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1
A.A. 2015/2016 - UNIMORE, International Management
LinkedIn. An overall analysis of the
company.
Borsari Marco
Zanichell...
2
INDEX
INTRODUCTION ........................................................................................................
3
4.2 Resources and Competencies analysis....................................................................................
4
INTRODUCTION
LinkedIn is an international business founded in Mountain View, California (USA) in December
2002, which op...
5
1. COMPANY OVERALL PROFILE
1.1 Company history1
2002-2003
LinkedIn was originally founded in Santa Monica, California, i...
6
2012
Project Inversion and a completely re-architected site enabled an unprecedented pace of product
innovation and tran...
7
Table 1 - Venture funding of LinkedIn until 2008
6
LinkedIn said it has been operating cash flow positive for the last c...
8
Chart 1 – LinkedIn’s stock price from 2011 to 2014
8
1.2.3 Investors
In the link below there are several tables, which e...
9
1.3.1 For LinkedIn members
LinkedIn wants to help its members to be more productive and successful. So they offer tools ...
10
reading experiences, easily explore compelling professional content, and share stories on their
favourite social networ...
11
SPONSORED UPDATES
Sponsored updates can get the content in front of the world’s professionals on desktop,
smartphone, a...
12
With introducing LinkedIn Referrals, automatically uncover quality hires by engaging customer
employees, unlocking thei...
13
over 200 countries and territories. In addition, Professionals are signing up to join LinkedIn at a
rate of more than t...
14
FOCUS ON LINKEDIN OFFICE IN MILAN
An interesting article, which is linked below, explains how was built and designed Li...
15
Collaboration
Much like the network effects inherent in LinkedIn’s business model, the company believes that as
valuabl...
16
Table 2 - Acquisitions
34
2.5.2 Joint-Venture35
Focus on China Joint-venture
Besides the acquisitions, LinkedIn has als...
17
3. BUSINESS ANALYSIS AND COMPETITIVE POSITIONING
In this section of the paper our objective is to investigate the busin...
18
This graph clearly define the industry life cycle of PNS. First of all, it is a quite recent industry which
is started ...
19
Naturally we have to consider some limitations for this study. First of all we have considered just
few actors of the P...
20
LinkedIn is very-well-positioned, and its approach of updating functions is accurate, preventive
measure are key.”
Thre...
21
incomes. In particular in the earlier stages of the business, when, for example, there is the
gap of new comer. Moreove...
22
penetration in the online recruiting market, the productivity of the field sales organization and the
value that these ...
23
Graph 3 – Position in the market
46
Ansoff matrix
According to Ansoff matrix, LinkedIn products could be classified “ne...
24
As a reminder, Viadeo’s total revenue consists of three different types of revenue:
 Revenue from Recruitment and Trai...
25
Intelligence Competence Center AG, including its Jobbörse.com website which is the largest jobs
search engine in German...
26
of 2014. [...] Turnover outside of China was down 4.4% compared with the third quarter of 2014
and this drop is closely...
27
Premium products, which is reflected in our strong growth figures for that segment. Our sustained
member growth also sh...
28
B2B B2C B2B/B2C
LinkedIn 65% 23% 46%
Blog 63% 69% 63%
Twitter 53% 58% 59%
Facebook 47% 77% 80%
YouTube or other shered ...
29
revenue for most online social networking sites, the requirements of these advertisers to learn a
new advertising syste...
30
possesses advanced technology entailing sophisticated algorithms, which directly increases the
value creation for users...
31
Regarding how its service is distributed, LinkedIn does not manage this part of the value chain
directly. In fact, it i...
32
of the value chain to increase their value. The more this viral effect will occur the more LinkedIn’s
hiring and market...
33
5.1.2 Process (supply) innovation
In the process innovation, we have analysed the situation of LinkedIn and we have fou...
34
LinkedIn, they seem to be substantially economical, with the IPO which has probably laid down the
foundations for a wea...
35
Next, the section will turn to focus on the financial comparative analysis versus Xing, with a trend
analysis, and comm...
LinkedIn. An overall analysis of the company.
LinkedIn. An overall analysis of the company.
LinkedIn. An overall analysis of the company.
LinkedIn. An overall analysis of the company.
LinkedIn. An overall analysis of the company.
LinkedIn. An overall analysis of the company.
LinkedIn. An overall analysis of the company.
LinkedIn. An overall analysis of the company.
LinkedIn. An overall analysis of the company.
LinkedIn. An overall analysis of the company.
LinkedIn. An overall analysis of the company.
LinkedIn. An overall analysis of the company.
LinkedIn. An overall analysis of the company.
LinkedIn. An overall analysis of the company.
LinkedIn. An overall analysis of the company.
LinkedIn. An overall analysis of the company.
LinkedIn. An overall analysis of the company.
LinkedIn. An overall analysis of the company.
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LinkedIn. An overall analysis of the company.

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This paper is the result of a teamwork and the aim of this project is to examine LinkedIn under several aspects: from the profile of the company to the financial performances, from the innovation and competitive advantages to the strategies.

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LinkedIn. An overall analysis of the company.

  1. 1. 1 A.A. 2015/2016 - UNIMORE, International Management LinkedIn. An overall analysis of the company. Borsari Marco Zanichelli Francesco
  2. 2. 2 INDEX INTRODUCTION ...........................................................................................................................................3 1. COMPANY OVERALL PROFILE............................................................................................................5 1.1 Company history ............................................................................................................................5 1.2 Corporate governance and Organizational structure .....................................................................6 1.2.1 Board of directors.........................................................................................................................6 1.2.2 LinkedIn’s IPO..............................................................................................................................6 1.2.3 Investors........................................................................................................................................8 1.2.4 Organizational structure..............................................................................................................8 1.3 Company’s portfolio ............................................................................................................................8 1.3.1 For LinkedIn members ................................................................................................................9 1.3.2 For LinkedIn Customers............................................................................................................10 1.4 International presence......................................................................................................................12 2. CORPORATE STRATEGY....................................................................................................................14 2.1 Mission................................................................................................................................................14 2.2 Strategic goals...................................................................................................................................14 2.3 Corporate culture ..............................................................................................................................14 2.4 Strategic model..................................................................................................................................15 2.5 Horizontal development....................................................................................................................15 2.5.1 Acquisitions.................................................................................................................................15 2.5.2 Joint-Venture ..............................................................................................................................16 2.6 Vertical development ........................................................................................................................16 3. BUSINESS ANALYSIS AND COMPETITIVE POSITIONING...........................................................17 3.1 Industry analysis (concentration analysis, market shares, market penetration rates) .............17 3.1.1 Concentration analysis and market shares ............................................................................18 3.1.2 Market penetration rates...........................................................................................................19 3.2 Porter’s five forces analysis .............................................................................................................19 3.3 Key success factors..........................................................................................................................20 3.4 Competitive positioning ....................................................................................................................22 3.4.1 Competitors’ short analysis ......................................................................................................23 3.4.2 Maps of the competition positioning in PNS market (2014) .................................................25 3.4.3 Competitors’ growth...................................................................................................................25 4. COMPETITIVE STRATEGIES AND RESOURCES...........................................................................27 4.1 Generic competitive strategies........................................................................................................27 4.1.1 Differentiation strategy ..............................................................................................................27 4.1.2 B2B focused ...............................................................................................................................27
  3. 3. 3 4.2 Resources and Competencies analysis.........................................................................................28 4.2.1 Internal analysis .........................................................................................................................28 4.2.2 Social loyalty...............................................................................................................................28 4.2.3 Switching costs...........................................................................................................................28 4.2.4 Cost disadvantages ...................................................................................................................29 4.2.5 Company profile and internal analysis ....................................................................................29 4.3 Value Chain analysis ........................................................................................................................30 5. INNOVATION AND COMPETITIVE ADVANTAGE............................................................................32 5.1 Product and process technology-based innovation......................................................................32 5.1.1 Product (service) innovation.....................................................................................................32 5.1.2 Process (supply) innovation .....................................................................................................33 5.1.3 Technology - based industries: classification........................................................................33 5.1.4 Incremental and radical innovation..........................................................................................33 5.1.5 LinkedIn and the innovation process.......................................................................................33 5.1.6 LinkedIn and lead user innovation...........................................................................................34 5.2 Strategic, organizational, and marketing innovation.....................................................................34 6. PERFORMANCE ....................................................................................................................................34 6.1 Financial performance (3-4 years analysis; comparative analysis)............................................35 6.1.1 Financial Analysis ......................................................................................................................35 6.1.2 Financial comparative analysis, from 2008 to 2011 ..............................................................40 6.2 Financial performance (growth analysis) .......................................................................................41 6.3 Financial performance (risk analysis).............................................................................................42 7. FUTURE SCENARIOS...........................................................................................................................42 7.1 S.W.O.T. analysis .............................................................................................................................42 7.2 Future perspectives ..........................................................................................................................45 APPENDIX ...................................................................................................................................................47
  4. 4. 4 INTRODUCTION LinkedIn is an international business founded in Mountain View, California (USA) in December 2002, which operates in the Professional Networking Service (PNS). It is mainly used to built professional network in a business-oriented ambit. Up to now, as a free-website, most of their incomes come from the provision of services for professionals both individual and firms. The aim of this paper is to examine LinkedIn under several aspects. At the beginning it is presented the company’s overall profile, with its history, corporate governance and organizational structure, focusing also on LinkedIn IPO, a very important fact for the company. Therefore, in the same section Company’s portfolio is explained, with the distinction between members and customers. The section concludes with company international presence. The second section deals with corporate strategy and it is described through an analysis of mission, strategic goals, corporate culture and strategic model. Moreover, also in this section it is explained LinkedIn horizontal development, while vertical development is not considered in particular for the company. In section 3, we concentrated our focus on the business analysis and the competitive positioning. In particular we defined at the beginning the industry, with an analysis of the concentration, a comment of the market share and of the market penetration rates. Then we discuss the Porter’s five forces model of the industry of PNS and for LinkedIn. Very important is also the attention for the key success factors which have been analyzed for the industry and the strongest point for LinkedIn. Finally, fundamental is the examination of the competitive positioning in PNS. Competitors’ short analysis and competitors’ growth rates are the latest paragraph of this section, in which we briefly discuss and analyse the two major competitor of LinkedIn: Viadeo and Xing. A final part concern a cause of reflection for the possible future scenario in the competitive positioning with the emerging of new possible actor in the PNS as Facebook for instance. The fourth part describes LinkedIn competitive advantage. Generic competitive strategies are briefly explained, mainly focusing on the differentiation of the business social network company and its strong presence in B2B markets. Then, there is a detailed analysis of company resources and competences, described in order to clarify LinkedIn competitive advantages. Then, value chain analysis concludes this section. In the following section we discuss about innovation and competitive advantage. In particular we put the focus on the product and process technology-based innovation, and we investigate both the product innovation and the process innovation in a company as LinkedIn. Then we try to classify the industry of PNS on the base of the technology. After that, it follows a discussion on the positioning of LinkedIn compared with innovation. It emerges that the Company could be consider an incremental innovator. Next, we try to contextualize LinkedIn in the innovation process and in the concept of lead user innovation. Finally the last paragraph concerns a discussion on strategic, organizational, and marketing innovation for LinkedIn. The 6th section is about performance. We analyse the performance of LinkedIn with a financial point of view through a 3-4 years analysis, considering the key metric values adopted by the company. Then, under financial figures, we try to compare the Company with one of its major competitors: Xing. The last section regards the possible future scenarios of LinkedIn. In particular we focus on the S.W.O.T. analysis, discussing about the strengths, weaknesses, opportunities, and threats. Finally, we try to identify the future perspective of this international firm, in a slightly different approach for a “high-growth” company as LinkedIn.
