The first aspect that can be considered a reason behind LinkedIn’s success is its definitive stance in the question of differentiating between social and professional media. At the time of the service’s arrival to the scene, the online domain was already familiar with the concept of social networks, mainly due to the massive success of platforms such as Facebook and MySpace (Yoffie et al. 1). Since LinkedIn closely resembled the said resources in its fundamental concepts, it was tempting to organize it on a largely similar premise, leaving the professional aspect as a theme. Instead, the founders decided that it needs to be associated with social networks as little as possible, citing a similar distinction observable in other types of media and arguing that there is no reason why the same distinctions are unnecessary in the online domain.
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It was also expected that the service users would appreciate the differentiation on an organizational, psychological, and ethical level, in the same way as they traditionally differentiate between their personal and professional life. Another valuable addition was the fact that the service was strongly oriented towards the corporate domain and, as a result, appealed to organizations as well as individuals, thus facilitating support from both sides. By this principle, the development of the platform took a two-pronged approach aimed at satisfying both audiences. The interface for the individual users was strictly professional, with little to no details outside of the professional field. The networking component relied heavily on the connection between the users by utilizing the concept of the degrees of contacts (the number of connections through which every two parties were related).
To reach the party of interest (e.g. a potential partner or an employer), the user was required to request an introduction to all of the involved connections (essentially intermediaries). After this, the parties were required to agree with the establishment of a connection necessary for moving forward. Such a process produced two positive outcomes. First, it prompted the users to expand their connection networks, which, in turn, facilitated their professional growth. Second, it established genuine trust among the parties, which could be used as a verification mechanism for each side. In other words, the individuals dealt with the online representation of a real-life professional environment enhanced by the possibilities of a digital format and the advantages of uncluttered design and minimalistic functionality.
Simultaneously, a range of services and instruments were available to corporate customers. First, the platform provided several products that allowed the recruiters and employers to post listings using their website and otherwise target possible candidates. Starting from 2008, the offer was expanded by the introduction of the tools for companywide networking. The mechanism resembled the intranet services used by corporations to establish communication and exchange of knowledge. The functions of these tools range from sharing the advice and sharing company news to enabling collaboration within workgroups. All such actions were conducted using the means of the network and provided sufficient convenience and protection for the participants. While this can be considered a minor addition and could not compete with the solutions offered by dedicated services, it appealed to the corporate clients and demonstrated the platform’s alignment with corporate interests and values. Finally, the diversification of the company’s revenue streams can be considered its strength. LinkedIn received its profits from four distinct domains with a fifth one planned for the introduction in 2008. Such diversity served as a mitigation factor for the possibility of a complete failure of a single revenue source.
However, the company’s area of function has led to the emergence of noticeable risks from several fields. Despite the company’s clear orientation towards differentiating itself from social networking services as a professional network, the dividing line between the two was becoming less clear by the late 2010s. This development has led to a situation where the service’s popularity was challenged by the social networking platforms from the one side and the competing professional network services from the other. The social networking segment at the time was represented by two major players – Facebook and MySpace, both of which were highly visible and readily associated with the concept. MySpace was a service founded in 2003 that has since garnered recognition from individual users as a default social networking platform.
After receiving a sizeable part of the user base as a result of the migration from Friendster, the service then built up the reputation of a hub for creativity and autonomy, especially in the independent music industry. Interestingly, despite the obvious orientation towards social individualized social content which could be expected to broaden the gap between it and LinkedIn, the strong commitment of musicians and their use of MySpace as a place to promote their products has introduced a minor professional component as a factor. Another risk factor that needs to be acknowledged was the 2005 acquisition of MySpace by News Corp., the company that also owned the Wall Street Journal, one of the major professional publications. This setup has led to concerns that the new owner could allocate its proficiencies in the field, including the brand, to create a professional counterpart to the service.
Facebook was another major competitor from the SNS domain. Despite its strong orientation towards the social interaction between individuals, some of its components were in direct competition with LinkedIn’s offers. Specifically, numerous applications created using the Facebook Platform facilitated recruiting activities by specialized companies. Also, there was an indication that the service was planning an introduction of separate profile sections that could include the professional profiles, which could have expanded an already existing corporate presence. Several less visible networks, such as Orkut and Plaxo, rolled out their versions of professional networking services which, despite the smaller scale and minor presence in the North American market, posed a sizeable threat due to the backing by major players (Google and Comcast, respectively).
Also, several established competitors in the domain of professional networking services posed a certain risk to LinkedIn. For instance, XING, a relatively successful PNS originating from Germany, controlled a sizeable proportion of the European market and demonstrated a steady revenue growth by the time LinkedIn was establishing its reputation. The company expanded outside Germany mainly throughout acquisitions, which was perceived by the LinkedIn’s officials as a reason for only a minor concern due to a significant difference in strategy. Monster Business was another PNS launched by the job posting resource Monster. However, the scope of the service’s operations remained relatively limited by several factors, including the presence of paid subscriptions (found to be unpopular among the customer base) and the service’s direct competition with the company’s main source of revenue. Finally, several specialized PNSes existed on the market that targeted specific audiences such as CIOs and healthcare professionals. Admittedly, the specialty factor significantly limited the threat posed by them to LinkedIn. Nevertheless, the depth of field it could offer to its users had to be reckoned with and was thus categorized as a minor risk.
