 it introduced its business lines: jobs andsubscriptions 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” andtraded its first shares on May 19, 2011 on the New York Stock Exchange (‘‘NYSE’’).c. Solutions | ServicesAs mentioned before, LinkedIn has free and monetized solutions, each one providing separatedspecific services.FREE SOLUTIONSIt is the option that users get free of charge and it is focus on expanding the professionalnetwork. Connections across the network are classified into three degrees: first degreeconnections are members who agree to connect, second degree connections are members whoshare one or more mutual connections, and third degree connections are related via twoconnections. Members can retrieve the contact information of their first degree connections andbrowse their second and third degree connections in order to find additional opportunities.FREESOLUTIONSFunction ExamplesManageProfessionalIdentity Profile Skills/EndorsementBuild and engagewith professionalnetworks Invitations People YouMay KnowAccess toKnowledge, Insightsand Opportunities Groups SlideShareMulti-platformAccess Mobile APIs55API = Application Programming Interfaces. Used to build applications in the cloud computing market
  • 4. 31th MAY 20135 LINKEDIN | SIX DEGREES OF SEPARATIONManage 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 (fromhard skills such as knowledge of IT softwares to soft skills like team management) and otherscan endorsed/recommend this person, assessing its veracity.Build and engage with professional networks =| Invitations | Members can send invitations to connect and expand their network. Inthis case, 1stdegree contacts can invite each other. 2nddegree contacts can be contactedthrough messages, not invitations.| People You May Know| Users receives a list of possible members they might know butthey 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 fromLinkedIn but it is an added service > www.slideshare.com.Multi-platform access=|Mobile| LinkedIn is available on cell phones through mobile applications, including iOSfor iPhone and iPad, Android, Blackberry, and Windows Mobile.| API | It is possible to program applications that integrates services and content fromthe website into another websites or platform. Additionally, the content and display of a profilein LinkedIn can be modified using these tools.MONETIZED SOLUTIONSMONETIZEDSOLUTIONSSolution Function ExampleTALENTSOLUTIONSFind candidatesmore easily Advanced Searches InMailMARKETINGSOLUTIONSPromote productsinside the network Display Ads Recommendation AdsPREMIUMSUBSCRIPTIONSOrganizeindividual/company’sprofile better Sales Navigator Profile organizer
  • 5. 31th MAY 20136 LINKEDIN | SIX DEGREES OF SEPARATIONTalent solutions:Aims at companies being able to identify efficiently and acquire the right talent for theirneeds. It is based on the idea that 80% of potential employees are passive job seekers. It aims atrecruiters and corporations, who want to create a corporate page, access LinkedIn’s database ofusers 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 aproduct through graphic or text link in LinkedIn.Premium subscriptions:Is directed to those who want to improve their profiles with more information, bettercustomization and gaining access to those in a company with decision-making-power assometimes the contact network might be very extend but not filled with the people the user needsto address.d. Overall performance | FinanceThe following are indicators to see the performance of LinkedIn.Net revenue | ProfitVariation from 2013 to 2014, calculated based on the Consensus Scenario of 2013.Source: http://investing.businessweek.com/research/stocks/earnings/earnings.asp?ticker=LNKDOverall, experts predict a prosper future for the company with net revenues climbing to $1,500million in 2013 and $2,100 million in 2014.
