I’ve been thinking about LinkedIn quite a bit lately. I think LinkedIn is really interesting because in many ways I think it is one of the most durable and hard to disrupt companies that sit at the intersection of SaaS and social networking. I’ve also been meeting a ton of companies that I think are looking to compete with LinkedIn by attacking them on a feature-by-feature basis as opposed to a full frontal assault. There are some interesting and emerging things I’m seeing on this front and I wanted to write down some of my thoughts on the subject.
LINKEDIN AS A THREE-LEGGED STOOL
I think LinkedIn is a company that has three facets to its model that all work together in a very complementary fashion:
LinkedIn is a directory – LinkedIn is a directory that allows professionals to create profiles with lots of information about their past work history and professional interests.
LinkedIn is a social network – LinkedIn uses social networking features to show how people are interconnected in a professional context. You can call it the business graph or the professional graph.
LinkedIn is an enterprise software company – LinkedIn makes a lot of money from selling services to companies that want to use its platform for business development or recruiting.
All three parts of that business work together. Encouraging professionals to create profiles fills out the directory. The social connections give context to how professionals are interconnected. This data plus the context allows LinkedIn to offer recruiters and business development professionals access to their platform for a fee. I think this chart gives a sense for just how much leverage they get from the 3 legs of their stool. Recruiting Solutions continue to drive the bulk of the revenue the company sees.
THE CHALLENGE IN COMPETING WITH LINKEDIN
LinkedIn really is a juggernaut of a company in the world of technology. If you’re not convinced, I’d encourage you to check out the 10-Q and see how well they are doing. In thinking about how to compete with LinkedIn, there are a few things that I believe make it particularly challenging – I’ll outline them below:
YOU WON’T DISRUPT LINKEDIN BY BETTER DESIGN – THE CRAIGSLIST ANALOGY
It’s very easy to criticize LinkedIn’s design. It isn’t the most beautiful site on the planet. It’s not the most modern design. But it is very functional. People largely know how to use LinkedIn. Search works reasonably well. The site is also very, very SEO friendly, which helps greatly in terms of organic traffic. It does not feel like the way to compete with them is to build a more beautiful version of the experience – LinkedIn wins on utility, not design.
PEOPLE ARE UNLIKELY TO ACTIVELY RECREATE THE LINKEDIN GRAPH MANUALLY
I think it’s highly unlikely that the majority of people will go and recreate a professional profile from scratch for a new service if it requires manual data entry. It’s one thing to create a new social profile on a consumer social network. Those usually only require a simple photo and a little bit of information to get started (if that). Creating and maintaining a professional profile is a lot of work. Unless the benefit of creating this new profile on a new service is clear, I think it will be hard to activate professionals and recreate that same graph that LinkedIn has built.
LINKEDIN IS UNLIKELY TO ALLOW A COMPETITOR TO BUILD ITSELF ON THE BACK OF ITS API
Perhaps most importantly, I think LinkedIn understands the power of the profiles they’ve collected and that the fastest way to competing with them is to get your hands on that profile and relationship data via their API. I think it’s totally fair and smart of LinkedIn to be fairly conservative as to whom they allow to access their API and how they allow them to use it. I don’t see them intentionally enabling a competitor by allowing folks looking to disrupt them to use their own API to do so.
HARD TO IMAGINE AN ASYMMETRIC VERSION OF LINKEDIN
When Twitter started to emerge as an alternative to Facebook, it seemed natural to me that the two services would head in different directions. Facebook, like LinkedIn, is largely about symmetric “friends” and not asymmetric “followers”. It is very hard for me to envision what an asymmetric LinkedIn would look like. What would it mean to follow a professional contact? Part of the value of LinkedIn is that symmetric friendships validate that both parties have agreed that they know each other.
THE CASE FOR UNBUNDLING LINKEDIN IS NOT OBVIOUS TO ME
One of the most common themes in the conversation around platforms is this theme of unbundling. For those of you with a general interest in unbundling and apps, I think there are two really good posts out there on the general theme of service unbundling, including this one by Benedict Evans at a16z and this one by Tom Tunguz at Redpoint.
I’ve been trying to wrap my head around what it would mean to unbundle LinkedIn and whether it would in fact be a good, useful thing for the company to do. It’s worth thinking through which pieces of itself LinkedIn could effectively unbundle, what it would mean for consumers, and what it would mean for their business model. My initial thoughts are that unbundling makes less for LinkedIn, regardless of whether it works in practice, than it does for someone like Facebook.
A simple search of the app store already shows that LinkedIn is experimenting with some form of unbundling, with separate standalone apps for a number of functions including Job Search, Pulse, Contacts, and Recruiter. I think the case for LinkedIn is very different than the case for Facebook:
Facebook is a platform that relies on ongoing consumer engagement to power its ad-supported business model. Any new entrant, such as Instagram, WhatsApp, or Snapchat, that competes for or siphons off end-user attention represents a real threat to that model. The decision to unbundle apps like Slingshot, Poke, Camera (remember that one), or Messenger makes sense in the context of retaining access to customer attention. LinkedIn is quite different. LinkedIn is a platform company that needs relatively accurate data and comprehensive coverage to power its enterprise model. So long as LinkedIn continues to have access to relatively accurate profile and relationship data, the core of their business model should continue to work well. The argument for LinkedIn to unbundle its core functions around network intelligence, contact management, and recruiting seems weaker.
THE OPPORTUNITY TO COMPETE WITH LINKEDIN
Despite the sizable moat that LinkedIn has built around its business, there are some clever ways that companies can compete with them to build professional graphs and value-added services. A few things worth keeping in mind if you want to compete with LinkedIn:
LinkedIn does not have a monopoly on professional network data – While LinkedIn has a potential monopoly on its own network or platform data, it does not have a monopoly on all social networking data. Increasingly, I find out about people’s professional lives on Twitter, Facebook, AngelList and other channels. That data can be leveraged to construct professional graphs and network relationship data.
Contact info and basic graph data is available via app permissions and mail and calendar info – While LinkedIn does have a great store of contact info and past interaction data, that data can be gleaned from mobile address books, calendars, and email inboxes.
Mobile favors quick, simple applications and interactions – LinkedIn is still one big monolithic application. Doing anything that’s simple or quick still means you need to open the core application and navigate to your desired function or section of the app. Mobile tends to make monolithic applications vulnerable to competition from single-purpose applications.
Ability to combine professional and personal data to improve profile “freshness” – If I could identify one weakness in LinkedIn’s model, it’s that they don’t prioritize or even need the freshest profile or relationship data in order to make their model work. LinkedIn’s business model will work just fine so long as they have reasonably fresh profile information on their users. There is an opportunity to focus on the type of applications where data freshness is more valuable and useful.
When I look at the latest crop of applications that are focused on professional networking, including Refresh (I wrote about them here), Accompani, and RelateIQ, I think a lot of them are pursuing smart strategies around how to compete with LinkedIn without poking the bear. I’m very interested to see how these companies evolve and develop in the shadow of a giant.
LinkedIn is a very good company with a very good business. Trying to take LinkedIn head-on seems foolish to me. Whatever will compete with LinkedIn will have to chip away at the monolith by exploiting opportunities that seems small today but are likely to become valuable over time.
As always, comments are open. Feel free to leave your thoughts below or connect with me on Twitter @chudson.