The first dilemma can be solved by the gradual distancing from the walled garden concept and a shift towards an open platform. Such a decision is more aligned with the recent trends observed in the industry and provides a range of advantages. First, several experts, including Charlene Li, suggested that the concept of using a specific resource to conduct the desired actions was showing the signs of obsolescence as early as 2008. At the time, networking services have already established themselves as a core component of modern reality, both for personal and professional use. This meant, among other things, that the demand for their ubiquity will prompt a transition towards a more seamless nature of their use. Simply put, the users of social networks will expect to find their functions integrated everywhere. In this light, the restriction of access to a single point on the web will be considered an inconvenience at best and a significant barrier at worst. Importantly, the move towards the described trend can already be observed today, with massive adoption of the decentralized solutions and external applications and APIs in the modern business and social platforms. Such a shift already provides greater agility and adaptability of the offered services, which grow in demand in response to the increased dynamism of the modern organizational standards.
Another advantage of enhancing the openness of the platform is the opportunity of involving external entities to increase the functionality of the service, in a way similar to that achieved by the introduction of the Facebook Platform. Importantly, such an approach is known to produce unfavorable results in the Facebook case by generating redundant content and cluttering the service’s interface. This issue can be dealt with by introducing the specified criteria for admission of the extensions. In this way, the functionality of the platform can be extended, and the individual users will receive a more flexible and adjustable experience.
It should be noted that such an approach also introduces certain risks. First, as was partially exemplified above, the involvement of the external parties could lead to the uncontrolled growth of functions which would eventually disrupt the minimalistic and functional design philosophy. In a broader sense, greater freedom provided to the participants will undermine the tight control over the platform’s core concepts. While it is possible to minimize such disruption by introducing stricter regulations and monitoring measures, such precaution would require significant time and resource investment and, by extension, will limit the profitability opportunities associated with the move, and possibly mitigate the expected benefits of the initiative. It should also be acknowledged that the arguments provided above are more relevant for the social networks whereas their professional counterparts may not require such degree of accessibility and ubiquity.
Nevertheless, it is worth mentioning that despite the relatively optimistic prognosis made by Nye, the issue may turn out to be more urgent than initially estimated. The last decade demonstrated a tremendous shift towards openness throughout the field of informational technologies. Therefore, while it is still possible to regard the complete transition as a long-term goal, it would be unwise to retain the default position of having only a limited number of portability options.
The recommended solution to the second dilemma is to stay focused on the professional market and not expand into the traditional social networking domain. The primary reason for this is the fact that despite the attractiveness of the social component to a wide audience, it has little to offer in terms of professional development. The common social features such as media sharing, games, and feedback to the published content do not provide sufficient capacity for improvement in the professional domain to consider them a necessary addition.
One of the advantages of such an approach is the highly specialized nature of the strictly professional service. While it is highly likely that the addition of the familiar social components will increase the service’s customer base, it is doubtful that a significant proportion of the newcomers will be interested in the resource’s main specialization. As a result, the value of the service will decrease for both the corporate and the individual users aiming at finding new career opportunities. Also, it is important to understand that in its current form, LinkedIn already features one prominent social feature – namely, the concept of contact degrees. While such a concept does not resemble the social network mechanisms familiar to the general public (and can be considered restrictive by some), it aligns strongly with the principles of the corporate culture and professional development. By capitalizing on the existing social component, rather than introducing the new ones, the company can turn its unique feature into a competitive advantage without straying away from the familiar area.
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Admittedly, the decision brings up several issues. First, the numbers presented in the case suggest that such a move would restrict the customer base growth and, by extension, would limit the potential profitability of the platform. However, while it is true that the social networks demonstrate significantly greater possibilities for monetization, including the average time of stay and daily signup rate, it would be safe to assume that the majority of the users in question do not have interest in the site’s core features and functions (Yoffie et al. 12). It is certainly possible that a certain amount of users will eventually appreciate the ability to connect to an employer or seek business partners, but the likelihood of such occurrence is negligible in comparison to the overall decrease in the density of the professionally-oriented users. In simple terms, the disadvantage of insufficient growth of the user base is acceptable when viewed against its adverse effect on the service’s main strength (the adherence to professional standards).
Another potential disadvantage that needs to be highlighted is the lack of adjustment to the increasingly vague distinction between social and professional activities characteristic for the young generation of professionals. While this is certainly the case on a broader scale, there is no clear benefit of introducing a similar junction in the functions provided by the platform. As was mentioned above, the service already contains certain social components that enable professional interactions that are considered sufficient by the industry standards. In other words, while the inclusion of social networking shows certain alignment with the modern perception of the professional activities at a conceptual level, the lack of observable pragmatic value allows dismissing it as redundant.
Yoffie, David B., et al. “LinkedIn Corp., 2008.” Harvard Business Publishing. 2009, Web.