  • 6. 31th MAY 20137 LINKEDIN | SIX DEGREES OF SEPARATIONShare value | the highest and lowest value per quarterSource: http://investors.linkedin.com/annuals.cfm | 2012 Annual ReportThe initial value was $ 45 in May 2011 and nowadays the average is $ 1706, reflecting positiveexpectations from the industry in general.e. Overall performance | WebsiteDistribution of members worldwide6http://investing.businessweek.com/research/stocks/earnings/earnings.asp?ticker=LNKD
  • 7. 31th MAY 20138 LINKEDIN | SIX DEGREES OF SEPARATIONAs presented before, LinkedIn has a stronger presence internationally than its maincompetitors but there are still raising markets which can be better explored.Stage of development – Product Life CycleMarket share | Market GrowthUnder “Others”, Tianji was included even though it’s presence is only in China but because it is part of the Viadeo Group, it might haveimpact in the future in the global marketSource: based on own calculations | Traffic and users information from corporate websites and www.alexa.comThe market share according to number of users worldwide shows a favorable positionfor the company.LinkedIn;74,86%Viadeo;16,63%3,66%Others;4,85%MARKET SHARE BY APRIL 2013 |USERS-BASED
  • 8. 31th MAY 20139 LINKEDIN | SIX DEGREES OF SEPARATIONDemographic characteristics of usersSource: http://www.globalrecruitingroundtable.com/2013/01/22/linkedin-facts-figures-2013/#.UaeZk9JSjOU [Accessedon 30th of June 2013]More than 50 million unique visitors each week2.6 Billion pages viewed in one month (Traffic for Dec 20 2012 – Jan 18 2013)1% of the addicts are responsible for 26% of all trafficThe average user spends 7 minutes and 22 seconds on the website25% 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 PageWeb Traffic SourcesSource: https://www.quantcast.com/linkedin.com [Accessed on 30th of June 2013]
  • 9. 31th MAY 201310 LINKEDIN | SIX DEGREES OF SEPARATIONTraffic in the US | Social Networks + Professional Networks | To April 2013Source: http://www.dreamgrow.com/top-10-social-networking-sites-by-market-share-of-visits-april-2013/ [Accessed on30th of June 2013]Although not the same category, this graph is included with the purpose of showing how overallLinkedIn is gaining market share in the US even comparing it with more popular and massivewebsites like Facebook and Youtube which have a bigger potential customer base.Market growthAccording to LinkedIn data, the number of customers grew by 16 million during the first quarter of2013. It is representing a rate of more than 2 new registered users per second. Taking intoconsideration the growth trends from the first quarter 2010 until the first quarter 2013, theaverage 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 theyear and 262 million users in total.
  • 10. 31th MAY 201311 LINKEDIN | SIX DEGREES OF SEPARATION0,00%2,00%4,00%6,00%8,00%10,00%12,00%14,00%Q210Q310Q410Q111Q211Q311Q411Q112Q212Q312Q412Q113Market Growth perquarter 2010-2013 | %Source: www.slideshare.net/linkedin/q1-2013-earnings [Accessed on 31th of June 2013]2. Strategic analysisa. MacroenvironmentPOLITICALGovernments are expressing their concern about privacy contents which could harm thecompany 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 illegalconducts, such as the unauthorized spread of national security information, money laundering orsimilar, can restrict or impose additional costs upon the conduct of the business or cause users toleave the service.Taxation issues are also important as the unclear nature of business (legislation and onlineapplications) can force the payment of double fiscal obligations.
  • 11. 31th MAY 201312 LINKEDIN | SIX DEGREES OF SEPARATIONECONOMICFluctuations in the economy and market in general can affect the numbers of users seeking forjobs, 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 torecruiting, might be more common while peak trends of recruitment, for example, the secondquarter of the year and Marketing Solutions can be highly requested during winter seasons whenpeople spend more time on the Internet.There is also the currency exchange fluctuation as LinkedIn is entering international markets withmore 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 alsouseful as the need of investing is constant and therefore, also limits the possibility to pay dividendsto investors more frequently.SOCIALUsers are feeling more comfortable of using online services to look for jobs but on the otherhand, feeling worried about privacy policies and its effectiveness.Additionally, each country and cultural aspects related to work and selection processes aredifferent and what in one place might be acceptable might not be in another. For example, addinga picture is obligatory in South American countries but in European countries, that is more like anoptional option.There is also a tendency of requesting accessibility anytime, anywhere and this is where mobileapplications 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).TECHNOLOGICALThe constant development of new technologies impacts the growth of the industry, as newsolutions and opportunities appears.In the area of information security and data protection, most states have passed laws requiringnotification to users when there is a security breach for personal data, such as the 2002amendment to California’s Information Practices Act and any future changes might affect how thewebsite is or can be programmed and with which informatics infrastructure.
