I’m sure most people in the active work force have recently received this request: “I’d like to connect with you on LinkedIn.” Given that the company now boasts more than 300 million members, it’s probably fair to assume that many of you reading this story have already signed up. While I normally accept the invitation – unless of course I have no idea who the person is or why he (or she) wants to connect with me – I sometimes inject a touch of humour, answering: “I have joined your social network on LinkedIn, what I call Facebook for Grownups!”
While LinkedIn does not have the membership base of Facebook (which currently stands at 1.3 billion), it is an extraordinarily successful – and serious – company with revenues approaching $2 billion per annum, and a market capitalization of almost $30 billion. That’s not bad for a company that was founded just 12 years ago and listed on the New York Stock Exchange in May 2011. How does it make its money, though?
There are three basic revenue streams in LinkedIn’s business model: talent solutions; marketing solutions; and premium subscriptions. About 57% of the company’s revenues come from talent solutions, its recruiter product that helps corporations find employees, both those looking for a job – and those that might not be looking! Another 23% of LinkedIn’s income is generated by marketing solutions, the advertisements you see on the site, while the balance of 20% comes from premium subscriptions, the service for which most members have not signed up.
The premium subscription costs $300 per annum, which translates into only 1.3 million subscribers, i.e. less than 1% of the signed-up members. No wonder they keep sending those promotions, encouraging us to try out the service with no obligation! It also means the company has significant opportunities for growth.Forbes has identified a few areas where LinkedIn is likely to make news in the years ahead: (1) acquisitions (it’s already spent more than $300 million in 2014 on companies such as Bright, Newsle and Bizo); (2) the power of big data (think about their uncanny ability to suggest contacts with people you might know); and (3) the demise of traditional headhunting companies.
Their latest initiative sees them teaming up with Liam Neeson, where the actor will identify one lucky member: “I will find your LinkedIn profile, I will review it, and I will record a video of myself endorsing your particular set of skills.” Now that’s some endorsement!