What's next for LinkedIn?
- 04 August, 2016 22:00
LinkedIn shot for the moon with its first broadcast TV commercial in March, but the company quickly careened back earth when Microsoft scooped it up for $26.2 billion in June.
The 14-year-old company is financially healthy, but the acquisition suggests LinkedIn may have hit a ceiling. Are the company's best days behind it?
The social network for professionals is diverse, with business units that range from publishing and educational training to sales-lead generation.
But LinkedIn is still primarily a way for people to find their next jobs. Under Microsoft, LinkedIn has an opportunity to focus on its areas of strength and growth opportunities, according to a set of analysts and LinkedIn experts who spoke with CIO.com.
The social network side of LinkedIn's business may have hit a threshold with its 433 million members, but the company can still see growth related to its marketing business and enterprise solutions for recruiters and sales professionals, according to Jenny Sussin, a research director with Gartner.
LinkedIn should share more data to generate insights for Microsoft and other partners, she says. "The opportunity is exposing LinkedIn data and analysis to additional data sets where new insights can be discovered."
LinkedIn must continue to do what it does best
TJ Keitt, a senior analyst at Forrester Research, says LinkedIn must continue to provide value for people who want to network and recruit. He anticipates little disruption to the core service and expects that Microsoft will do everything it can to ensure LinkedIn's users remain active. "Microsoft will most likely seek to add more value to the LinkedIn experience by tying in some of its communication assets (such as Skype and Yammer) to augment the built-in messaging capability," Keitt says.
LinkedIn's is first and foremost a platform for professional networking, and the company will be fine as long as it doesn't expose user data in a way that violates user privacy, according to Sussin. "Once a network for a purpose is well-developed it's really hard to take it down, as we can see from Facebook and its competitors over the years," she says. "Even if the new model of the competitor optimizes something where [LinkedIn] fell short, it requires a majority of users to move to the new network."
LinkedIn serves a very specific purpose for a unique audience, but its problems are not unlike other social services that have struggled to make money, according to Raul Castanon-Martinez, a senior analyst with 451 Research. "Facebook has become the benchmark for monetizing social networks and messaging applications, but few have been successful at this and no one even comes close to Facebook," he says.
LinkedIn faces tremendous pressure to continuing its growth. And though the company's gains don't seem particularly impressive when compared to Facebook, the emphasis on short-term growth places unreasonable expectations on many businesses like LinkedIn, according to Castanon-Martinez. Leading up to Microsoft's bold bet, "LinkedIn faced the prospect of its growth slowing down and its value further declining," he says. "There are important growth opportunities for LinkedIn but these are within the framework of a bigger Microsoft umbrella where it can build synergies with enterprise applications.
As such, Castanon-Martinez expects LinkedIn to largely continue its operations with little immediate direction from Microsoft.
LinkedIn relies on job ads, recruiting and marketing
Job advertisements and recruiting generated nearly 60 percent of LinkedIn's revenue during the first quarter of 2016, and marketing solutions and subscription fees from LinkedIn's premium products represented a combined 35 percent of total revenue. (The company reports its most recent earnings later this week.) Recruiting and sales are key to Microsoft's business, as well, according to Mike O'Neil, president of Integrated Alliances, a LinkedIn consulting and training firm.
LinkedIn's struggles relate to high subscription costs and a lack of focus, he says. The company has also "gone a bit overboard in pushing their publishing," and the Lynda.com acquisition was a mistake, according to O'Neil. "LinkedIn is simply too expensive and very splintered," he says. "To do my work I need two LinkedIn Premium accounts: Business Plus and Sales Navigator. I have two inboxes, two sets of InMails and have to check two places very often."
LinkedIn has made missteps in recent years, according to O'Neil, but he expects things to change once the company is under Microsoft's control. "[LinkedIn] has severed links to products and services that add value to LinkedIn and to LinkedIn users to maintain a strict control," he says. The company sits on a "gold mine" of data, and some of its users are willing to pay for more qualified access to that data, according to O'Neil. "They are getting some of that now but there is so much more potential."
Whether or not LinkedIn hit some sort of ceiling, the site's novelty has worn off, according to Lisa Marie Dias, a social media marketing consultant. "It is slipping into that everyone-is-on-it-but-no-one-is-sure-why phase that many social media platforms seem to go through."