  5. 5. 5 1. COMPANY OVERALL PROFILE 1.1 Company history1 2002-2003 LinkedIn was originally founded in Santa Monica, California, in 20022 and launched on 5th May 2003 by Reid Hoffman, former CEO and current Chairman of the Board, and colleagues coming from companies related to online business as PayPal and SocialNet. LinkedIn was developed under the idea that a network focus on business can connect the world’s professionals to make them more productive and successful providing them with better opportunities3 . 2004 Growth accelerates with the introduction of address book uploads in late 2003. LinkedIn introduces new features like Groups and partners with American Express to promote its offerings to small business owners. 2005 LinkedIn introduces its first business lines: Jobs and Subscriptions. The company also moves into its fourth office in three years. 2006 With the launch of public profiles, LinkedIn begins to stake its claim as the professional profile of record. In 2006, the company achieves profitability, and core features like Recommendations and People You May Know are introduced. 2007 After four years as CEO, Reid steps aside to run product and brings in Dan Nye to lead the company. LinkedIn moves to Stierlin Court and opens the Customer Service centre in Omaha. 2008 LinkedIn becomes a truly global company, opening its first international office in London and launching Spanish and French language versions of the site. 2009 Jeff Weiner joins LinkedIn first as President, then CEO, and brings focus and clarity to LinkedIn's mission, values, and strategic priorities. 2010 Company shifts into to hyper-growth. By the end of the year, LinkedIn has 90 million members and nearly 1,000 employees in 10 offices around the world. 2011 LinkedIn celebrates its eighth anniversary, becomes a publicly traded company on the New York Stock Exchange, and hosts a town hall with the President of the United States. 1 LinkedIn website: https://www.linkedin.com/about-us 2 LinkedIn. A valuation assessment of the fair value of LinkedIn: http://studenttheses.cbs.dk/bitstream/handle/10417/4816/henrik_lysgaard_jensen_og_bartosz_sm%C3%B3lczynski. pdf?sequence=1 3 N.Aliaksey, C. Cafure, 2013. LinkedIn, six degrees of separation: http://www.slideshare.net/bialorusin/id-57830- narko-aliaksey-id-57822cafurecristian-linkedin-written-assignment-strategic-management-sgh-spring-semester-2013- v2?from_action=save
  6. 6. 6 2012 Project Inversion and a completely re-architected site enabled an unprecedented pace of product innovation and transformation of the site and the company, which focused on three concepts: simplify, grow, everyday. 2013 By the end of our first decade, the company has reached 225 million members, and is growing at more than two members per second. 2014 Beginning the next decade of LinkedIn, we sought to create a map of the digital economy, its participants, and every facet of opportunity linking these nodes together. 1.2 Corporate governance and Organizational structure Corporate governance is described by Board of Directors, investors and Management Team. 1.2.1 Board of directors The Board of Directors of LinkedIn sets high standards for the Company's employees, officers and directors. Implicit in this philosophy is the importance of sound corporate governance. It is the duty of the Board of Directors to serve as a prudent fiduciary for shareholders and to oversee the management of the Company's business. To fulfil its responsibilities and to discharge its duty, the Board of Directors follows the procedures and standards that are set forth in these guidelines. These guidelines are subject to modification from time to time as the Board of Directors deems appropriate in the best interests of the Company or as required by applicable laws and regulations4 . Board of directors is composed by: Reid Hoffman, A. George Battle, Leslie Kilgore, Stanley J. Meresman, Michael J. Moritz, David Sze and Jeffrey Weiner5 . Before talking about investors it is useful to introduce how LinkedIn became public. 1.2.2 LinkedIn’s IPO LinkedIn’s initial public offering (IPO) was not just an event for the firm, its founders and early investors. LinkedIn's IPO became a spectacle for Silicon Valley start-ups and investors. Its IPO was viewed as a litmus test for Wall Street's appetite for future offerings. LinkedIn’s shares were traded on a private market. In July 2010, Tiger Global Management LLC purchased a 1% stake in LinkedIn for $20 million meaning a valuation of approximately $2 billion. It provided the first test of whether the public markets can sustain the soaring private-market valuations of social-media companies. Silicon Valley entrepreneurs were also following LinkedIn's fortunes for a signal as to how well investors will receive future IPOs of Internet consumer services. In the table below is listed the steps of early private venture funding. By the end of 2008 LinkedIn received $103 million. Venture funding of LinkedIn until 2008 are explained in the following table. 4 LinkedIn website: http://investors.linkedin.com/governance.cfm 5 LinkedIn website: http://investors.linkedin.com/directors.cfm
  7. 7. 7 Table 1 - Venture funding of LinkedIn until 2008 6 LinkedIn said it has been operating cash flow positive for the last couple of years, and has not even needed to use money it raised in 2008. In January 27, 2011 LinkedIn filed to go public. For the IPO LinkedIn was priced at $45 a share by Morgan Stanley, Bank of America Merrill Lynch and JPMorgan Chase, raising $352 million for the company. Though LinkedIn warned that revenue will slow and it will be unprofitable in 2011, the stock leapt more than 100% in its first day of trading, generating hundreds of millions of dollars for special clients of the underwriting banks. Shares of LinkedIn opened at $83 on the New York Stock Exchange, up 84% from its initial public offering price of $45. By the market's 4 p.m. close, the stock had soared 109% to $94.25. At the end of the day, LinkedIn was worth $8.9 billion. It was the biggest Internet IPO since Google Inc.'s debut in 2004. LinkedIn's offering marked the first time a company that has been actively traded on a private market will go public. The public-market investors had little data about the company, obviously a case of information asymmetry. On balance, according to Yahoo LinkedIn’s stock price were $123.79 (Jan. 2, 2013), and $153.47 (April 1, 2014). It is interesting to know that LinkedIn was launched before MySpace (2003), Facebook (2004), YouTube (2005) and Twitter (2006). The following bar chart illustrates the stock price from 2011 to 20147 . 6 http://etm.entechnon.kit.edu/downloads/LinkedIn_Corp.pdf 7 http://etm.entechnon.kit.edu/downloads/LinkedIn_Corp.pdf
  8. 8. 8 Chart 1 – LinkedIn’s stock price from 2011 to 2014 8 1.2.3 Investors In the link below there are several tables, which explained very well how the company shares are distributed. Moreover, it is clarified the role and the importance of the investors, in particular major holders9 . 1.2.4 Organizational structure10 LinkedIn functional organizational structure is composed as the next picture illustrates. Jeff Wiener is the LinkedIn CEO, under him there are three main subdivisions Steve Sordello (CFO), Steve Crane (Vice-president of Marketing) and David Henke (Vice-president Engineering and Operations). Under them there are the other functions, which coordinate the organization and development of the company. Picture 1 – Organizational structure 11 1.3 Company’s portfolio The company offers different solution services relating to the use of the social network. The main subdivision is between members and customers. 8 LinkedIn website: http://investors.linkedin.com/stocklookup.cfm 9 https://finance.yahoo.com/q/mh?s=LNKD 10 http://www.cogmap.com/chart/linkedin 11 http://www.cogmap.com/chart/linkedin
  9. 9. 9 1.3.1 For LinkedIn members LinkedIn wants to help its members to be more productive and successful. So they offer tools to help them tell their professional story and identity, in order to attract opportunities and be more successful. Moreover, they offer tools useful to build and nurture their networks so they can unlock future opportunities. Furthermore, they provide a guide to learn and grow professionally with the new professional needs. Following there are explained the three services, which LinkedIn provides to all its member: Identity (tips), Network (as problem solution) and Knowledge. Identity (Tips) Firstly, in order to achieve these purposes LinkedIn suggests different tips directly to the members while they are logging in the business social network. For instance, it teaches to the members that just by adding a photo to the profile or sharing a specific article with the network, LinkedIn Profile would be eleven times more likely to be viewed and potentially attract more professional opportunities. Furthermore, LinkedIn introduces the new Who’s Viewed Your Profile, packed with new visual analytics and actionable insights designed to give more ways to manage professional identity and increase members’ visibility across LinkedIn. Moreover, the most exciting new feature LinkedIn’s developers have added are the real- time personalized tips on actions that allow to make members’ identity more discoverable to other like-minded professionals, potential employers or business partners on LinkedIn. The personalized tips on Who’s Viewed Your Profile provide suggestions on everything from actions members can take to complete themselves profile to industry relevant articles that they can share to professional groups they can join, as well as how those actions can potentially increase views of a profile. Ultimately, this takes the guesswork out of how members can continue to build their own professional brand and manage their professional identity to make themselves even more productive on and off of LinkedIn12 . Network (as problem solution) Secondly, LinkedIn can also provide solutions to some problems, thanks to the enormous data bank that it owns, in order to satisfy personal member needs. For instance, if a user wants or have to make a career change, it would be grateful for him having more information about this topic. In fact, making a career change can be one of the more difficult professional challenges to face. In many cases, LinkedIn networks help make these decisions. LinkedIn networks can also help provide insight on potential career paths and put in touch with the relevant knowledge to decide which career path to take or when to make a career transition. To help people looking to make a career transition, the business social network mined the data found in millions of LinkedIn member profiles, isolated instances where members made career jumps, and put together an interactive graph that shows the most common transitions that occur between careers. With this information, anyone can see what transitions are possible for his career, and perhaps find the right person to talk to in the network to get some advice13 . Knowledge Finally, LinkedIn provides to its members the possibilities to improve their knowledge with the use of different tools. LinkedIn invests in these (acquiring and developing) in order to improve the use of the business social network by its members14 . For instance, LinkedIn bought Pulse newsreader for a figure of more than $ 50 million in 2013. LinkedIn Pulse is a professional news application. It enables its users to customize their news- 12 LinkedIn website: https://www.linkedin.com/ 13 LinkedIn website: http://blog.linkedin.com/2014/12/08/charting-your-next-career-move-with-data-from-linkedin/ 14 LinkedIn website: https://www.linkedin.com/pulse/top-8-ways-3d-printing-disruptive-michael-spencer
