LinkedIn offers few competitive openings

Last week, professional social network LinkedIn turned in a strong quarter and announced a smart acquisition. The company seems to have proven, a year after its IPO, that it has staying power and growth potential. Indeed, LinkedIn has addressed some vulnerabilities (e.g., mobile, sales efficiencies) even if it hasn’t really started to cash in on its platform or identity management opportunities yet.

LinkedIn doubled its revenues year over year to $189 million, showed a $9 million net profit and raised its guidance for the year. Analysts and the stock market responded warmly. LinkedIn’s mix showed sales of services for recruiters growing the fastest among its different businesses, to over $100 million, while advertising grew the slowest. But even ad sales were up 70 percent to $48 million, growing at a rate well above that of other online ad stalwarts like Yahoo or even Facebook.

LinkedIn capped the day by announcing its intention to buy SlideShare for $119 million. SlideShare looks like a good fit for LinkedIn. It’s a solid communications tool for business professionals, and could add regular usage for LinkedIn’s customers, something it’s been trying to boost relative to other social networks. I wouldn’t call SlideShare “identity management” in the technology platform sense of the term – that is, powering professional social graphs or enabling identity authorization and authentication. But it’s a way for LinkedIn members to boost their professional profiles. At the same time, SlideShare has a complementary premium subscription offering, and a content and services syndication strategy that aligns nicely with LinkedIn’s own.

Addressing shortcomings

After LinkedIn’s IPO, I had called out the company for a native inefficiency in its sales organization. Direct sales had been increasing as a percentage of LinkedIn’s total, but the company would have a hard time achieving economies of scale since it had to sell to distinct customer bases: recruiters and hiring firms for services, and employers, brand advertisers and business service providers for advertising. That condition still exists, but LinkedIn is showing a better revenues to marketing expenses ratio than other tech players, and its direct/indirect mix is balancing.

GigaOM Pro had also chided LinkedIn for a sluggish mobile effort. But recently, the company released a well-reviewed tablet app. And the app is largely built using HTML5 technologies, which means LinkedIn should have less work to do supporting different mobile platforms, and be able to add features faster, leveraging the cloud to deliver services from servers rather than depending entirely on porting them to applications.

Entrenched in recruiting

LinkedIn has become entrenched as a key platform in the emerging new recruiting ecosystem. It has become close to dominant in the U.S., cutting into the roles of traditional recruiting firms and job boards alike.

LinkedIn’s growth has attracted plenty of competition from newcomers as well as some so-far weak responses from traditional job boards. Viadeo recently raised $32 million to build a professional network focused on countries where LinkedIn has less presence. BranchOut raised $25 million to build LinkedIn-like services as an app atop Facebook’s social graph. Gagein is attempting to create a business information network by building a database of company information and tapping into existing social enterprise platforms like Salesforce and Yammer.

It will be difficult for challengers to cut into LinkedIn’s position with recruiters. And switching costs for LinkedIn users remain high, though LinkedIn’s platform aspirations do open it up a bit. BranchOut and others have scraped data and connections from LinkedIn APIs.

To maintain its growth pace, LinkedIn needs to establish itself as the go-to supplier of professional identity and add functions beyond recruiting. Integrating business service marketplaces with professional connection data may the best way to cut LinkedIn off at the pass. But even a company as strong as Salesforce has yet to turn its 2010 acquisition of Jigsaw into a business connections tool at LinkedIn’s expense.

Question of the week

Where is LinkedIn vulnerable?