In the heyday of the Facebook hype (it seems so long ago now!), Facebook was going to eat LinkedIn’s lunch. Based on recent experience, I don’t think so.
I recently had reason to use LinkedIn seriously, using my existing network to tap into a market that I had not previously been exposed to. I had not used LinkedIn since the early days, so this was my first serious update.
I have NOT used Facebook seriously. I registered out of curiosity about the phenomenon and found that the only network I could join was based on zip code - and that was useless. Then Read/WriteWeb set up a group on Facebook, but I looked once and left. When I want the Read/WriteWeb network, I go to the site itself. So please take my comments on Facebook with a large lump of salt; but Fred Wilson too has made a more determined effort to use Facebook and he has been disappointed. If there are technology entrepreneurs on Facebook, you would think they would respond to an ad from one of the leading VCs in the social media space saying “be my friend”.
If Fred had used LinkedIn, he would have gotten a big response; possibly too big and that is a filtering issue that LinkedIn seems sensitive to. LinkedIn has definitely been useful for me. It is not a silver bullet, but when used with respect for real world relationships it has served one very important purpose - I can meet my objectives with the minimum of intrusion on my contacts. I can search for the contacts/companies that I want to reach and find who has a relationship and ping them for help.
This is far more efficient than spamming all my contacts with a mass email saying “anybody know anybody in this role at these companies?” That would probably get a quick response but would rapidly deplete my 'relationship capital'. It is also more effective than guessing who would have the right contacts. In LinkedIn I have been constantly surprised by contacts that I would never have guessed would be useful.
LinkedIn links to Webmail services such as Gmail, Yahoo and AOL, which is a very effective way to increase their network scale. The Gmail link enabled me to see which contacts were already in LinkedIn and send them a request to connect via LinkedIn. Bearing in mind the 'connection pollution' problem, I was careful to only invite people who I have a real relationship with. I left out the weak connections.
This also served a bit like a Plaxo update. I had old emails for people who had changed jobs; LinkedIn automatically showed me where they work now (I asssume based on email forwarding). This email link is very powerful and illustrates the point that Fred Wilson made about email systems having the most accurate social graph.
Leaving out duplicates and non-business contacts, I estimate that close to 80% of my business contacts use LinkedIn. The people who were NOT in LinkedIn were either a) young or not in business, or b) older. The latter was interesting. Some of the people with the most clout and large networks accumulated over decades in business were not in LinkedIn; probably a mix of technophobia and lack of need. That’s OK, my phone still works fine :-)
The key point is that around 80% of my business contacts were in LinkedIn (perhaps not 80% by valu,e given the point about senior people not being there). If other people have this experience it is pretty significant. This sounds like a network tipping point/chasm crossing, or whatever we call it now.
However there are a couple of reasons why LinkedIn - while useful - may not become a highly valuable business. There are rumors they are looking at an IPO, so then we will find out the real numbers. Until then, here are two observations that indicate limitations on valuation:
1. LinkedIn mirrors real world relationships but does not change them. I assume the same is true on Facebook. More to the point, attempts to use LinkedIn to change real world relationships can be counterproductive.
I found a few people who seemed as if they were almost “professional” LinkedIn users. Their names came up constantly as connections. They had 500+ connections (LinkedIn shows the number of connections but only says “500+” above 500, so the person could have 5,000 connections). Most of those are bound to be weak connections. One example; somebody who contacted me by email years ago, it was not of interest to me but I must have responded to his LinkedIn request to connect. I really did not know this person. Another example; somebody I know well, but when I tried to use the connections he told me that during a job search period he'd networked relentlessly and entered every random contact into LinkedIn. He had effectively made his LinkedIn connections useless by 'pollution'.
2. I can bye-pass the network and avoid paying the fees. The 'professional' users of LinkedIn tend to be sales people or recruiters. In other words people who network for a living. They are the ones who will pay the fees that LinkedIn charges:
| Monthly cost | $19.95 | $50 | $200 |
| Request Introductions | 15 at a time | 25 at a time | 40 at a time |
| Contact users directly through InMail | 3 per month | 10 per month | 50 per month |
| LinkedIn Network search results | 100 | 150 | 200 |
The problem is that 'reciprocity' (aka what goes around comes around; or you scratch my back and I'll scratch yours) is missing. Sales guys sell, they don’t buy. If they simply use LinkedIn as a glorified marketing database, people will put up the barriers.
I contacted some people through LinkedIn’s built in messaging, but more often I reached out by email or phone. This was not only, or even primarily, induced by a cheapskate desire to avoid paying the fees. Sending a standardized mail through LinkedIn seemed like a cold and impersonal way to re-establish a relationship and ask for a favor. So I am not sure how viable the subscription revenue business will be.