  10. 10. 10 reading experiences, easily explore compelling professional content, and share stories on their favourite social networks15 . 1.3.2 For LinkedIn Customers For the members that decide to become LinkedIn customers, the social business network provides tools to hire, market, and sell, plus unique insights that will help businesses succeed. The company has a diversified business model with revenue coming from Talent Solutions, Marketing Solutions and Premium Subscriptions products16 . Chart 2 – 2015 Q3 revenue distribution 17 This pie chart shows that LinkedIn works on the constant diversification and improvement of the top line performance. The three main categories of products contributing to the overall revenue are hiring solutions, marketing solutions and premium subscriptions18 . Marketing solutions This part of the revenue is derived primarily from the fees that are being received from the advertisers displaying text and visual advertisements on the LinkedIn site. The recognition of the revenue happens when the advertisement is being displayed on the site and not before. On a general level, there are no warranties given to the users of the marketing solutions. This means that there is no revenue, which is considered a future provision for the customers that have not used the purchased advertisement. In this relation, the dynamic of churn is unfortunately unknown, making it impossible to know whether the sale is being made through the acquisition of the new customers only or whether recurring customers are considered a base for the revenue19 . The aim of all marketing products is to deliver the right content to the right people and boost quality leads. The products are: 15 https://www.crunchbase.com/product/linkedin-pulse#/entity 16 LinkedIn website: https://www.linkedin.com/company/linkedin 17 LinkedIn website: https://press.linkedin.com/products 18 LinkedIn. A valuation assessment of the fair value of LinkedIn: http://studenttheses.cbs.dk/bitstream/handle/10417/4816/henrik_lysgaard_jensen_og_bartosz_sm%C3%B3lczynski. pdf?sequence=1 19 LinkedIn. A valuation assessment of the fair value of LinkedIn: http://studenttheses.cbs.dk/bitstream/handle/10417/4816/henrik_lysgaard_jensen_og_bartosz_sm%C3%B3lczynski. pdf?sequence=1
  11. 11. 11 SPONSORED UPDATES Sponsored updates can get the content in front of the world’s professionals on desktop, smartphone, and tablet. DISPLAY ADVERTISEMENTS Display advertisements reach the world’s largest professional audience with display advertisements that drive brand awareness and keep the customer on prospects’ minds, wherever they go online. SPONSORED INMAIL With this tool, customers can send targeted messages directly to the people who matter most to your business. LEAD ACCELERATOR Lead accelerator allows to drive more quality leads blazingly fast. TEXT ADVERTISEMENTS Text advertisements allow to drive new customers to business with LinkedIn easy, self-service pay per click (PPC) advertising platform20 . LinkedIn Sponsored Updates – YouTube video: https://www.youtube.com/watch?v=oCkCmZQYRgo Hiring solutions Furthermore, this part of the revenue is derived primarily from the sale of the products allowing enterprises and organizations in need of professionals, to identify job candidates based on the characteristics such as: industry, past job functions, geography, experience, education and so on. Job slots are also available to use the LinkedIn site as an interactive job posting panel. The revenue is recognized pro rata on the basis of the current subscription binding, such as monthly, quarterly or yearly. As analysts, it is assumed that the churn dynamic on this product can be driven by and dependent mostly on the job market dynamics and the demand for new employees. Even though we are unable to establish the correlation between the two, it is highly anticipated, that in years of bull development, the top line will increase significantly as a result of a rise in revenue coming from this area. This product should impact the balance sheet, as the provision should be recognized for the potential of the customer cancelling the subscription for the service21 . These products are ideal for any company with a recruiting strategy, in growth mode, or frequently in need of new talent. There are five different products. RECRUITER With the recruiting tool that transformed recruiting it is possible to view and contact anyone on LinkedIn, find the right talent faster and stock talent pool. JOB SLOTS This product is able to automatically recommend the right job to the right candidate through LinkedIn, email, and LinkedIn Job Search app. CAREER PAGES Career Pages allow to build employer brand and attract top talent with a LinkedIn Career page. WORK WITH US ADVERTISEMENTS With this product, customers are able to attract more top talent to customer company by putting job advertisements right an employees LinkedIn profiles. REFERRALS 20 LinkedIn website: https://business.linkedin.com/marketing-solutions 21 LinkedIn. A valuation assessment of the fair value of LinkedIn: http://studenttheses.cbs.dk/bitstream/handle/10417/4816/henrik_lysgaard_jensen_og_bartosz_sm%C3%B3lczynski. pdf?sequence=1
  12. 12. 12 With introducing LinkedIn Referrals, automatically uncover quality hires by engaging customer employees, unlocking their networks, and inspiring everyone to recruit22 . Find and Engage the Best Passive Talent with LinkedIn Talent Solutions – YouTube video: https://www.youtube.com/watch?v=FicFVDgNzWo Premium subscriptions In conclusion, this part of revenue is derived primarily from the sale of the upgraded individual membership subscriptions to the platform. With the tools made available by a premium subscription, individuals are having much greater access to the functionalities and features of the platform needed for the purposes of networking, scouting and searching. LinkedIn lists the enhanced search results, communication capability and improved organizational functionality as core features of the premium subscription feature. Members are offered monthly or annual subscriptions, which provide the provisions sensitivity, which should be recognized on the balance sheet23 . The social selling era starts with LinkedIn Sales Navigator and nowadays social selling leaders create 45% more opportunities.24 LinkedIn Sales Navigator taps into the power of the LinkedIn network to help Sales professionals to establish and grow relationships with prospects and customers25 . In the age of social media, leveraging professional networks like LinkedIn to drive customer own sales leads is becoming increasingly important, because today social media generate more sales leads. Utilizing social selling for lead generation enables LinkedIn customer to find and connect with their potential sales leads, who are already on those social platforms, engaging with others and content. With access to over 400 million members on the world’s largest professional network, LinkedIn creates sales lead generation success by enabling sales professionals to easily and quickly find the right prospects. LinkedIn customer can use advanced search and filtering system to quickly identify influencers and decision makers and save them as leads to create high quality lead lists26 . Start your day with LinkedIn Sales Navigator - YouTube video: https://www.youtube.com/watch?v=jZtIk7Za4YQ Make the Connection – YouTube video: https://www.youtube.com/watch?v=5gV8e48Q8as 1.4 International presence LinkedIn wants to have an international footprint as a global leader of business social networks. In order to success in this challenge LinkedIn has more than 9,200 full-time employees with offices in 30 cities around the world. Moreover, LinkedIn is currently available in 24 languages, more than Viadeo (8 languages) and Xing (2 languages). Thanks to these characteristics LinkedIn operates the world’s largest professional network on the Internet with more than 400 million members in 22 LinkedIn website: https://business.linkedin.com/talent-solutions 23 LinkedIn. A valuation assessment of the fair value of LinkedIn: http://studenttheses.cbs.dk/bitstream/handle/10417/4816/henrik_lysgaard_jensen_og_bartosz_sm%C3%B3lczynski. pdf?sequence=1 24 LinkedIn website: https://business.linkedin.com/sales-solutions?u=0 25 LinkedIn website: https://business.linkedin.com/sales-solutions/site-forms/request-free-demo- gc?icp=lsshpwd&u=0 26 LinkedIn website: https://business.linkedin.com/sales-solutions?u=0
  13. 13. 13 over 200 countries and territories. In addition, Professionals are signing up to join LinkedIn at a rate of more than two new members per second. The next picture summarizes information about LinkedIn members around the World, explained before27 . Picture 2 – Members distribution 28 27 https://press.linkedin.com/about-linkedin 28 https://press.linkedin.com/about-linkedin
  14. 14. 14 FOCUS ON LINKEDIN OFFICE IN MILAN An interesting article, which is linked below, explains how was built and designed LinkedIn Milan office in connection with company’s values. Il Prisma has designed the new offices of LinkedIn trying to recreate “The Places of Trasformation”. The complete article: http://officesnapshots.com/2015/08/18/linkedin-milan-offices/ 2. CORPORATE STRATEGY In this section there is described briefly LinkedIn corporate strategy. So to have an insight on this topic, below there are described about the company: mission, strategic goals, corporate culture, strategic model, horizontal and vertical development. 2.1 Mission “Our mission is simple: To create economic opportunity for every member of the global workforce. When you join LinkedIn, you get access to people, jobs, news, updates, and insights that help you be great at what you do.”29 2.2 Strategic goals30 LinkedIn’s strategy is based on three main pillars. Simplify Making the product easier for members in order to unlock value from core products and services. Grow LinkedIn growth is characterized by two main purposes: to expand global membership and extend monetization efforts to benefit both members and customers. Everyday Delivering value to members everyday by helping them build out their professional identities and gain valuable insights. The goal is for professionals to use the platform as the main professional profile worldwide. 2.3 Corporate culture31 The company culture is intended to reflect who LinkedIn and their staff are and where the company aspires to be. There are five main points: Transformation People who work at LinkedIn are there because they seek to make a positive and lasting impact on the world, help realize the full potential of LinkedIn and fundamentally alter the trajectory of their careers. Integrity LinkedIn does not believe the ends justify the means. Rather, employees are expected to do the right thing no matter what. 29 LinkedIn website: https://www.linkedin.com/about-us 30 “2012 LinkedIn Annual Report”: http://investors.linkedin.com/annuals.cfm 31 “2012 LinkedIn Annual Report”: http://investors.linkedin.com/annuals.cfm
  15. 15. 15 Collaboration Much like the network effects inherent in LinkedIn’s business model, the company believes that as valuable as they are as individuals, they are all exponentially more valuable when aligned and working together. Humor Fulfilling LinkedIn’s mission and vision requires an intense focus, so the company believes it is important to not take themselves too seriously and try to have some fun while doing it. Results LinkedIn set clear, actionable goals and have high expectations for the company’s performance, counting that employees consistently deliver excellent results, seek leverage through greater efficiency and effectiveness, and demonstrate leadership at all levels. 2.4 Strategic model32 LinkedIn’s strategic model is based on 3 elements: International expansion As explained before, LinkedIn acts in a way to promote international expansion, through building offices outside US, more variety of language availability and international sales force. Closed platform The website is a closed platform in the sense of no links to other networking sites are promoted. Pre-empt competitors LinkedIn provides new services to avoid actual and potential competitors to try to enter the market. 2.5 Horizontal development The aim of this section is to identify the horizontal development of the company, analysing the direct acquisitions and the joint venture in the same relevant markets. 2.5.1 Acquisitions33 One of the main purposes of LinkedIn is to provide the largest number of services and products useful for its members, in order to improve their business social networks management. The following table shows LinkedIn acquisitions, the date and the amount that the company has paid. 32 “2012 LinkedIn Annual Report”: http://investors.linkedin.com/annuals.cfm 33 https://www.crunchbase.com/organization/linkedin/acquisitions
