Is a Public Linkedin Positioned Against Recruiting Firms?
The Linkedin IPO is the first major public offering of a pure-play social networking company. Some anticipate incredible growth in the sector, while others anticipate another bubble. Warren Buffett, as reported by Bloomberg, urges caution in the sector. “Most of them will be overpriced,” said the world’s most famous investor. ”It’s extremely difficult to value social-networking-site companies… Some will be huge winners, which will make up for the rest.”
Much of the revenues of Linkedin are produced by talent matching and recruitment related services. In their filing with the SEC, Linkedin details their recruitment related products and the scope of their market penetration. They cite almost 5,000 corporate solutions clients and an accelerating growth curve. In the first quarter, their corporate solutions customers increased by over 23%, which implies a greater than 100% yearly growth rate for 2011.
Linkedin is clearly gaining steam and the new public offering will provide the profitable company with the capital to expand further. However, the company is not without risks. In a reference most likely to Facebook, their filing details a competitive threat: “Companies that currently focus on social networking could also expand their focus to professionals.” The technology threats are clearly multi-fold and diverse. But are recruitment firms on Linkedin’s hit-list?
The filing makes this alignment against traditional recruiting firms quite clear. When listing their competitors (under heading “Enterprises and Professional Organizations—Recruiting”), the filing explicitly states, “With respect to our hiring solutions, we compete with established online recruiting companies such as Monster+HotJobs and CareerBuilder, talent management companies, such as Taleo, and traditional recruiting firms. In this area, we compete primarily on the basis of the efficiency and usefulness of our solutions for enterprises and professional organizations, which are influenced by the number and engagement of our members.”
Additionally, when discussing the potential opportunity for the company, Linkedin states, “We believe our solutions are both more cost-effective and more efficient than traditional recruiting approaches, such as hiring third-party search firms, to identify and screen candidates.”
Linkedin’s formal positioning is quite clear; however, the reality of the market might dictate a very different reality. Independent recruiting firms and executive search professionals are very active users of the service and no doubt make up a good portion of Linkedin’s subscription and job posting revenues. While in the SEC filing, Linkedin appears to position itself almost directly against recruiting firms, it will no doubt be extremely disinclined to alienate the large and profitable customer group.
From the filing, it would appear that online job-boards and career resources have reason for concern. Linkedin’s rapidly growing user base and sharp professional focus, when combined with a massive influx of capital for expansion, could easily overtake many traditional web recruitment offerings. Recruiting firms, however, long proponents and advocates of Linkedin, might begin to approach the service with more caution if they view the company as a competitor.
For now, however, recruiting firms are probably the most visible and active users of the social networking site. The practical reality of recruiting will continue to reward Linkedin use and expertise, so that most recruiting firms will continue to be the primary beneficiaries of the very popular service.