  • 12. 31th MAY 201313 LINKEDIN | SIX DEGREES OF SEPARATIONAs the platform is growing in its’ membership and adding new services, upgrade of systems arerequired while accommodating actual and anticipated changes in the service to overcome possiblecapacity constraints.There is also a dependency on Internet search engine’s methodologies (Google, Yahoo, etc) todirect the traffic to LinkedIn.Finally, if there are communication shutdowns and no access to internet, which depends on thirdparties, nullifies efforts from LinkedIn.ECOLOGICALAbout the ecological aspect, the tendency from Green initiatives can lead the usage of digital toolsinstead of the physical printing of CVs for example.Additionally, natural disasters or other catastrophic occurrences could interfere the access to theserves of LinkedIn and therefore, making it inaccessible. US corporate offices are located in SanFrancisco Bay Area and Southern California, both regions known for seismic activity and althoughthere is a disaster recovery program, it might take time for the service to being re-established.LEGALBecause of the wideness and not-well-defined field of application (international and “virtual-online”), multiple jurisdictions or yet-to-define concepts are addressed. Additionally, lawsconcerning labor agreements, privacy of data, acceptable marketing has to be taken considered.Additionally, Intellectual property rights are important considering the know-how, applicationsand programs developed for the website, and how easily an invention or concept can be replicatedon 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 affectcompanies conducting businesses online, many of which are still evolving and could be interpretedin ways that could impact the business. In US and abroad, laws relating to the liability of providersof online services for activities of their users and other third parties are currently being tested by anumber of claims, including actions based on invasion of privacy, unfair competition, copyrightand trademark infringement.
  • 13. 31th MAY 201314 LINKEDIN | SIX DEGREES OF SEPARATIONThere is also privacy and data protection laws, and their application to the Internet is unclear andchangeable according to country, region and security breaches, investigations and litigationsaround this topic can impact strongly on the business. Connected to this, payments and flow ofmoney is done to pay for the services and an incorrect manipulation of data can lead to frauds orother illegal acts which can result in fines and harm of the reputation of the company.b. MegatrendsPNS adding SNS features and viceversa | FeaturesThe addition from LinkedIn of features such as recommendations, groups, etc and on the otherhand, Facebook applications such as Branch-out (application with job-seeking-purposes) shows atrend toward mutual “bench-marking” when applicable.New services and options | AccesibilityPNSs 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 devicesother than personal computers, including smart phones, handheld tablets and mobile telephoneshas 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 GlocalizationThe less glocalized strategy from websites like Viadeo and XING reflects a tendency towardaddressing the global market as one, but placing additional features for users to customize itscontent in case they need it. There are also more languages available in order to make membersfrom different part of the globe being connected in a single platform.c. Microenvironmenti. SWOTSTRENGTHSSufficient financial resources to fund projectsNowadays with over USD 320 million revenues per quarter, LinkedIn is not a small weak startup asit was at the beginning. This is reflected on how they spent money on acquisitions such asSlideSharE for USD119 million and Pulse (newsreader web and mobile) for USD 90 million. The
  • 14. 31th MAY 201315 LINKEDIN | SIX DEGREES OF SEPARATIONcompany has financial resources to develop project from the inside and provide its users with newservices.LinkedIn has a good reputation among professional networking siteIn a study from ROI Research, 59 per cent of respondents say LinkedIn is their most importantaccount on social networks. Even during the recession at the job market in many countries, it isone of the most common places for job seekers to find opportunities and the companies to findcandidates. 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 isrelying on its quality to attract new users and the addition of two new members per second is asign that shows confidence for the future. This is reflected on the 49% of members findingLinkedIn to be a good source for “word-of-mouth” information on brand experiences.7Diversified revenue streamsAs it was mentioned above, LinkedIn has different sources of revenue from its different. Thisprovides flexibility and more future options to exploit.First mover and leader in the marketBeing the first comer to the market of professional networks and current leader places LinkedIn ina favorable position to act and establish future trends.International presenceLinkedIn has users all over the world and not only in specific regions, such as Viadeo and XINGmainly focus in Europe.WEAKNESSESSecurity vulnerability | Privacy issuesIn 2012, a security breach and passwords of more than 6,5 million users were stolen and postedonline by hackers. Although this represented only 5% of total accounts, it was a warning for thecompany 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 placespersonal information on the webpage trusting that this information is kept safe. LinkedIn did notpresent solid anti-threat-security-measures on their servers at that time.7Acccording to PunchMedia Marketing Agency - http://www.slideshare.net/punchmedia/linkedin-statistics-2013