  16. 16. 16 Table 2 - Acquisitions 34 2.5.2 Joint-Venture35 Focus on China Joint-venture Besides the acquisitions, LinkedIn has also Joint-ventures. For instance, LinkedIn launched a Chinese version of its site through a joint-venture. The expansion has taken place as a joint venture with Sequoia and CBC Capital. Now that it has a local presence, the company also opens up itself to greater monitoring from the Chinese government. In a blog post, CEO Jeff Weiner stated that the company disagrees with China’s approach to censorship, but it will abide by any necessary laws in order to operate in the country. Weiner also outlined the following three guidelines that LinkedIn will maintain for the venture:  Government restrictions on content will be implemented only when and to the extent required.  LinkedIn will be transparent about how it conducts business in China and will use multiple avenues to notify members about our practices.  The company will undertake extensive measures to protect the rights and data of our members. Based on the company’s launch post, LinkedIn appears to be treading carefully as it enters China. Foreign Internet companies have historically struggled to gain traction in mainland China, even as they faced criticism in their home countries for submitting to government censorship. Weiner noted in his post that LinkedIn consulted with human rights organizations as it weighed whether to enter China. In the end, the company decided that the venture would have greater benefits for its user, both in China and abroad, than the downside of increased regulation. 2.6 Vertical development In our opinion, vertical development is not considered in LinkedIn’s corporate strategy. Because LinkedIn type of industry and type of product/service are not suitable for vertical development. On the other hand, these characteristics fit better horizontal development, as explained before. 34 https://www.crunchbase.com/organization/linkedin/acquisitions 35 http://thenextweb.com/asia/2014/02/25/linkedin-goes-china-new-joint-venture-localized-chinese-language-site/
  17. 17. 17 3. BUSINESS ANALYSIS AND COMPETITIVE POSITIONING In this section of the paper our objective is to investigate the business sector of the Company and the performance and positioning of the competitor, through an overall industry analysis, the disclosure of the key success factors for the industry and for LinkedIn, and the competitors’ growth rates and trends in this years. Firstly, is important to distinguish between the so called Social Networking Service (SNS) and Professional Networking Service (PNS). SNS is defined as an online community that allows users to construct a profile, create a personal network, search and share interests, invite and communicate with other users, within a private ambit. While, PNS is a variation of the SNS model, which concerns business and professionalism rather than personal relationships36 . The principal differences between SNS and PNS are the following: Social networking is the process of using websites or mobile application to connect with other people especially friends and family and to share interests and opinions . Instead, professional networking is the process of using websites or even mobile application to connect with businesses and other professionals (which also post the profile of their company) to look for employment possibilities or to share one’s knowledge. “Although social networking sites are also used to promote products and services, they are mostly used for personal interactions whereas professional networking sites are used for professional and business interactions.”37 For example to connect with enterprises and companies of your interests, to connect with business people or colleague, to look for possible job offers, etc. According to the definition that LinkedIn gives of itself as “ the world's largest professional network with more than 400 million members in 200 countries and territories around the globe”38 and also in our opinion, the industry sector in which the Company operates is the PNS. In spite of the clear positioning of LinkedIn in this market, one should bear in mind the constant effects that SNS have on PNS and all the possible consequences. 3.1 Industry analysis (concentration analysis, market shares, market penetration rates) The first step at this point is the industry analysis. It will concern the discussion about the concentration analysis of the sector, then we will move to analyse the market share, and finally the paper will focus on the market penetration analysis. Graph 1 – Industry life cycle 39 36 LinkedIn presentation: http://www.slideshare.net/jkwong5/linkedin-presentation-5150716 37 http://www.differencebetween.net/business/organizations-business/difference-between-social-networking-and- professional-networking/ 38 LinkedIn website: https://www.linkedin.com/about-us 39 N.Aliaksey, C. Cafure, 2013. LinkedIn, six degrees of separation: http://www.slideshare.net/bialorusin/id-57830- narko-aliaksey-id-57822cafurecristian-linkedin-written-assignment-strategic-management-sgh-spring-semester-2013- v2?from_action=save
  18. 18. 18 This graph clearly define the industry life cycle of PNS. First of all, it is a quite recent industry which is started in the last decade, as a variation of SNS that was establishing worldwide. Therefore, this industry has just begun the growth stage. This means that PNS has an enormous potential both in terms of revenues and in terms of future members (every worker of the globe!) and the maturity stage is far from be reached. Naturally, the characteristics of PNS have attracted many potential new entrants and so the competition could become quite high, in spite of the concentration very low, due to the totally leading of LinkedIn. However, this scenario could change rapidly with the entrance of competitors which are leader in SNS as Facebook and Twitter, because of the similarity between industries. 3.1.1 Concentration analysis and market shares The concept of industry concentration is strictly related to the market types. For instance the industry concentration is high when we face a situation of oligopoly because the market demand is satisfied just by few large firms. Thus the higher the concentration degree of an industry, the greater the market power of part of the firms of that industry. Consequently, we can assert that concentration degree of an industry has an effect on the market power of a firm, in other words on its ability to influence customers and suppliers behaviours, that is on firm’s ability to influence price level and quantity. In the case of LinkedIn, if we consider the SNS (social networking service) as its core business industry, the concentration is not really high due to the fact that there is a consistent number of firms such as also Facebook or Twitter. Otherwise, if PNS (professional networking service) is assumed as the industry of the Company, the concentration increase because the less number of actors and in this situation LinkedIn plays a very strong market power. We decided to consider PNS as the most fitting sector for LinkedIn, without forget SNS. Usually for the computation of the concentration indices, there are some data needed. Firstly, firm’s turnover or sales volume, which in the case of LinkedIn we can translate it in the number of its total products sold/ services provided (marketing solutions, talent solutions, and premium subscriptions). However, because not all the competitor sell the same products or provide the same services, we decided to translate the sales volume in the sales revenues, which are though related each other. We decided also to consider for this analysis LinkedIn, Xing and Viadeo, the majors actors in the PNS industry. Quarterly speaking, for the Q3 of 2015, LinkedIn signs revenue for 780 million $, Xing 30,5 million $ and Viadeo 6 million $.40 Then we have to consider the industry total sales (industry turnover), which is the aggregate sales value at industry level. The total sum of the revenue of PNS industry is equal to 780 + 30,5 + 6 = 816,5 million $. Finally we can compute the market share for each firm, from firm’s turnovers and industry turnover. Chart 3 – PNS Market share 2015 (million $ revenue) 40 LinkedIn corporate website: http://investors.linkedin.com/results.cfm, Viadeo corporate website: http://corporate.viadeo.com/en/investors-2/, Xing corporate website: https://corporate.xing.com/index.php?id=339&tx_ttnews[tt_news]=0&tx_ttnews[pointer]=0&tx_ttnews[backPid]=0& cHash=0&cat=0&L=1 96% 4% 1% LinkedIn Xing Viadeo
  19. 19. 19 Naturally we have to consider some limitations for this study. First of all we have considered just few actors of the PNS. However, if we strictly follow the definition, the PNS industry itself is composed by these few actors, where LinkedIn due to many factors, has always prevailed. Consequently, if we change the point of view, considering also some SNS actors, the scenario would change completely. Finally, we considered revenue for computing market share but similar analysis could have been done considering the registered members. Talking about concentration ratio, because of the few number of actors and the high concentration in PNS, substantially we can assert that the largest firms of the market represent the 95-100% of the total industry revenues. For the same reason the computation of the Herfindahl Index would not be very useful, because of the few number of firms that we could consider. We could foresee a value near 1 which means monopoly, because of the supremacy of LinkedIn, even if the PNS industry is not a situation of monopoly. 3.1.2 Market penetration rates Because the difficulty to find the precise datum of the growth rate, we tried to foresee the market penetration rate. We assumed that PNS is a relatively “young” and continuously increasing industry. However, given the dramatic performance of LinkedIn, in our opinion the firm’s growth rate is probably higher. Due to this, LinkedIn is enhancing his market share. 3.2 Porter’s five forces analysis41 Industry rivalry - Competition In the PNS industry, LinkedIn is the leader, with a great distance from competitors like Viadeo and XING. However, its leadership can rapidly change in a short period of time, because the peculiarities of this market, and how fast customers preferences can evolve. “Additional features, new services and the variety of options provided by the company, both with free solutions and monetized solutions, offer users different choices, and with that, attracts many different segments on the industry of professionals as individuals, companies, marketing agencies, etc. Both Viadeo and XING are planning on reformulating their strategies from “glocalization” to internationalization as they realize how connected the global market is and that presence only in Europe is acceptable but not enough in the future.” Competitors have less available languages than LinkedIn, showing a less internationalized strategy and also a focus on the European market. For example, Viadeo is present in China with the brand Tianji. Threat of new entrants If start a business in the field of PNS is not so difficult, likewise cannot be said to success, which take many years to be built, with several investments and brand identity awareness. Then there are the economies of scale of big player to fight. LinkedIn also has a first mover advantage in the professional networking industry, which is a strong competitive advantage. The threat of possible new entrants could come “from SNS such as Facebook, Twitter or from job portals like Monster (www.monster.com), customer relationship management market (www.salesforce.com) or even companies involved in the IT market in general, for example Microsoft and its interest in Yammer (recently launched PNS).“42 For SNSs, which have experience in manage a wider range of users and internet traffic of data, just adding new services would be easy to “take a share on the market, or creating alliances, joining efforts with smaller companies already providing additional features and therefore, although 41 N.Aliaksey, C. Cafure, 2013. LinkedIn, six degrees of separation: http://www.slideshare.net/bialorusin/id-57830- narko-aliaksey-id-57822cafurecristian-linkedin-written-assignment-strategic-management-sgh-spring-semester-2013- v2?from_action=save 42 http://www.neowin.net/news/microsoft-shows-interest-in-buying-yammer
