In little over a month, shares in LinkedIn lost over half their value — because of poor growth forecasts, fears over future income, and even investor concerns over a tech bubble.
The issues facing LinkedIn, however, go beyond the company itself.
The problem stems from each of the company’s revenue streams, which ultimately diminish the business value of using the service. In other words, LinkedIn’s business model inhibits the growth of the network; and the network growth is ultimately what its business model is reliant upon.
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LinkedIn is not, in fact, a business network — individuals on LinkedIn represent themselves, not their businesses. And as LinkedIn’s content is mostly user-generated, the incentive is for the users to produce material that promotes themselves.
This creates a conflict. Most people aren’t looking to change jobs all the time. Instead, they want to communicate and build relationships. However, because LinkedIn’s revenue streams and design restrict typical business forms of communication and facilitate paid ones, most interactions on the platform are low-frequency and one-directional in nature, such as recruitment offers and sales pitches.
As a result, LinkedIn is now, at best, a business card holder. At worst, it’s a delivery service for spam.
With both recruiters and top talent not finding what they need on LinkedIn, real business interaction is carried out on other platforms.
To reboot investor trust, LinkedIn needs to overhaul its strategy and stop incentivizing the worst behavior on the site.
The company needs to simplify its number of revenue streams and make sure that they work in concert with its user engagement and growth strategy, rather than in conflict.
Furthermore, if LinkedIn is to be a useful platform for sales organizations, it needs to focus more on the organisation, not just the individual. It must also utilize the vast amount of data that is not user generated and combine it with existing content to create a more complete picture of companies and their characteristics, vastly improving its ability to help sales and marketing teams.
Finally, the company should also end its protectionist policy with regard to its API. By not sharing its data with others, LinkedIn safeguards some of its revenues, but also restricts integration with business workflows – relegating the network to continue to be one focused on individuals rather than businesses.
My 2 cents:
LinkedIn’s heightened loyalty to its users as exemplified by its ads constraints, refusal to release data, and bias towards platform serving initiatives as opposed to integration channels is beginning to backfire. Users and recruiters alike are finding limited added benefit from hunting on LinkedIn and see it as somewhere between a social network and a job hunting medium. LinkedIn’s noble and brilliant push to generating a wealth of employment data is hitting a road block as its providers of information aren’t engaged to provide information, especially with rising competition that seems to get the job done on the job front.