  • 15. 31th MAY 201316 LINKEDIN | SIX DEGREES OF SEPARATIONInadequate presentation for some industriesLinkedIn 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 professionsrelated to art (actors, singers, etc) are examples who might not find their needs satisfied with thisservice.Cultural barriers + Weak presence outside the US specially in India and ChinaEach country has its cultural customs when it comes to work-related-issues. The composition ofthe membership of Linkedin is a reflect of this as a half of them are from the US, then 25% of themare from Europe, but emerging markets like India and China represent only 18% (2 million usersout 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.OPPORTUNITIESPeople from all over the world are potential members of PNSLike mentioned before, two new members join the membership of LinkedIn every second andevery person who looking for a job, is a potential member.Trend toward usage of Internet for everyday lifePeople 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 CVsand 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 WebCompanies are trying to attract users to their products and/or join their staffs by creating Brandexperiences based on both Conventional and Online Marketing. This allows PNSs to create newopportunities and broaden its services.Unexploited growing Asian marketNow three out of four users of LinkedIn are either from US or Europe, however by being the onlyleading social media which is allowed in China company can use its potential and increase its sharein the country with a population of more than 1, 3 billion or the Indian market as well.
  • 16. 31th MAY 201317 LINKEDIN | SIX DEGREES OF SEPARATIONTHREATSDynamism of the industry and varied potential competitorsOnline services are constantly changing and new entrants can emerge. As the area of competitionis interconnected with different markets possible rivals can include social networks, such asTwitter, Facebook; professional networks like XING, Viadeo and Goldenline in Poland; or seeminglyunrelated 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 availablefor more than 30 million users in 15 languages) presents potential threats for LinkedIn.Those who does not use or are not interested in Online ServicesThose who are outside the network, either because they are not interested in looking for a job, theservice or does not want to create profile, are potential candidates which might interestcompanies in certain positions.Possible unreliability of dataIt is said that on Facebook, 83 out of 955 million social network users are fake. In LinkedIn, someusers might place references or skills which cannot be corroborated, inaccurate data orinappropriate usage of the network by users who can use to for spamming can damage LinkedIn’sreputation.ii. Porter’s five forces analysisIndustry rivalry - Competition MODERATE Leadership among PNS | Wide variety of options | Dynamic market | CompetitiveactionsAmong other PNS, LinkedIn is the leader, far away from competitors like Viadeo and XING but thatleadership 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 varietyof options provided by the company, both with free solutions and monetized solutions, offer usersdifferent 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 inEurope is acceptable but not enough in the future.
  • 17. 31th MAY 201318 LINKEDIN | SIX DEGREES OF SEPARATIONPrint Screen taken from Viadeo - www.viadeo.com [Accessed on 26thMay 2013]It is possible to see that the available languages are less than LinkedIn, showing a lessinternationalized strategy and also focus on the European market but slowly changing toward anmore 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 playersPossible 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 evencompanies 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 facinghigher 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 creatingalliances, joining efforts with smaller companies already providing additional features andtherefore, although LinkedIn is very-well-positioned, and its approach of updating functions isaccurate, preventive measure are key.Threat of substitute products or services MODERATE SNS | Job Search Engine - Online Job ServicesPossible 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 through8http://thenextweb.com/insider/2013/01/14/pealk-viadeo/9http://www.neowin.net/news/microsoft-shows-interest-in-buying-yammer
  • 18. 31th MAY 201319 LINKEDIN | SIX DEGREES OF SEPARATIONLinkedIn, but also professionals might refer to Facebook, Twitter if they want to know aboutopportunities in a company and they do not use or know PNSs. Online Marketing features can beused both to position a company and also to attract new candidates and promote opportunities.Picture of Facebook promoting a Job Opportunity | Combination Job Posting + SNSBargaining power of customers/buyers LOW-MODERATE No concentration | No switching costs | Undisputed leaderCustomers 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 onprofessional/social networks, a good reputation is built slowly but a downturn can create aninstant 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, thewebsite Myspace (www.myspace.com) was created in 2003, was the main leader in visits until2007 but started a decline from 2008, compare to Facebook or Twitter to quote a few, becausethey stuck in their “portal strategy” and did not add features to improve the “social-networkingexperience”.Additionally there are no switching costs and users can easily join other options. Fortunately forthe company, considering being the clear leader of the market, the viral effect makes more usersjoin the network, and giving more reasons to users to stay.Overall, users might switch to competitors but LinkedIn provides good quality services (andconsequently, has good reputation), adds new features and responds to market needs, plus thecurrent membership support available, makes it well-positioned against this force.