  20. 20. 20 LinkedIn is very-well-positioned, and its approach of updating functions is accurate, preventive measure are key.” Threat of substitute products or services “Possible substitutes can include SNSs, depending on the fact that networking [...] can be done refering to Facebook or Twitter if they want to know about opportunities in a company and they do not use or know PNSs. For example, Online Marketing features can be used both to position a company and also to attract new candidates and promote opportunities.” Bargaining power of customers/buyers Because customers as individuals, enterprises or professional organizations are not concentrated their power to bargain is low. However, because of the continue dynamics on businesses like PNS or SNS, a downturn can create an immediate negative reputation and movement to other options. The absence of innovation or the adaptation to the change in customers’ needs means a loss of market share. All this scenario with no switching costs for users that can easily join other options. “Overall, users might switch to competitors but LinkedIn provides good quality services (and consequently, has good reputation), adds new features and responds to market needs, plus the current membership support available, makes it well-positioned against this force.” Finally, since LinkedIn is directly selling its services to the customers, there is no dependency on the external distribution channels which further strengthens its bargaining power. Bargaining power of suppliers There are many services for this industry (from data storage to applications for mobile phone) and providers often are bought as a common strategy to internalize. For example the acquisition of SlideShare by LinkedIn in 2012 for $119. “Overall, the position of LinkedIn is solid, as it is the clear leader, there are no strong followers, it has international presence and provides many services to attract different segments inside the market of professionals looking for online features. [...] The approach of LinkedIn of buying suppliers, adding new services and adapting the websites’ feature to each customers’ needs places then in a favourable position.” In general, since professional supplier are spending significant amount of time and efforts to build their network and personal brand on LinkedIn, it would be extremely expensive for them to switch to another professional network in the future, enhancing the dependency of them on LinkedIn in the long term and providing substantial competitive advantage to LinkedIn over its competitors. 3.3 Key success factors For business (SNS and PNS) According to the definition of PNS and its industry, the key success factors could be summarize as follow:  Number of registered members: more the members that have signed in, more the extension of the network. Thus, companies should promote the subscriptions.  Products and services offered: this is the core of PNS companies’ revenue. With a wide range of products the firm will be able to satisfy every customers’ need and for every need satisfied there is an income. Therefore, the higher the number of premium subscriptions, the higher the revenues. Companies have to be able to offer the right solutions for professional, and having a diversified revenue streams means key success factor.  Internationalization: the growth of a networking site, both social or professional, depend on the international role and scope which the company has. If the firm is able to extend is competitiveness and largeness abroad, becoming the model to follow, it will be easier to succeed.  Specific investments: in order to be able to continuously satisfy the mutant customers’ needs and to follow the technological changes, companies have to invest parts of their
  21. 21. 21 incomes. In particular in the earlier stages of the business, when, for example, there is the gap of new comer. Moreover, the acquisition of some SME which express a great potential, is fundamental to provide a new service to the members.  Innovation: be able to innovate, also in an incremental way, is fundamental in a sector as PNS. The threat of new entrants, should lead firms to differentiate, to provide specific services, and to create a strong brand identity. This is possible through a constant attention to the market and its evolution, which required a constant development.  Clear differentiation from SNS: professionals who are looking for new opportunities know that the services of a PNS company is the right solution. This is due to the strong differentiation from SNS that companies in PNS industry underline building their business and identity. Thus, actors in PNS should enhance the difference between their specific activities and the more general of a social network. However, adding some SNS’s features could pre-empt efforts for example by Facebook to enter PNS market. For instance, in a PNS is important to give the possibility to built your profile which appear as a CV and to construct your own network with professionals, and the chance to utilize tools useful also for your job. Strongest point of competition for LinkedIn43 Number of Registered Members: number of individual users who have created a member profile on the website. The company believes is a key indicator of the growth of the network and reflects how successfully services and solutions offered to professionals have attracted new members. LinkedIn realizes than registered members are different from actual members (due to falsification, etc) but still considers it a valid metric. Unique visitors: users who have visited the website at least once during a month regardless of whether they are a member, based on data provided by comScore, (provider of digital marketing intelligence). For the company, this measure shows the growth in brand awareness among users and whether useful products and services are provided, thereby increasing engagement of members and that increasing the sales of the monetized Solutions. Year 2010 2011 2012 2013 Unique Visitors 65000000 92000000 116000000 139000000 % increase / 41,5% 20,6% 19,8% The figures for the chart finish in 2013, because from this year up to now it has been changed the metric (unique visiting members). Page views: number of pages on the website that users view. Similar to unique visitors, it is an indicator for gaining insight about members engagement and effective-value-delivery of the services provided. Year 2010 2011 2012 2013 2014 Q3 2015 Page views 5,5 7,6 15 22 30 38 % increase / 38,2% 97,4% 46,7% 36,4% 26,7% Number of LinkedIn Corporate Solutions Customers: number of enterprises and professional organizations that are under active contracts for Talent Solutions. This indicator shows the market 43 N.Aliaksey, C. Cafure, 2013. LinkedIn, six degrees of separation: http://www.slideshare.net/bialorusin/id-57830- narko-aliaksey-id-57822cafurecristian-linkedin-written-assignment-strategic-management-sgh-spring-semester-2013- v2?from_action=save Year 2010 2011 2012 2013 2014 Q3 2015 Registered Members 90000000 145000000 202000000 277000000 347000000 396000000 % increase / 61,1% 39,3% 37,1% 25,7% 14,1%
  22. 22. 22 penetration in the online recruiting market, the productivity of the field sales organization and the value that these products bring to large and small enterprises and professional organizations. Sales Channel Mix: Talent and Marketing Solutions can be sold offline through LinkedIn’s field sales organization or online through the website. The majority of Premium Subscriptions are sold online. The offline channel is characterized by a longer sales cycle where price can be negotiated, higher relative average selling prices, longer contract terms and higher selling expenses. 3.4 Competitive positioning The examination of the competitive positioning of LinkedIn could start with its placement in compliance of the product, the internationalization, competitive position and market. “LinkedIn is ahead of its competitors as it is providing new services, reaching more users internationally and creating a bigger professional network than the rest. It is also understanding the importance of being available everywhere, especially with the raising of usage from users of mobile applications and also differentiating customers inside the PNS market as a whole, with the Talent Solutions, Marketing Solutions and Premium Subscriptions and making profits based on them while at the same time attracting users with free services which, on the other hand, represents a bigger membership and stronger presence on the Web.”44 Strategic group map LinkedIn provides a wider range of products than competitors in a highly internationalized geographical scope. However, In the future, also competitors will adopt a more globalized strategy while at the same time an even wider product range from LinkedIn. Graph 2 – Strategic positioning 45 Position in the market - Grand strategy Considering the market growth and the competitive positioning as variables, we could classified LinkedIn as a company in a rapid market growth with a strong competitive positioning. Instead, its competitors could be seen in a weak competitive position. 44 N.Aliaksey, C. Cafure, 2013. LinkedIn, six degrees of separation: http://www.slideshare.net/bialorusin/id-57830- narko-aliaksey-id-57822cafurecristian-linkedin-written-assignment-strategic-management-sgh-spring-semester-2013- v2?from_action=save 45 N.Aliaksey, C. Cafure, 2013. LinkedIn, six degrees of separation: http://www.slideshare.net/bialorusin/id-57830- narko-aliaksey-id-57822cafurecristian-linkedin-written-assignment-strategic-management-sgh-spring-semester-2013- v2?from_action=save
  23. 23. 23 Graph 3 – Position in the market 46 Ansoff matrix According to Ansoff matrix, LinkedIn products could be classified “new” only at the beginning of its business. While up to now, without forgetting the investments in research of new tools and application for its customers, it is providing already existing product, in a substantially recent market as PNS is. Graph 4 – Ansoff matrix 47 3.4.1 Competitors’ short analysis LinkedIn is the biggest professional social network in the world, both in term of members and in term of revenues. In few years the company has taken off, and now it is leading in the world. But, naturally, due to a growing industry as PNS, many are the competitors (and followers, if we consider LinkedIn an innovator). Viadeo The linking service Viaduc was created in 2004, becoming Viadeo in 2007. Now the Group, with 65 million members worldwide, the firm is the world’s second-biggest professional social network. It is leader of PNS in its home country, France, with 10 million members and first-provider in China with 25 million48 . “Adopting a multi-local approach to business, the Viadeo Group has focused its development particularly on France, China, Russia, and North Africa. The Group is now a major leader in each of these regions and currently operates under two different brand names: Tianji in China and Viadeo in the rest of the world. Today, the Viadeo Group has 450 employees spread across five cities: Beijing, Casablanca, Moscow, Paris, and San Francisco.”49 46 N.Aliaksey, C. Cafure, 2013. LinkedIn, six degrees of separation: http://www.slideshare.net/bialorusin/id-57830- narko-aliaksey-id-57822cafurecristian-linkedin-written-assignment-strategic-management-sgh-spring-semester-2013- v2?from_action=save 47 N.Aliaksey, C. Cafure, 2013. LinkedIn, six degrees of separation: http://www.slideshare.net/bialorusin/id-57830- narko-aliaksey-id-57822cafurecristian-linkedin-written-assignment-strategic-management-sgh-spring-semester-2013- v2?from_action=save 48 Viadeo corporate website: http://corporate.viadeo.com/en/about-us/group-fact/ 49 Viadeo corporate website: http://corporate.viadeo.com/en/about-us/the-group/
