Strategic Marketing Analysis: a case study of LinkedIn Co.

December 16, 2010

Strategic Marketing Analysis: a case study of LinkedIn Co. December 16, 2010 1.0 Introduction

The Internet allows people to communicate and connect in ways that simply weren't possible a few decades ago. You can chat with friends, sharing photos and videos while you catch up. Online social networking sites are some of the most popular online destinations right now. It was Web 2.0 that changed how we use the Internet today; enabling content generation by end users, and allowing them to distribute it with ease to their colleagues. A Social Network Service (SNS) is an online service or platform that focuses on building relationships among people with similar interests. Facebook, MySpace and Hi5 are examples of SNS with enormous number of users. A niche social network is one that targets a select segment of the general population. These networks allow users to connect with fewer people who have the same interests, hobbies or professional association. For example: Kaboodle (for shoppers), Ravelry (for knitters) and Flixter (for movie fans). Professional Networking Sites (PNS) are a variation of SNS model. PNS is built around business rather than personal relationships. A good example is LinkedIn. Ryze, XING and Spoke are other examples. By maintaining the focus on productivity and professionalism PNS become an asset to corporations in contrast to the more popular social networking sites such as Facebook. A member serves dual roles as both supplier and consumer in SNS business models, where as in a traditional business model, the suppliers and consumers are two distinct agents. Revenue is typically gained through advertisements, but subscription-based revenue is also possible when membership and content levels are sufficiently high. Social Networking sites also function as platforms where third-party applications (APIs) are run, adding value to users. These applications often leverage the networks vast databases to other websites and thus form a third source of income. LinkedIn was launched in May 2003. It has over 85 million members in over 200 countries. The membership grows by a new member approximately every second1. When you join LinkedIn you create a profile that summarizes your professional expertise and accomplishments. You can then form connections by inviting trusted contacts to join LinkedIn. Your network consists of your connections, your connections connections, and the people they know, linking you to a vast number of qualified professionals and experts. A member can search for business partners, potential customers and also search for job opportunities.

-----------------------1. http://en.wikipedia.org/wiki/LinkedIn

Strategic Marketing Analysis: a case study of LinkedIn Co. December 16, 2010 2.0 Situation Analysis of LinkedIn
LinkedIn will be the leader in business networking. Its a productivity tool, used for professional people search, reference checking, recruiting, finding experts and getting expert advice, and work group collaboration. - Dan Nye, CEO LinkedIn LinkedIn is clearly a professional, rather than social or personal in nature. PNS target a different group of people who wish further their careers. For this they are willing to keep their personal lives separate. In the section that follows the internal and external factors that affect LinkedIn is outlined.

2.1 SWOT Analysis

Strength LinkedIn is the largest PSN in the world. Financial backing from several venture firms ($27 million in June 2008) High quality of user base. (a network that users join to further their careers) Raises productivity as work place and generally considered a corporate asset. Available as a mobile application Available in several languages (Chinese, German, French, Japanese and Spanish) Growth rate: 1.2 million new members per month Opportunities Advertising potential (average LinkedIn user more attractive than reader of the Wall Street Journal)

Weaknesses The switching cost of membership is high. Operating a closed propriety system (walledgarden model). Attempting to promote individual profiles while providing corporate tools to promote intracompany networks. Member spend less time per visit (6.5 minutes per visit compared to average 21 minutes on Facebook)

Threats Challenge posed by SNS such as Facebook and MySpace, which have larger networks and offer overlapping services. Competition from Google (Orkut) and Microsoft (TownSquare) Challenges from other PNS such as XING and worlds largest job-search engine Monster.com Social cultural factors than makes penetration in the Asian market difficult Proposed open-platform for social networking

Offer premium features for a subscription fee Job postings by employees and recruiters Corporate solutions (head-hunting) and business research Leveraging with other organizations to run widgets on their websites (Business Week)

Table 2.1: SWOT Analysis

Strategic Marketing Analysis: a case study of LinkedIn Co. December 16, 2010 2.2 Industrial dynamics
Innovation has been a key factor to the growth of Social Networking Sites. Could innovation help SNS and PNS to move on to open-platforms? In the section that follows these and other industrial dynamics that affect Social Networking Sites is outlined.