Which leaves advertising. If they go for something similar to the Facebook ad model, that would go down like a lead balloon in this business community. It is possible that LinkedIn has the 'magic monetizer', the Adsense equivalent that turned a useful service into $ billions in revenue. I just have not seen it yet.
Linked In has some of the smartest investors around (one of the angel investors is also an investor in Facebook). These investors have deep pockets and they are almost certainly following the model of building both scale and deep end user value before attempting too much monetization.
I have seen signs that they are looking at deepening their service value, specifically by becoming a network to find small service providers. With reputation ratings, that has big value. It has reciprocity as there are times as a buyer when you really need a small, specialist firm at short notice. So this is valuable to buyers as well as sellers. There are specialist networks doing this already, so LinkedIn can do it at scale across multiple domains. That looks like a winner.
Thinking about monetization, I looked at the primary motivations for using a business networking service like LinkedIn:
1. Push marketing. Find the right contacts to avoid cold call. This has limits. Over-use will lead to barriers getting erected to avoid 'networking spam'. This is true whether one is selling a product, a service or person (e.g. recruiters). This works when it is occasional, uses close contacts only and there is reciprocity in the real world relationship.
2. Pull markerting. Put up your profile, or your firm’s profile, and get found by the right buyers. This is nascent in LinkedIn today but shows big promise.
3. Just-in-time expert advice for cash. This is what companies like Gerson Lehman Group have done for years and they have built a real business. There are more consumer-oriented variants such as BitWine. With their scale, LinkedIn could easily get into this business.
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I don't know that Facebook *changes* real-world relationships, but it has certainly re-activated them for me. It's a communications tool more than a contact tracking tool.
I use LinkedIn, too, and have about the same number of contacts/friends in each. But I check Facebook almost as often as email - and use it for a kind of casual socializing that LinkedIn just isn't designed to.
I've started conversations with classmates I like but haven't seen in years, a young cousin I don't see enough of, jump in on wall postings between colleagues, field questions about my latest status update, etc. Those renewed conversations have led to lunches and phone calls and dinner gatherings.
Posted by: Kira | November 16, 2007 3:00 PMThoughtful analysis of the motivations behind using LinkedIn and the inherent limitations in its current state. It does help me reach further and faster into the potential connection pool than other methods. However, it stops there. I have to create value to sustain and grow those relationships. And I have the same contact technologies I've always had (email, phone, snail mail, and... meeting face-to-face).
That said, I look forward to some of the applications which come out of their APIs. The push marketing model definitely comes into play as the low hanging fruit. Also, there is an opportunity to extend their platform to help with the value creation part of connections/relationships. Some the basic business apps built off of Salesforce would be beneficial on the LinkedIn platform.
Posted by: Bob Angus | November 16, 2007 3:06 PMBernard
Great post!
I'd love to see Linked In to find ways to extend itself to blogs and sites, so you could use it as your professional info repository, but reuse that info on your on sites, and also build on Linked In relationships at your site.
Also - I'm no Linked In guru, but it seems like there's a lot of potential for Linked In to be used for business networking based around events. I've been to Podcamp Boston and a WebTrends meeting in the last month, and it would be nice to have easier ways to follow up with your offline event connections with online ones.
Posted by: James Lewin | November 16, 2007 3:38 PMAs always - spot on. LinkedIn is fantastic tool for biz dev. Facebook does not come close because I do not even know how to mine my contacts or contacts' contacts.
What I'd like to see in LinkedIn is this UI: What is the best way for me to reach into company XYZ?
That should consider person's position, degrees away from me, responsiveness of my contacts and others in the chain, etc. Such a basic thing that I'd love to be able to do more easily with LinkedIn.
Posted by: Alex Iskold | November 16, 2007 8:36 PMIts interesting to look at who the initial users were for facebook and linkedIn and how that has grown and developed.
Facebook was for students, LinkedIn was primarily for .com workers, both of these have grown and extended out of these groups. So now, facebook is for friends, LinkedIn is for business contacts.
The power of this growth is clearly in the strength of the invite, the personal recommendation that this site is worthwhile.
But it will be interesting to see, as more and more social networks launch what the users appetite for these are, how many invites will you need to receive before you look at any new offerings, and does the take up of new services mean the demise of older services, do users now use facebook, and not myspace? or do they use both?
Posted by: Phil Geraghty | November 16, 2007 9:10 PMI definitely used LinkedIn like a rolodex as well as a public resume as it were. Facebook on the other hand is definitely for more personal connections, although for people in new media etc, it doubles as a professional tool as well. My level of interaction with people on Facebook is significantly higher, but I like the distinctions between the two and prefer to keep them distinct and separate.
Posted by: Deepak | November 16, 2007 10:45 PMPhil brought up an interesting point. How long will these sites last before new sites with better features come up and cater to this younger generation who are stuck in the middle. I say, stuck in the middle because most of this younger generation are not using LinkedIn and are confused as to how professional networking can be incorporated into their social profiles on Facebook.