  24. 24. 24 As a reminder, Viadeo’s total revenue consists of three different types of revenue:  Revenue from Recruitment and Training Services, an area of strategic focus for the Group, incorporating three main product families: job offers on the Group’s website and mobile applications, access to the member database via a specialized interface to meet recruiters’ requirements, and “Employer Brand” communication products;  Revenue from Marketing and Advertising Services, which includes marketing in the form of global communication campaigns of advertising products such as banners published on the Group’s sites and emails sent to members. These operations target members based on certain profile criteria;  Revenue from online memberships. Based on a “Freemium” model, the Group offers members the option of purchasing an online subscription, which provides access to a broader range of features reserved for “Premium” members.”50 Picture 3 – Viadeo’s figures 51 Xing Xing is another competitor of LinkedIn. It is the largest business network in German-speaking countries with already 15 million members worldwide. “XING is the social network for business contacts. XING has 9.7 million users in its core German- speaking market, 9.2 million of whom are XING platform members. XING is a platform where professionals from all kinds of different industries can meet up, find jobs, colleagues, new assignments, cooperation partners, experts, generate business ideas and get informed about latest industry topics. Members can meet and exchange views in over 74,000 specialist groups, while also getting together at networking events. The platform is operated by XING AG, which was founded in Hamburg, Germany, in 2003, has been publicly listed since 2006, and listed on the TecDAX since September 2011. In December 2010, XING acquired Amiando AG, a Munich-based company and Europe’s leading provider of online event management and ticketing. Since the end of 2013 the company has been trading under the name XING EVENTS GmbH. The acquisition of Kununu, the leading platform for employer reviews in German-speaking countries, allows XING to extend its position as the social recruiting market leader. At the start of 2015 XING also acquired 50 2015 Q3 releases from Viadeo financial webpage: http://corporate.viadeo.com/wp- content/uploads/2015/11/PR_VIADEO-Q3-2015-VF-EN-03112015.pdf 51 Viadeo corporate website: http://corporate.viadeo.com/en/about-us/group-fact/
  25. 25. 25 Intelligence Competence Center AG, including its Jobbörse.com website which is the largest jobs search engine in German-speaking countries with over 2.5 million jobs. The company currently employs more than 700 people and is still on the lookout for new talent to join the team.”52 Xing offers to Premium members many professional features for their professional network: see profile visitors along with detailed statistics, access the advanced search, enjoy prominent placement in member searches, take advantage of great partner deals, and much more. Among the services of Xing you can find marketing (ProJobs), hiring (E-Recruiting) and advertising (Display ads, Cooperations, XAS) solutions, which help professionals and firms to develop. 3.4.2 Maps of the competition positioning in PNS market (2014) Picture 4 – Competition positioning map 53 To build this competition positioning map for PNS have been analyzed “127 countries with Alexa’s data in order to obtain the top professional network in each one of them. LinkedIn is leading in 91 countries. Xing is the main one in Germany and ties up with LinkedIn in Austria. Viadeo is the top one in Cameroon, Madagascar, China (through Tianji) and Canada (through Unyk). Poland’s top professional network is GoldenLine. LinkedIn’s kingdoms are painted with blue (darker as it is closer to the top 10 sites). Viadeo’s ones are coloured with orange, while green was reserved for Xing’s (Germany) and yellow for GoldenLine’s (Poland). We did not include Mixi as it’s not exactly a professional network.”54 For details: http://blogs.alianzo.com/socialnetworks/2014/03/20/world-map-of-top-professional-network- linkedin-xing-and-viadeo/ 3.4.3 Competitors’ growth Viadeo From the latest Viadeo’s quarter financial release of 2015 we can find out that, as stated Dan Serfaty, Viadeo CEO, “Viadeo’s corporate activities (B2B activities involving both companies and professionals) outside of China were up by 14.4% in the third quarter of 2015. Within this area of activity, marketing/advertising services grew by an impressive 53.2% in relation to the third quarter 52 Xing corporate website: https://corporate.xing.com/no_cache/english/unternehmen/xing-ag/ 53 http://blogs.alianzo.com/socialnetworks/2014/03/20/world-map-of-top-professional-network-linkedin-xing-and- viadeo/ 54 http://blogs.alianzo.com/socialnetworks/2014/03/20/world-map-of-top-professional-network-linkedin-xing-and- viadeo/
  26. 26. 26 of 2014. [...] Turnover outside of China was down 4.4% compared with the third quarter of 2014 and this drop is closely linked to the continued decrease in online subscriptions. This loss will be countered by the development and commercialization of our new, “vertical” paid services (such as the launch of our platform dedicated to freelance professionals in September 2015). Overall, we are still taking strides to align our business model with the latest developments in the professional world. As such, the emphasis placed on corporate development activities and the mobilization of our business capabilities represent our key areas of focus for the coming months. [...] With the continued development of company and professional-centred B2B activities, both of which represent important areas of growth for Viadeo, we have complete confidence in this model’s ability to generate results, firstly as a complement to and subsequently as a replacement for our subscription activities and services to individuals.” Table 3 – Viadeo’s 2015 Q3 revenue 55 The group’s consolidated revenue levels to the end of September 2015 remained fairly stable (- 2%) compared with the same period in 2014.56 http://corporate.viadeo.com/wp-content/uploads/2015/11/PR_VIADEO-Q3-2015-VF-EN- 03112015.pdf Where Group stands for Viadeo + Tianji (China). Xing “XING AG is the leading social network for business professionals in German-speaking countries (DACH) with close to nine million members.” Paid memberships (subscriptions) are the core business, and allow them to tap into new markets while retaining high levels of profitability. They have expanded the e-Recruiting and Events divisions and established XING in these markets. In German-speaking countries (DACH), far fewer people use online business networks than in neighbouring countries, thus Xing foresee excellent potential for growth.57 XING AG, increased its third quarter revenues of 2015 by 17 per cent to €30.5 million (Q3 2014: €26 million), where every segment of the business contributed to this growth. “The company’s core segment, paid memberships, continued to grow strongly with an 18 per cent increase from €15.6 million in Q3 2014 to €18.5 million in Q3 2015. During the first nine months of the current financial year, XING acquired more than 34,000 new paid members, which is an increase of over 30 per cent compared to the same period in 2014 (25,800). This increase means that a total of 869,000 members were using XING’s paid B2C products (Premium and ProJobs) in the DACH-region as of the end of September.”58 XING CEO Thomas Vollmoeller said: “We grew in every segment of the business again during the third quarter. What’s particularly pleasing is the fact that more and more people are opting for our 55 2015 Q3 releases from Viadeo financial webpage: http://corporate.viadeo.com/wp- content/uploads/2015/11/PR_VIADEO-Q3-2015-VF-EN-03112015.pdf 56 2015 Q3 releases from Viadeo financial webpage: http://corporate.viadeo.com/wp- content/uploads/2015/11/PR_VIADEO-Q3-2015-VF-EN-03112015.pdf 57 Xing financial webpage: https://corporate.xing.com/english/investor-relations/ 58 Xing financial webpage: https://corporate.xing.com/english/investor-relations/
  27. 27. 27 Premium products, which is reflected in our strong growth figures for that segment. Our sustained member growth also shows that an increasing number of people see XING as a fundamental part of their everyday life.”59 Others Analysing the possible competitor of LinkedIn is quite complicated. First of all, because the concept of PNS is not clearly defined, and there is not a substantial difference with SNS as for example Facebook. Then, due to the fact that ever more new competitors arise in the market, and the possibility to grow is rapid. Connected with the interrelation of this two point there is the new service which Facebook has is program to launch. “Facebook at work” is the name of the new professional version of the social network. “It is expected to launch in the coming months, after spending a year in tests. [...] The new service, geared towards workplace collaboration, is nearly identical to its ubiquitous social network, with a scrolling news 'feed', 'likes' and a chat service. However, Facebook at Work users will maintain special profiles that are distinct from their existing Facebook profiles.”60 The great potential of the PNS market has lead also giant as Facebook to intervene. The possible scenario of the competition for LinkedIn seems to be upward. 4. COMPETITIVE STRATEGIES AND RESOURCES 4.1 Generic competitive strategies LinkedIn’s competitive strategy focuses mainly on a strong differentiation with other social networks, and also with other business social networks. In order to success in this challenge the company has created a very strong and differentiated image of itself. Moreover, has already explained before, LinkedIn’s competitive strategy consists also in adding value with a larger products/services disposability for its members, through acquisitions and joint-ventures. The following two paragraphs describe briefly the differentiation strategy.61 4.1.1 Differentiation strategy LinkedIn has created a niche for itself in the professional world over the last few years. It has differentiated itself from other social networks, such as Facebook and Twitter. In fact, it focuses on professionals with specific business purpose in mind rather than just social network. It employs a “fermium” business model wherein it spent its initial years to build up the user network by offering free services and LinkedIn Jobs and Paid Subscription to start make revenues. LinkedIn’s free services, in a sense act as a base for its premium services. Fostering viral member growth and creating a professional record of all its members is critical for the success of its premium services. Moreover, LinkedIn expanded partnerships with Twitter, CNBC, Business Week and New York Times. Wanting to be seen as the hub for professional conversation. LinkedIn is also continuously innovating itself through acquisitions for enhancing its services and adding of new features to its repertoire. 4.1.2 B2B focused The table below shows the effective social media platforms, according to marketing operators of US, sales channel primary, April 2011. 59 Xing financial releases: https://corporate.xing.com/no_cache/english/press/press-releases/details/article/xing- continues-growth-course-in-third-quarter/339/33e0ec0ff5e662cf142919cc7fcf6f42/ 60 http://www.dailymail.co.uk/sciencetech/article-3353822/Facebook-service-aimed-professionals-launch-coming- months.html 61 LinkedIn presentation: http://www.slideshare.net/jkwong5/linkedin-presentation-5150716
