LinkedIn's external and internal challenges in professional networking

¶ … Organization

LinkedIn Corporation is the "biggest professional-networking website" (Kucera & Frier, 2012). Launched on May 5, 2003 (Linkedin Corporation, 2012), and going public on the New York Stock Exchange in May, 2011 (Kucera & Frier, 2012), LinkedIn's stock more than doubled in value since going public, with stock valuation at $117.30 at close of trading on May 4, 2012 (Kucera & Frier, 2012), and LinkedIn increased its membership from 150 million to 161 million during the 4th quarter of 2011 (Kucera & Frier, 2012). Clearly, LinkedIn is a success story on several levels. Nevertheless, LinkedIn must deal with external and internal challenges, as do all corporations. A significant external factor/challenge to LinkedIn is posed by huge social networking sites, while a notable internal factor/challenge is presented by the lack of income from most of LinkedIn's users. These factors, along with other external and internal challenges, mean that LinkedIn cannot be content with its current position; rather, it must continue to meet those challenges in order to remain competitive.

Analysis

External Factor

An external factor affecting LinkedIn is competition from other networking sites such as Facebook and MySpace. Though there are many networking sites, including but not limited to Cyworld, Bebo, Mixaloo, College Tonight, Friendster and AOL (CrunchBase, 2012), Facebook is the greatest external challenge for LinkedIn. Though LinkedIn is a professional networking site while Facebook is a social networking site, Facebook's size and functionality make it a genuine threat to LinkedIn. LinkedIn boasts membership of 161 million professionals worldwide as of March 31, 2012 (Linkedin Corporation, 2012). Facebook as "526 million daily active users on average in March 2012" and "901 million monthly active users at the end of March 2012" (Facebook, 2012). According to a report released by Carnegie Mellon University in 2011, Facebook is a major threat to LinkedIn: not only does Facebook have a huge user base, it also offers "corporate pages" providing online networks for corporations, employees and customers (Kodicherla, Karunanidhi, & Hinge, 2011, p. 5). In addition, Facebook states that it intends to provider greater functionality in the area of Professional Networking (Kodicherla, Karunanidhi, & Hinge, 2011, p. 5). Facebook also released its new Profile display in December 2010, which allows members to display information about Work, Study and the number of Languages known on the profile page (Kodicherla, Karunanidhi, & Hinge, 2011, p. 5). Finally, if and when Facebook officially enters the Professional Networking market, its members will have both social and professional networking on one site (Kodicherla, Karunanidhi, & Hinge, 2011, p. 6). Consequently, the report's authors insist that it is only a matter of time before Facebook (and MySpace, for that matter) officially enter the professional networking market (Kodicherla, Karunanidhi, & Hinge, 2011, p. 6).

A weaker but still considerable external threat to LinkedIn comes from MySpace. Conceived as a project of eUniverse, an internet marketing company, MySpace was launched in January 2004 (CrunchBase, 2012). By July 2005, when News Corporation purchased eUniverse and renamed it Intermix Media, $327 million of the $580 million purchase price was attributed to MySpace's valuation, as MySpace had 20 million members by that time (CrunchBase, 2012). MySpace continued to grow rather steadily until 2008, when "user growth…stagnated" and the number of page views "and other metrics" began to fall (CrunchBase, 2012). In June 2011, Specific Media purchased MySpace for $35 million and, though MySpace's vital statistics have fallen, it is still one of the largest social networks in the world "with about 125 million users" (CrunchBase, 2012). Though MySpace's numbers are not as impressive as Facebook's numbers, MySpace still poses a considerable external threat to LinkedIn by its large membership base, acquisitions and predicted foray into professional networking (Kodicherla, Karunanidhi, & Hinge, 2011, p. 6).

Though LinkedIn has retained its primary focus as a professional networking service, the Facebook threat has forced LinkedIn to follow some steps taken by Facebook, such as establishing "corporate pages" much like those offered by Facebook, and offering "Public LinkedIn Groups" that "make it easier to share content from the outside world into the professional networking platform via the new official LinkedIn Share Button, which can now be easily embedded into websites similar to Twitter's ReTweet and the Facebook Share button" (Kodicherla, Karunanidhi, & Hinge, 2011, p. 5). In this way, LinkedIn attempts to remain competitive with social networking giants such as Facebook and MySpace.

Conclusion

Touted as the largest professional networking site in the World, LinkedIn Corporation has expanded in its 9-year history, going public along the way, doubling the value of its stock to $117.30 on May 4, 2012, and currently boasting approximately 161 million members. Given those numbers, LinkedIn can currently be called a "success story." Nevertheless, LinkedIn faces significant external and internal challenges.

Perhaps its most significant external challenge comes from other networking sites that do not label themselves "professional networking" but retain large memberships and capabilities that pose fierce competition for LinkedIn. The most notable external challenge apparently comes from Facebook. Facebook is officially a social networking site rather than a professional networking site; however its membership reportedly stands at more than 901 million monthly active users, more than 5 times as large as LinkedIn's current membership. In addition, Facebook has the functionality, funds and aggressive marketing tactics that have already lead it into offering "corporate pages" allowing online networking of corporations, employees and customers. Finally, Facebook has already stated its intention of moving into professional networking in the future. Another externally challenging social networking site is MySpace which, despite its somewhat stagnated figures since 2008, is still large enough at 125 million members, functional enough and forward-thinking enough to be projected as a genuine threat to LinkedIn's supposed supremacy as a professional networking site. Finally, Facebook and MySpace are merely two of the multiple networking sites that currently threaten LinkedIn competitively.

In addition to external factors, LinkedIn is faced with internal challenges. One of its most significant internal challenges is the lack of revenue from most of its users. Offering both free use and premium memberships, LinkedIn is saddled with a majority of users who at least theoretically contribute nothing to the company's revenues. Laboring with a largely free number of users, LinkedIn must nevertheless struggle to maintain its competitiveness with other networking sites and continually expend time, money and effort on its infrastructure in order to accommodate its large number of users. That factor requires LinkedIn's reliance on aggressive marketing to increase premium membership, which is difficult due to the site's reported "boring" reputation. In addition, LinkedIn is forced to aggressively pursue advertisers in order to glean some profit from its largely nonpaying "customers."