Just last week, Nethooks, a new professional networking site emerged with a number of interesting and appealing features as featured on Mashable. While they have a challenge of luring in current LinkedIn members, the site charges no fee and specifically targets Facebook crowd and the younger working class.
There is an unwritten rule that most networking sites last for about 4-5 years or less before losing their appeal to younger and more attractive websites. Friendster, MySpace and Facebook are an obvious examples. LinkedIn has enjoyed its share of monopoly in the professional networking area for a while now. This monopoly may have contributed to the lack of evolution to cater to the younger generation and probably a major factor as to why LinkedIn charges its users.
I guess, it will be interesting to see at what point LinkedIn's membership will start declining as baby boomers start retiring and at what point people will start looking for new options.
Posted by: Nevets Kok | November 16, 2007 11:42 PMGood post.
LinkedIn's value to the business user while limited still addresses their primary needs - business netowrking, sales, etc. By sticking to the essential features, LinkedIn may not be all things to all people - but they deliver value. Reason people pay the premium fees.
LinkedIn introduces features with in slow and staged manner - reason for almost zero backlash to new features - unlike FB (or spam king Plaxo) where every new feature beckons a ton of backlash. Facebook is trying to be all things to all people - a proposition that will work for people at a certain time in the lives - but as they evolve into business professionals, they will move their time and money into places like LinkedIn.
Posted by: G | November 17, 2007 5:25 AMFacebook is diluted with so much crap that it's difficult to defend it as a viable business application. I really enjoy LinkedIn. I also like Plaxo as well - it's a great compliment to LinkedIn to keep my Address book up to date.
Posted by: Douglas Karr | November 17, 2007 5:44 AMThanks to everyone for some very interesting comments. Rather than try to respond to each I want to just make the general point that the quality of comments is what makes R/WW such a valuable site IMO. The number of comments is manageable (I switch off when I see 50 comments and the first one is a rant). Which makes me think that people only comment when they have something useful to say and that is really refreshing. Which makes me think about ways to measure quality of media vs simply quantity (ie page views), but I guess that is another story...
Posted by: bernard lunn | November 17, 2007 7:19 AMCould not agree more about the added value of LinkedIn versus Facebook, particularly in a working environment. In my view, the greatest value is the functionality for social search and discovery. Then people then can use first degree connections (by way of their regular email) to connect to people. I've been able to do this a number of times to foster meaningful working relationships. LinkedIn can encourage a kind of synchronicity between online/offline activities, which is a healthy way to use the web service.
At a minimum, and to agree with Deepak, the value is that LinkedIn provides a self-evolving rolodex and contact list. There is value just in that, frankly.
A couple weeks ago I finished a paper looking at social website comScore data over the last 2.5 years. To my surprise, LinkedIn's monthly traffic growth rate was second only to Flickr. (out of 13 websites including Facebook and MySpace) Both grew by more than 1,000% from May 2005 to September 2007. Of course the total users is still very small compared to the big guys. Still it's interesting to think what "scale" there is for a service like LinkedIn.
Bernard, nice post-
Posted by: Paul DiPerna | November 17, 2007 9:46 AMInteresting post. For those that I know with LinkedIn, they don't know the value of it beyond conncections. And once that situational need is done, so is LinkedIn. Contact social networking services like FB and LinkedIn need not just to be a network, but have a value beyond situational situations.
As soon as LinkedIn can plug itself into my phone book (menu option on my mobile to 'connect to social network') then it gets an even better value proposition. And I am sure that is true for several people not on the front end of the 'long tail' of social networking.
Posted by: Antoine of MMM/Brighthand | November 19, 2007 7:55 AMAs a small business owner looking for what's available in social media I find your post quite interesting and informative.
Posted by: Howard A Brown | November 19, 2007 9:50 AMI recently decided to give up growing my LinkedIn network and focus completely on FaceBook. I'm 35, a self-employed small business owner, and I have lots of contacts. My decision to move to FaceBook comes from the simple fact that FaceBook clearly is more useful! How do I know? Because I use it more. I started with LinkedIn about two years ago and only recently moved to FaceBook (maybe five or six months ago). Over the last two or three months I found myself using FaceBook substantially more frequently than LinkedIn: having conversations with friends, yes, but also many professional activities including setting up small groups for clients and co-workers and people in my discipline, posting events, mirroring my professional blog, maintaining a profile that acknowledges I have a personal side as well as a professional side, and generally connecting with more people more quickly than in LinkedIn. To make the point more specific: on FaceBook, I have started new relationships while on LinkedIn I never have.
Posted by: Mishkin Berteig | November 19, 2007 7:41 PMFacebook was for students, LinkedIn was primarily for .com workers, both of these have grown and extended out of these groups. So now, facebook is for friends, LinkedIn is for business contacts.
Posted by: Soma | November 30, 2007 1:29 AM