  28. 28. 28 B2B B2C B2B/B2C LinkedIn 65% 23% 46% Blog 63% 69% 63% Twitter 53% 58% 59% Facebook 47% 77% 80% YouTube or other shered video 47% 51% 64% Slideshare or other shared presentations 21% 12% 18% Delicious or other social bookmarking 14% 29% 24% Flickr or other shared foto 9% 21% 13% Scribd or other shared possibilities 9% 10% 9% Table 4 – Effective social media platform 62 As it is possible to see in the table, LinkedIn is the more effective social platform for B2B commerce. But it is not the best for the B2C commerce. This is in line with the strategic choices of differentiation that the company has operated. 4.2 Resources and Competencies analysis63 4.2.1 Internal analysis In this section, there are identified the internal resources of the company in order to determine the value creation in LinkedIn. So, with value creation being the key goal in at the company, return on invested capital (ROIC) is widely assumed to be one of the core components driving the value in any company. One of the key drivers of a high ROIC, is the company’s competitive advantage. Therefore, identifying the available resources (physical, human, intangibles, financial) in the company, along with the uniqueness of these resources, will be useful in assessing LinkedIn’s competitive advantage. 4.2.2 Social loyalty Firstly, product differentiation plays a significant role in raising entry barriers. Research show that users of different online social networking sites are increasingly spending more time on the same site through social interaction features and sites from advertisers. One out of every six minute spent online is now used on social networking sites alone, confirming the overwhelming presence of sites such as LinkedIn, Twitter and Facebook. These sites have created massive customer loyalty among their member bases with continuous development in specialized features and applications. Moreover, all of these sites were first‐movers on a global level within each of their field. As history shows, getting there first means absolutely everything in the online social networking industry. Already in 2006, the online social networking industry was comprised of significant players with strong brand awareness. This strong brand awareness has led to a high degree of customer loyalty globally through 2009 up until today. Thus, with highly differentiated products, established firms with a high degree of brand awareness and customer loyalty characterize the industry requiring potential new entrants to spend heavily in order to overcome existing customer loyalties. This effort will most likely involve severe start‐up losses and great risk of failing. 4.2.3 Switching costs Although switching costs traditionally involves a one‐time financial cost for the buyer in switching from one supplier to another, this concept can be applied to the online social networking industry in terms of both economic switching costs as well as one‐time switching costs in time. Since features on online social networking sites can be vast and functionalities usually are rather diverse, users will be required to learn and interact on an entirely new interface. This might result in a significant cost in terms of amount of hours. Moreover, with advertisers constituting an immense amount of 62 MarketingSherpa “2012 Search Marketing Benchmark Survey – SEO edition” August, 18 2011 63 Global strategy of LinkedIn: http://www.slideshare.net/muneetbhatia/global-strategy-linkedin
  29. 29. 29 revenue for most online social networking sites, the requirements of these advertisers to learn a new advertising system might also result in severe switching costs. This is obviously also a result of strong loyalty, which has been built through years. 4.2.4 Cost disadvantages A third dominant factor applies to cost disadvantages. Established firms in the online social networking industry may have cost advantages, which are not replicable by potential entrants regardless of their size or potential attained economies of scale. One apparent and significant factor, which has been characterizing the industry during the past years falls within the category of “proprietary product technology” described as “product know‐how or design characteristics that are kept proprietary through patents of secrecy”. With the foundation of Facebook in 2003, growth in patents that applies to social networks has exploded. More specifically, the patents apply to online social networking applications. Obviously, this development makes it harder for potential new entrants to imitate current online social networks since the different applications and features are increasingly being protected by patents. Applications and features which, combined, constitute the actual platform and product. In conclusion, there are several issued patents being owned by significant players in the industry. This poses as a significant entry barrier since the cost of developing a product fulfilling the same need, as other online social networks would be immense due to the fact that applications and functions cannot be imitated easily due to patent protection. 4.2.5 Company profile and internal analysis A description of LinkedIn’s overall strategy can be useful in identifying the company’s future direction and essential components in obtaining excess returns. According to LinkedIn, the very cornerstone of their strategy is to first and foremost focus on their members. The company emphasizes the fact that it provides the far majority of its solutions to its members and no cost and LinkedIn believes this approach provides the optimal path for continuing to increase their mass of users resulting in beneficial network effects. These network effects are believed to promote a larger utilization of the company’s solutions and, hence, high level of engagement for all individuals and corporations involved with the company meaning that the value increases for the members when making use of the platform. Some key elements in LinkedIn’s strategy include: - Faster viral member growth - Work wherever its members work - Increase monetization while creating value for members - Expand its international presence With the number of members currently more than 400 million, LinkedIn wishes to boost growth in its member base virally through initiatives such as registration optimization, enhanced search engine optimization and integration with different applications online and on smartphones. Secondly, LinkedIn will employ more developers to make LinkedIn accessible on an increasing number of online platforms and devices making the products available everywhere. Thirdly, the company intends to increase its monetization through increasing efficiency and effectiveness in identifying potential candidates for companies purchasing hiring solutions. As a final key cornerstone of the strategy, LinkedIn Corporation expresses a great desire to expand its international presence and currently sees significant growth in its international member base. The international expansion strategy should be achieved through making the platform available in more languages and develop the brand through expanding its operations, sales and technical support to more international locations. Human resource aspects of the company determine potential competitive advantages for the company. In this regard, the founding team of LinkedIn consists of extremely experienced and skilled entrepreneurs and executives with experience from establishing some of the most successful companies in Internet history. With Reid Hoffman being characterized as one of the greatest company builders of our time along with lead developers and executives from both PayPal and SocialNet, LinkedIn is believed to have an enormous competitive edge in this area. Moreover, a direct consequence of a strong team of developers is that LinkedIn has developed and
  30. 30. 30 possesses advanced technology entailing sophisticated algorithms, which directly increases the value creation for users, advertisers and firms looking to hire. Addressing the intangible resources at LinkedIn’s disposal, it is obvious that the company quickly has managed to build a strong brand awareness and equity on a global scale. The LinkedIn brand is widely recognized making it extremely difficult for potential new entrants attempting to capture a share of the market revenue. Lastly, about the financial resources of the company we have already described before. On financial resources it is possible to affirm that LinkedIn financial edge will enable the company to continue to leverage its online platform and network worldwide and potentially develop new products and expand into new markets where beneficial opportunities arise. 4.3 Value Chain analysis64 First of all, for a firm whose business relies on social media, it is possible to talk of Value Chain which puts the consumer in the heart of this model. Social Media enables the consumer as an actor of the firm’s development and he or she becomes part of the company’s value chain. The following picture sums up the main points of LinkedIn Value Chain: Picture 5 – Value chain 65 As the picture depicts, primary activities in their value chain are the following: Open Inbound Logistics In LinkedIn’s case, the raw materials are the different members of its website. LinkedIn members are professionals or students looking to increase their network in order to enhance their opportunities. The more the quantity and the quality of the members they attract, the more they will possess relevant data which will become the core of their business model in order to develop their three offers: premium subscriptions, marketing solutions and hiring solutions. Co-operations In a social media company, the Value Chain is responsible for creating value by networking with other professionals. As mentioned above, the Value Chain will generate relevant data and information which will give value to the firm’s offers. Outbound Logistics by Customers 64 Global strategy of LinkedIn: http://www.slideshare.net/muneetbhatia/global-strategy-linkedin 65 Global strategy of LinkedIn: http://www.slideshare.net/muneetbhatia/global-strategy-linkedin
  31. 31. 31 Regarding how its service is distributed, LinkedIn does not manage this part of the value chain directly. In fact, it is not part of its core business to deliver the package which contains their service. This activity is being handled by complementary industries such as computer manufacturers or phone, tablet manufacturers and service providers for mobile use of the service. Moreover, these stakeholders might offer complementary services to consumers and add value to LinkedIn’s services. What they provide to these stakeholders is the technical platform that members and other customers use in order to enjoy their services. Viral (Marketing and Sales) LinkedIn hired an external firm to work on sharpening its positioning, expanding marketplace and public perception of the site. However, we cannot consider that this activity is outsourced as it was more a consulting work. LinkedIn has own marketing offices in many markets. LinkedIn does not focus only on subscriptions in order to earn revenue. The other activities that create their revenue are sales, hiring and marketing solution. The key of their business model is to attract consumers, not necessarily premium subscribers. Indeed, enhancing their customer base will make their hiring and marketing solutions more valuable to potentials clients. Communities of Practice (Services) For LinkedIn, this activity is critical to developing their member base. As a result of poor service, they could indeed decide not to be active on their platform and that would damage the viral effect for enhancing their value. Multi-stakeholders infrastructure (Firm infrastructure) LinkedIn Corporation performs such activities as finance, accounting, auditing, general management, strategic planning mainly by itself. Although there are functions, which the company prefers to outsource. For instance, the company hired Atomic PR to provide public relations services. Also, LinkedIn outsources legal services with the acquisition of law firm Cooley LLP, which also helped LinkedIn to go public in 2011. All mentioned services are outsourced in the USA, because the location of headquarters. Customer network management (HRM) LinkedIn Corporation recruits employees using its own recruitment team. The majority of LinkedIn’s recruiting efforts take place on LinkedIn.com. Also the company head-hunts some persons for crucial positions from big, international technological and consulting companies such as Google, Yahoo, Booz & Company. Co-Creation development (Technology development) LinkedIn Corporation provides opportunities to customers of LinkedIn and even to people all over the world to create new and develop existing features of its social network. The company maintains a LinkedIn Engineering Blog and LinkedIn Labs. The goal of the blog is to share the latest technological developments at LinkedIn, discuss them and update. LinkedIn Labs hosts a small set of projects and experimental features built by the employees of LinkedIn. It solicits feedback from people in order to improve these projects. These are bright examples of co-creation development. Design of LinkedIn is developed by internal specialists as design is considered to be one of the main factors of success in e-business. LinkedIn’s team works on and develops special systems, which facilitates processes for flow and storage of information: information retrieval systems, the social graph system and supporting data infrastructure. Open procurement Procurement activities of LinkedIn mainly principally include purchasing of different computer equipment, especially data centres. All data servers, which are purchased by LinkedIn, are produced by Oracle Corporation, the world leader in database management systems. Material data centre facilities are provided by Equinix Operating Co. Moreover, it is possible to consider LinkedIn’s raw materials as each of its members, who will add relevant information in their profile and by linking with other members, enabling the other activities