  • 19. 31th MAY 201320 LINKEDIN | SIX DEGREES OF SEPARATIONBargaining power of suppliers LOW Many providers | Webpage programmed on Java10On this type of industry, it is possible to find many options as service providers. Ranging fromdata storage services to mobile and overall, new applications, the offer is vast. Purchase ofsuppliers, for a wider range of services for users, is a common strategy and it is possible to refer tothe first acquisition of LinkedIn in 2010 of mspoke (later LinkedIn Recommendations) andSlideShare in 2012 (still a separate webpage - www.slideshare.com) by $0.6 million and $119million respectively. Additionally, as it is programmed on Java, it is easier to find programmerscompare to other languages such as PHP, which requires more complex maintenance.Picture of LinkedIn Recommendations - Mspoke acquisition and it’s featureOverall, the position of LinkedIn is solid, as it is the clear leader, there are no strong followers, ithas international presence and provides many services to attract different segments inside themarket of professionals looking for online features.The characteristics of the industry makes difficult to differentiate competitors, substitutes andpotential new entrants as the example of SlideShare, which could have been acquired byFacebook, Microsoft or even an Enterprise Resource Planning (ERP) company and might enter thePNS market. Considering this, the approach of LinkedIn of buying suppliers, adding new servicesand adapting the websites’ feature to each customers’ needs places then in a favorable position.iii. Strategic group mapLinkedIn provides a wider range of products (3 different solutions)in a broader geographical scope. In the future, it is expected a moreglobalized strategy for the competitors while at the same time aneven wider product range from LinkedIn.10http://www.thebuzzmedia.com/linkedin-is-written-in-99-java/
  • 20. 31th MAY 201321 LINKEDIN | SIX DEGREES OF SEPARATIONd. Stakeholders expectationsAs stakeholders, the following were identified.LinkedIn’s employees they expect stable growth of the company and development of theirprofessional career within the corporation. Customers expect more useful services worth payingfor 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 andnumber of dividends they get. They expect the company to go the right way and be guided by theleaders with clear winning strategy. Creditors want stability as well, no decline and steady growthof the corporation. Society and community wants improvement of the job situation and thedecrease 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 peopleunemployed in their countries as well. Competitors want to see LinkedIn as a weaker player at themarket of social networks.3. Strategy formulationa. Mission statementMission:“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 toachieve higher levels of performance and professional success and enable companies to find andconnect 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 laborforce who has the ability to create economic opportunities for others as LinkedIn believes this isthe main power of its’ professional network.b. Strategic goalsLinkedIn’s strategy is based on 3 main pillars11and each is divided in 2 elements: Simplify Grow Everyday11http://investors.linkedin.com/annuals.cfm | “2012 Annual Report” [Accessed on 26th May 2013]
  • 21. 31th MAY 201322 LINKEDIN | SIX DEGREES OF SEPARATIONSimplify| “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 Homepageor 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 essentialsource for relevant shared information.Grow| “Expand Our International Presence” |” Increase Monetization While Creating Value for Our Member”Comprises two priorities:1. expanding global membership2. extending monetization efforts to benefit both members and customers.The website is now available in 19 languages and there is an increasing tendency of subscriptionsoutside the US during the last year.About monetization, each solution was improved and overall it can be seen an improvement infeatures related to access to the page through mobile services plus clearer value-addition forPremium Subscribers such as a Sales Navigator for the Sales Solution, which makes easier how tocontact 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 andgain valuable insights. The goal is for professionals to use the platform as the main professionalprofile worldwide,. The introduction of “Endorsements” allowing members to better recognize theskills of their colleagues is an example as well as the acquisition of SlideShare, allowing users toupload and share presentations.