STEEP Model
Socio-cultural Originally SNS targeted youngsters, but it has grown to include almost everybody. LinkedIn targets professionals. Their average age is 41 years. It has been noted that those who use Facebook also use MySpace as a second SNS, likewise those who use LinkedIn use Facebook for personal relationships. Having established in the US LinkedIn moved to the Europe, introducing three European languages. Though popular in India, penetration in the rest of Asia is made difficult by social and cultural factors. Technological Innovation is key to the success of any product/service. In more than one instance LinkedIn has followed the footsteps of Facebook. They launched a mobile application to tap non-US markets. Opened its own API to thirdparty application developers to build applications that leveraged LinkedIn data to enrich other websites. LinkedIn is available in five different languages. Economic SNS are moving towards interoperability between social networks; open standards and complete data portability. Social Media has received plenty of investment because of the new trends its causing in the Digital Economy. Social Networking sites are largely benefiting the business community and are been included in Integrated Marketing Communications (IMC) of most companies. Environmental Social Networking Sites have no adverse effects on the environment itself but may change the way people communicate in future. People leading busy lives will manage with SNS and be less enthusiastic about meeting face-to-face. Political/Legal Been open on SNS is not what the majority of the users want. This is clearly shown in the number of lawsuits against Facebook regarding privacy issues. Unlike Facebook LinkedIn has managed its services with strict control over the network. As the Digital World become more open new Laws regarding privacy and data protection is required.
Table 2.2: STEEP Model

Strategic Marketing Analysis: a case study of LinkedIn Co. December 16, 2010 2.3 Ansoffs Product-Market Matrix
With increased competition from Facebook, Googles Orkut and XING LinkedIn will look for ways and means of retaining its market share use innovative new products/services to attract new markets or speculate on venturing into the SNS market. The following matrix tabulates these options.

PRODUCTS/SERVICES
Existing Market Penetration (small risk) Existing Increase revenue from existing market; ie. Advertising Improved user interface for more engaged communication New Product/Service Development (moderate risk) Introduce new products/services for paid users. ie. CompanyGroups Use of third party APIs to add value to user functions

MARKETS

Market development (moderate risk)

Existing product or service sold to

new markets. ie. Widgets on other websites showcasing New LinkedIn members

Diversification (high risk) Moving from a walled-garden model to an open platform. Moving from exclusively PNS to new market of SNS. Offer new applications of games, photo and video sharing and other entertainment. (preempting efforts by Facebook to target PNS market)

Tapping the emerging new

markets in Asia.

Table 2.3: Ansoffs Product-Market Matrix

Competitor Analysis
LinkedIn has competitors in three categories. SNS: Facebook, MySpace, Orkut PNS: XING Job Search: Monstor.com Microsoft research with a labs are

experimenting

SNS called

TownSquare which can be potential competitor in future.

Fig 2.1: Unique Visitors to Global Social Networking Sites (Source: comScore)

Strategic Marketing Analysis: a case study of LinkedIn Co. December 16, 2010 3.0 Conclusion and Recommendations