  32. 32. 32 of the value chain to increase their value. The more this viral effect will occur the more LinkedIn’s hiring and marketing solutions will become valuable, therefore driving the customers’ willingness to pay up. The following picture summarizes the most important points of the LinkedIn Value Chain analysis above. Picture 6 – Detailed value chain 66 5. INNOVATION AND COMPETITIVE ADVANTAGE LinkedIn has revolutionized the point of view about the concept of social networking service: from SNS to PNS. No longer just a virtual place where images, video and news about the private life, but the Company has been focused on the business area, bringing in the spotlight the professional figure of the individual. In our opinion, this is the real innovation made by LinkedIn, which has been achieved through the enormous potential of a business sector like this: an industry that has just begun the growth stage of its industry life cycle. The following paragraph of this paper will try to define and identify the product and process innovation of LinkedIn, with the correlated technology-based classification. Then we move to describe the potential strategic, organizational, and marketing innovation for the Company. 5.1 Product and process technology-based innovation 5.1.1 Product (service) innovation Among the services offered, LinkedIn could be considered innovator because it has found the way to make profits through a virtual platform completely free, as a social network site is. In particular, offering additional paid services for users (clients) who desire to utilise specific instruments for specific purpose in the professional field. As already discussed in this paper, LinkedIn’s services are sales solutions, hiring solutions and marketing solutions, which allow us to state that LinkedIn could be considered an innovator in PNS industry. 66 Global strategy of LinkedIn: http://www.slideshare.net/muneetbhatia/global-strategy-linkedin
  33. 33. 33 5.1.2 Process (supply) innovation In the process innovation, we have analysed the situation of LinkedIn and we have found some interesting point of discussion. In we consider LinkedIn as a supplier of services, the professional social network could be seen as a new way to employ, a platform through which firms can hire new workers with the payment of a certain sum for the utilise of LinkedIn’s services. Therefore, we see in LinkedIn a process innovator, for its specific industry sector. The combination of the two mentioned innovation (product and process) lead to the competitive advantage for the Company, despite not having any technological innovation. Picture 7 – Management of innovation 67 5.1.3 Technology - based industries: classification If we should classify the PNS industry on the technology-based view, we could state that this is a medium-low tech industry because the competition is based on many key success factors, and technology and capability to innovate are included but not so determinant as for other industry. Naturally, new technologies can influence and modify the key success factors in some way, and make the capability to innovate more important.68 5.1.4 Incremental and radical innovation LinkedIn can also be classified as an incremental innovator, due to the fact that its industry, PNS, has arisen from the SNS, improving some features and enhancing existing practises. A new sort of social networking service with a professional point of view. 5.1.5 LinkedIn and the innovation process According to the innovation process proposed by Joseph A. Schumpeter, after the diffusion of the innovation follow the adoption by the demand side, and the imitation by the supply side. In the case of LinkedIn, its efforts to spread itself as much as possible have been paid back by its dramatical diffusion and adoption among professional users all over the world. This reward has been confirmed by the constant increase in registered members. However, this relatively new and growing market of PNS has attracted contemporarly also many competitors already present (Facebook) or not (Xing, Viadeo) in the SNS industry. The result of the imitation in PNS industry are successful cases like Tianji.com (then bought by Viadeo), the major PNS in China, but also some failure cases like edWeb.net, a PNS for educators, which has not really got a great success. Here, as regards the barrier to imitations from 67 Private slides from an academic lecture by prof. G.Marchi at UNIMORE 68 Private slides from an academic lecture by prof. G.Marchi at UNIMORE
  34. 34. 34 LinkedIn, they seem to be substantially economical, with the IPO which has probably laid down the foundations for a wealthy future. Nevertheless more other factors have to be bear in mind like multidimensional competitive advantages and complex bundles of resources and capabilities. The success of LinkedIn has to be found in constant investments to maintain its competitive advantage, and is confirmed by its mission and its vision. Up to now, it seems that comparing the success of LinkedIn, considered an early mover, and the followers, the former has not yet strong rivals. But the future of this industry is still to be written. Moreover, in the PNS, a standard has not yet been well established, despite the quite common practice to offer the same type of services: premium subscriptions for users and to enter hiring and marketing solutions for firms. But this can be seen as a natural consequence of a loose control on some kind of standards to maximize the market acceptance. 5.1.6 LinkedIn and lead user innovation In the case of LinkedIn, we cannot observe a case of firm which utilize the lead user innovation. Otherwise, is the Company itself that help the firms to find the right lead user for them. LinkedIn provide also a tool, which we have described in previous sections, called LinkedIn Lead Accelerator which “allows you to deliver high-quality leads to your sales teams by engaging prospects anywhere online with relevant ads and content”.69 5.2 Strategic, organizational, and marketing innovation Definitely, we can assert that LinkedIn has discovered, or better, exploited a new sector. PNS has became a real alternative for those who were looking for professionalism in social network. Due to this evolution of SNS into PNS, LinkedIn got the opportunity to develop new sources of competitive advantage has already discussed. In this element we found the strategic innovation of LinkedIn, which is part of the organizational and marketing innovation. Finally, LinkedIn should have also been considered as marketing innovator, in particular if we consider the marketing both a locus and a source of innovation. In the former case, is interesting both the “who to market to” view and the “what to market to” view. On one hand, LinkedIn has innovated changing the position in the market from the classic SNS industry to the PNS industry, segmenting more the market of the social network and identifying the professional figure worldwide. On the other hand, LinkedIn has innovated also the content, in particular with the already mentioned product/service innovation, and also with some new kind of promotion innovation with lot of possibilities for the interested firms. 6. PERFORMANCE In this section of the paper will be discussed the financial performance of the company with an analysis of the recent years, a comparative analysis with its major competitor (Xing) for the period 2008-2011, a growth analysis, and a risk analysis. This analysis aims to create the overview of the historical trends and performances that have taken place serving as the very foundation for creating profound hypotheses about future performance in conjunction with the strategic analysis. The analysis will start with the financial performance of the past years following the official publication on the corporate website of LinkedIn, in the financial section, of the Quarters’ results from 2009 to 2015. This will include Revenue, Adjustment EBITDA, Margin, Key values metric, and Guidance. 69 LinkedIn corporate website: https://business.linkedin.com/content/dam/business/g/en-us/pdf/lms/linkedin-lmn- en-us.pdf
  35. 35. 35 Next, the section will turn to focus on the financial comparative analysis versus Xing, with a trend analysis, and common‐size analysis for Income statement and balance sheet. In this point are very important the differences between IFRS (International Financial Reporting Standards) and GAAP (Generally Accepted Accounting Principles) which have to be considered to spot the potential differences in the presentation of the data that should be kept in mind during the company’s evaluation. This is especially important given that Xing, main competitor to LinkedIn is delivering results in the IFRS standards. Due to the unavailability of data from Viadeo, for the period considered for the comparative analysis (from 2008 to 2011), the company’s performance and, hence, accounting standards will not be considered in the financial analysis. Moreover, LinkedIn mentioned explicitly the German firm Xing AG to be a competitor. As previously stated, the comparative analysis (from 2008 to 2011) will be performed according to GAAP principles. Subsequently, the reorganization of the income statement and the balance sheet will take place where the operating, non‐operating as well as financing elements will be reclassified (see Appendix 4). Before moving forward with forecasting of future performance, we will make sure to include comments regarding the general level of growth in the case of LinkedIn.70 The final sections of the financial analysis is consisting of the growth analysis and risk analysis, with an overall view of LinkedIn. The first is very important to foresee the canvas of the next years through a look of the growth pace. The second gives insights concerning the various risk factors that LinkedIn could face. 6.1 Financial performance (3-4 years analysis; comparative analysis) 6.1.1 Financial Analysis The financial analysis is based on the Quarters’ results from 2009 to 2015, which are released on the corporate website of LinkedIn, in the financial section. Every LinkedIn Quarter Earnings Call is composed by: key value metrics, revenue, adjusted EBITDA and margin, Non-GAAP adjusted EBITDA reconciliation, and guidance. Revenue By merging the data from LinkedIn Quarter Earnings Call, from 2009 to 2015, it clearly emerges that LinkedIn faces a continuous growth in its revenues. In fact, expect for the Q1’15 where the figures were less than the Quartile before instead of major expected revenues, it can be stated that LinkedIn has incessantly increased them, as shown in the Figure 1. It is also interesting to notice that after the IPO (2011), its revenues’ growth rate became higher, while the attack on the LinkedIn website and platform in 2012 seems to have had no effects. 70 LinkedIn. A valuation assessment of the fair value of LinkedIn: http://studenttheses.cbs.dk/bitstream/handle/10417/4816/henrik_lysgaard_jensen_og_bartosz_sm%C3%B3lczynski. pdf?sequence=1

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