  • 22. 31th MAY 201323 LINKEDIN | SIX DEGREES OF SEPARATIONc. Business-levelCULTUREThe company culture is intended to reflect who LinkedIn and their staff are and where thecompany aspires to be.Transformation. People who work at LinkedIn are there because they seek to make a positive andlasting impact on the world, help realize the full potential of LinkedIn and fundamentally alter thetrajectory of their careersIntegrity. LinkedIn does not believe the ends justify the means. Rather, employees are expected todo the right thing no matter whatCollaboration. Much like the network effects inherent in LinkedIn’s business model, the companybelieves that as valuable as they are as individuals, they are all exponentially more valuable whenaligned and working togetherHumor. Fulfilling LinkedIn’s mission and vision requires an intense focus, so the company believesit is important to not take themselves too seriously and try to have some fun while doing itResults. LinkedIn set clear, actionable goals and have high expectations for the company’sperformance, counting that employees consistently deliver excellent results, seek leveragethrough greater efficiency and effectiveness, and demonstrate leadership at all levelsVALUES“Our Members Come First”“Relationships Matter”“Be Open, Honest and Constructive”“Demand Excellence”“Take Intelligent Risks”“Act Like an Owner”d. Corporate levelLinkedIn’s strategic model is based on 3 elements:1) International expansion: like it was presented on the point “Strategic goals”, LinkedIn acts in away to promote international expansion, through building offices outside US, more variety oflanguage availability and international sales force.
  • 23. 31th MAY 201324 LINKEDIN | SIX DEGREES OF SEPARATION2) Closed platform: the website is a closed platform in the sense of no links to other networkingsites are promoted. For example, SlideShare is handled as a separate place even though itbelongs to LinkedIn, keeping its specificities along. The needed information for users is insidethe page and embedded| displayed on it when necessary.3) Pre-empt competitors: LinkedIn provides new services to avoid competitors (actual andpotential) to try to enter the market. Wall Street Journal and the information that is availableinside LinkedIn is similar to Facebook and its’ relation with USA Today.REVENUESRevenues are generated from the monetized Solutions mentioned before.Talent Solutions: Revenues from providing access to the LinkedIn Recruiter comes from thesubscription 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 asource 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 havefurther features. Subscriptions are monthly or annual.NET REVENUE BY PRODUCTSource: http://investing.businessweek.com/research/stocks/earnings/earnings.asp?ticker=LNKDOverall, 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 marketpenetration of the product. On the other hand, net revenue from Marketing Solutions increased
  • 24. 31th MAY 201325 LINKEDIN | SIX DEGREES OF SEPARATION$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 byhigher user engagement.Net revenue from Premium Subscriptions increased $85.0 million as a result of an increase in thenumber of premium subscribers due to increases in engagement of members.Source: http://investing.businessweek.com/research/stocks/earnings/earnings.asp?ticker=LNKD4. Organizing for strategya. Strategy in action3 ASSERTIONS INSIDE THE BUSINESS MODELThere are 3 assertions which LinkedIn uses to deploy its strategy:1) Professional Social Network is different from Social Network: although they might sharesome characteristics, the purposes are different and professional wants to have a network forspecific 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 keeptheir basic and original idea of working only with professional users, because their needs are
  • 25. 31th MAY 201326 LINKEDIN | SIX DEGREES OF SEPARATIONspecific and it is a niche market (inside the social media market) which can be fully andfavorably exploited.3) Corporations’ support: considering the 2 assertions before, if LinkedIn stands for theprofessionals, corporations will support the concept and will invest money on it, as thereputation and the number of members will be good enough to provide the results thatcompanies desires.STRUCTUREBy 31th December 2012, LinkedIn had 3.458 employees, most of them in Engineering, Productdevelopment and Operations.Source: http://investors.linkedin.com/annuals.cfm | 2012 Annual ReportTherefore, the structure is focus on developing and maintenance of services and sales (althoughSales and Marketing are presented together, the main focus is on expanding sales internationallywith a stronger sales team).INTERNAL POLICIESLinkedIn encourages collaboration but at the same time embraces individual thinking andcreativity. As an example, one of the key approaches to attracting and retaining technical talentand fostering continued innovation is through sponsored events like ‘‘InDays’’ and ‘hackdays’’where employees are encouraged to create and implement new ideas. Participants then presenttheir ideas in front of the whole company with prizes awarded for the best ideas.Engineering |Productdevelopment |Operations44%Sales andMarketing42%Administrative14%SHARE OF EMPLOYEES BY FUNCTION