Two Strategic Dilemmas faced by LinkedIn: a) Open Platform The W3C report states that applications should share profiles and data across networks so that social networking companies can grow and open further Web 2.0 possibilities.2 The idea of social network interoperability is that instead of being a bunch of walled gardens and data silos, social networking sites can talk to each other the same way email services are used. LinkedIn is a closed platform. It uses this feature to control and monetize its members professional activities. Two of its major rivals are using contrasting approaches to the proposed open-platform. Facebook uses a closed platform approach maximizing on page views while Google has positioned itself to benefit from an eventual erosion of the walled-garden model. b) Expand to become a Social Networking Site The high popularity of SNS coupled with Facebooks indication of expanding to professional networking has serious effects on LinkedIns market position. With more and more youngsters joining SNSs many companies are using Facebook page as its PR hub. Not only are the growth rates more impressive on Facebook and MySpace the amount of time spent on these sites is also more. The question is, are the technology usage trends tipped towards social networking and hence, could LinkedIn lose its customer base? Conclusions Both LinkedIn and Facebook use a walled-garden approach to create a community that will network within its perimeters adding and multiplying its number of users. Networking sites while giving a bevy of free services go on to monetize the user activities, making use of the sheer number of page views and ideal target groups for advertising. These business models have helped SNS to gain high profits benefiting by all means from the closed platforms. Users on the other hand find it difficult to switch to another SNS because there is no guarantee that all the contacts will be members of the second SNS. The fact that most SNS users use a secondary SNS is ample evidence that users are split over communities, their functions and usability. -----------------------2. A Standards-based, Open and Privacy-aware Social Web http://www.w3.org/2005/Incubator/socialweb/XGR-socialweb-20101206/

Strategic Marketing Analysis: a case study of LinkedIn Co. December 16, 2010
Many users of SNS are unaware of the impact of social networking on their privacy. In September 2006 Facebook added two new features, News Feed and Mini Feed both of which revealed information that users assumed were concealed from others. The ensuing protests had Facebooks founder Mark Zuckerberg make a public apology for their mistake and privacy controls introduced. However users are not fully aware of this powerful feature. Opt out was recommended as the default setting where a user needed to make a choice of revealing his details. Considering this, suggestion to move to open platforms of social networking seems to be rather premature. It may be well worth to explore ways of safeguarding user privacy before opening up networks for interoperability of data. Since its inception in 2003 LinkedIn has built a large community of professionals who found the service useful for promotion, networking and job hunting. It has also been useful for companies to seek advice, find experts and recruit people. So far LinkedIn has had no privacy issues. Its strategy is to contribute to professional success and efficiency. When LinkedIn developed an API called BumperSticker on Facebook it became a huge success. It seems there is a clear distinction between social networking and professional networking. People often prefer to keep their work life and personal lives separate. LinkedIn serves both the interest of professionals and corporate markets. While most services are freely available for individuals, corporate services come at a premium price. Individuals network by their own initiative and paid services are offered for companies. This strategy will reduce the conflict in serving both parties yet maximize the user involvement. Recommendations The two areas of PNS and SNS are quiet distinct. LinkedIn should continue with its unique identity as the largest PNS and not emulate features available on popular SNS. A professional network has a high quality user base. LinkedIn could leverage on its user base to target advertising and increase profit margins. In order to continue with this revenue model LinkedIn should remain a closed-platform. It would benefit by strengthening its key features, enhancing user interfaces and focusing on strategies such has new products and services, widget and application that run on other websites, in order to retain its user base. Should the industry dynamics change the popular trends LinkedIn will wisely adapt with new strategies.

Strategic Marketing Analysis: a case study of LinkedIn Co. December 16, 2010
References David B. Yoffie, Michael Slind, Nitzan Achsaf, LinkedIn Corp., 2008 HBR Aug 2009, Available at: http://hbr.org/product/linkedin-corp-2008/an/709426-PDF-ENG Mikolaj Jan Piskorski, Thomas Eisenmann, David Chen, Brian Feinstein, Facebooks Platforms HBR Mar 2008, Available at: http://hbr.org/product/facebook-s-platforms/an/808128-PDFENG?Ntt=Facebook%27s%2520Platforms W. Glynn Mangold, David J. Faulds, Social media: The new hybrid elements of promotional mix, ScienceDirect March 2009, Available at: http://www.sciencedirect.com A Standards-based, Open and Privacy-aware Social Web, W3C Incubator Group, Dec 2010, Available at: http://www.w3.org/2005/Incubator/socialweb/XGR-socialweb-20101206/