  • 26. 31th MAY 201327 LINKEDIN | SIX DEGREES OF SEPARATIONSALES FORCEField sales organization uses a direct sales force to solicit customers and agencies. This offlinechannel, mainly used for Talent and Marketing solutions, allows a longer sales cycle where pricecan be negotiated, higher relative average selling prices and longer contract terms.Online channels (through the website) are available mainly for Premium Subscriptions andoccasionally, for Marketing solutions.MARKETING: Word-of-mouth advertisingThe member grew virally based on members inviting other members to join the network andtherefore, marketing costs are low. Based on trusting the quality and services provides, thecompany 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.OPERATIONSThe main characteristic of the platform is being available constantly and for that, the website andrelated infrastructure are hosted in multiple third-party facilities. In this way, in case oftechnological 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 thecompany responsible for this service since 2008.WEBSITE PERFORMER AS A DRIVERLinkedIn understands “Website performance” as the ability of users (regardless they are membersor not), enterprises and professional organizations in all geographies to access the website, serviceand solutions within acceptable load times.The company realizes that in some instances, they might not be able to identify the causes ofproblems for accessing the website or it might become difficult to maintain and improve theoverall performance, especially peak usage times and when the solutions and services becomemore complex. In case the service are unavailable when users need it, they may seek otherwebsites or services and that might affect the reputation of the company.
  • 27. 31th MAY 201328 LINKEDIN | SIX DEGREES OF SEPARATIONConsidering this scenario, LinkedIn aims at making investments to maintain and improve Websiteperformance while releasing new features. Because of this, a disaster recovery program wasimplemented allowing moving production to a back-up data center.TRADE SECRECY | Intellectual Property RightsAs mentioned in the Legal aspect in the PESTEL analysis, the importance of keeping inventions safeand possible infringements of intellectual property, makes very important to keep track of thisissue.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 wellas others, and as of December 31, 2012, are under licenses issued in US patents related to onlinenetworking, which expire between 2017 and 2029,and 124 patent applications on file in theUnited States and internationally12.TECHNOLOGICAL INFRASTRUCTURETechnological innovations are placed to make the service more efficient. The key technologicalpillars are the following:Professional Graph: graph engines are used in the webpage where nodes can representindividuals, companies, schools and other entities and connect, follow another member, basedon 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 (forexample, 2nd degree vs. 3rd degree).Open Sourced Technologies: the open source community is contacted to promote ideas andhelp increase the speed at which the technology can mature. The combination of open sourceand proprietary technologies used increases the speed at which productions of scale can beachieved. To quote a case, Hadoop is an open source project used to batch compute data fordifferent features from the website and that enables massive calculations.Search: multiple searches on real time based on key words in many languages is available toallow interconnections among members.Customized Content, Matching, Targeting and Recommendations. LinkedIn developed its ownrecommendation engine by combining the technologies coming from Professional Graphs and12
  • 28. 31th MAY 201329 LINKEDIN | SIX DEGREES OF SEPARATIONSearch engines. Based on a member’s profile, their 2nd and 3rd degree connections, theirviewing and clicking history, and a host of other criteria, our algorithms can provide intelligenceand recommendations around People You May Know, Groups You May Like, etc.POSITION IN THE MARKETGRAND STRATEGY MATRIX ANSOFF MATRIXLinkedIn is ahead of its competitors as it is providing new services, reaching more usersinternationally and creating a bigger professional network than the rest. It is also understandingthe importance of being available everywhere, especially with the raising of usage from users ofmobile applications and also differentiating customers inside the PNS market as a whole, with theTalent Solutions, Marketing Solutions and Premium Subscriptions and making profits based onthem 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 FactorsThe following are Key Success Factors from LinkedIn:Number of Registered Members: number of individual users who have created a memberprofile on the website. The company believes is a key indicator of the growth of thenetwork and reflects how successfully services and solutions offered to professionals haveattracted new members. LinkedIn realizes than registered members are different fromactual members (due to falsification, etc) but still considers it a valid metric.2012 2011 2010Number of registeredmembers* 201.912 144.974 90.437*in thousands
  • 29. 31th MAY 201330 LINKEDIN | SIX DEGREES OF SEPARATIONChange in % 2011-2012 = 39%Change in % 2010-2011 = 60%Unique visitors: users who have visited the website at least once during a monthregardless of whether they are a member, based on data provided by comScore, (providerof digital marketing intelligence). For the company, this measure shows the growth inbrand awareness among users and whether useful products and services are provided,thereby increasing engagement of members and that increasing the sales of themonetized Solutions.2012 2011 2010Unique visitors* 126 84 52*in millions| SlideShare is also considered in these numbersChange in % 2011-2012 = 50%Change in % 2010-2011 = 62%Page views: number of pages on the website that users view. Similar to unique visitors, itis an indicator for gaining insight about members engagement and effective-value-deliveryof the services provided.2012 2011 2010Page views* 38.258 29.420 18.059*in millions| SlideShare is also considered in these numbersChange in % 2011-2012 = 30%Change in % 2010-2011 = 63%Number of LinkedIn Corporate Solutions Customers: number of enterprises andprofessional organizations that are under active contracts for Talent Solutions. Thisindicator shows the market penetration in the online recruiting market, the productivity ofthe field sales organization and the value that these products bring to large and smallenterprises and professional organizations.2012 2011 2010Number of LinkedIn CorporateSolutions Customers 16.409 9.236 3.865Change in % 2011-2012 = 78%Change in % 2010-2011 = 139%
  • 30. 31th MAY 201331 LINKEDIN | SIX DEGREES OF SEPARATIONSales Channel Mix: Talent and Marketing Solutions can be sold offline through LinkedIn’sfield sales organization or online through the website. The majority of PremiumSubscriptions are sold online. The offline channel is characterized by a longer sales cyclewhere price can be negotiated, higher relative average selling prices, longer contractterms and higher selling expenses.In USD 2012 2011 2010Field sales / offline 552.459 287.634 135.691Online sales 419.850 234.555 107.408c. Future investment plansResources and future investment plans will be focused on: technology infrastructure: architecture, availability, performance, security, as well as disasterrecovery 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 publiccompany with an expanding global presenced. ConclusionsAs it is in a newly and developing market, LinkedIn has the chance of keeping a rate of growth butfor 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 informationIn % 2012 2011 2010Field sales / offline 57% 55% 56%Online sales 43% 45% 44%
  • 31. 31th MAY 201332 LINKEDIN | SIX DEGREES OF SEPARATION 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 lawsconcerning 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 theappropriate one as the market is rapidly changing and users are always requesting more featuresfrom 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 May2013] http://thenextweb.com/insider/2013/05/05/linkedin-10-years-social-network/ http://www.slideshare.net/ctnconsulting/linkedins-history-present-and-recent-features#btnPrevious http://corporate.viadeo.com/en/about-us/the-group/ http://corporate.XING.com/no_cache/english/press/press-releases/details/article/press-releasebrXING-passes-6-million-member-mar/ 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://www.trefis.com/stock/lnkd/articles/82455/growing-small-businesses-can-boost-linkedins-top-line-but-stock-is-still-rich/2011-11-28 http://en.wikipedia.org/wiki/LinkedIn http://www.globalrecruitingroundtable.com/2013/01/22/linkedin-facts-figures-2013/#.UaeZk9JSjOU http://venturebeat.com/2013/04/17/linkedin-mobile-web-breakup/ http://www.slideshare.net/punchmedia/linkedin-statistics-2013
  • 32. 31th MAY 201333 LINKEDIN | SIX DEGREES OF SEPARATIONAnnex - GlossaryApp: applications; services which provides new featuresEmbedded: a display of webpage inside another, so there is no need to go to the original siteMobile: any device that allow users to access Internet (Tablet, cell phone, etc)PNS: Professional Network Service. Social Network with business-orientated-goalsSNS: Social Network Service. A social network. For example, FacebookTraffic: number of users, frequency, etc of a webpage