08 February 2011

LinkedIn trumpets aggressive grab for recruitment agency market

The most significant event for the recruitment industry for 2011 so far has undoubtedly been the announcement by LinkedIn that they intend to ‘go public' at some stage this year. They did not set a date for the listing or a target price for their shares but they did reveal a lot of very interesting information when they registered their S-1 Statement with the United States' Securities and Exchange Commission (SEC) in late January.
Here's a snapshot of selected data as listed in LinkedIn's S-1 Statement.

Registered users as at 31 Dec 2009
55.1 million, total
Registered users as at 31 Dec 2010
40 million (USA), 50 million other


Revenue for 12 months of 2009
USD$80.8 million
Revenue for first 9 months of 2010 
USD$161.4 million
2010 Revenue breakdown

Job listings
41% (3,900 companies)
Advertising
32% (33,000 customers)
Premium subscriptions
27%


Fastest growing revenue line
Job Listings
revenue 12 mths 2009
$23.8 million
revenue 9 mths 2010
$65.9 million


Post-tax profit for 12 mths 2009
USD$3.4 million LOSS
Post-tax profit for first 9 mths 2010
USD $10.1 million


Cash on hand as at 30 Sep 2010
USD$89.6 million

To save you going through the prospectus, I have provided an edited version of what I believe to be the most interesting parts of the S-1 Statement. I have bolded in red the areas of particular interest to agency recruiters.

Our Mission

Our mission is to connect the world's professionals to make them more productive and successful. We will continue to concentrate on opportunities we believe are in the best interests of our members. Our long-term approach enables us to invest, innovate and pioneer in unexplored segments of our industry to increase the value proposition of our proprietary platform and extensive data.

Our solutions are designed to enable professionals to achieve higher levels of performance and professional success and enable enterprises and professional organizations to find and connect with the world's best talent.

Our Opportunity

We believe we are transforming the way people work by connecting talent with opportunity at massive scale. Our goal is to provide a global platform capable of mapping every professional's experience, skills and other relevant professional data to his or her professional graph, including connections with colleagues and business contacts.
 
We provide the following key benefits to our members:
1.    Ability to Manage Their Professional IdentityThrough online professional profiles of record that members create, manage and control, we are reshaping how members present their professional identity.
 
2.    Enhanced Ability to Build and Engage with Their Professional Network
We enable members to build their professional networks by linking their professional profiles with those of others to whom they are directly and indirectly connected, creating an ever-expanding professional graph.
 
3.    Access to Knowledge, Insights and OpportunitiesThe information and opportunities presented to each member are personalised based on his or her profile and professional graph, thereby providing our members with compelling and relevant information designed to make them more productive and successful.

In addition, enterprises and professional organizations also utilise our solutions to receive numerous benefits, such as attracting new talent and more fully understanding, retaining and engaging with their employees and other professionals.

We provide the following key benefits to enterprises and professional organisations:

1.    Matching Talent with OpportunityWith the world's largest online professional network, we provide enterprises and professional organizations the ability to connect with the global professional talent pool at scale.

Our extensive hiring solutions allow enterprises and professional organizations to leverage the insights from our platform to source and develop a pipeline of active and passive talent, including the ability to automate talent matching, post jobs, engage and educate candidates, streamline applications and validate information.

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.
 
2.    Efficient Marketing Channel
Through our marketing solutions, enterprises and professional organizations are able to create, promote and control their corporate identity and enhance their brand awareness.

Our proprietary platform is designed to leverage viral actions, social media, trusted recommendations and our rich user-generated data to efficiently connect members, enterprises and professional organizations to relevant products and services.
 
3.    Targeted AdvertisingOur member base constitutes one of the most influential, affluent and highly educated audiences on the web. According to The Nielsen Company @Plan data released in December 2010, U.S. visitors to our website represent more decision makers, have higher average household incomes and are comprised of more college or post graduates than U.S. visitors of many leading business websites.

Our marketing solutions provide advertisers with the ability to target audiences based on our members' profile information, including title, function, company name, company size, industry and geography.

In addition, our detailed advertising campaign reports provide advertisers with insights to further maximize the return on their advertising budget.
 
4.    Increase Employee Productivity We serve as the central hub of a professional's online network and a platform for enterprises and professional organizations to share knowledge and professional insights with their employees and thereby increase their productivity.

Our Competitive Strengths
We believe the following strengths provide us competitive advantages in realising the potential of our opportunity:
  • Exclusive Focus on Professionals
  • Large and Growing Global Member Base
  • Business Model with Powerful Network Effects
  • Robust and Trusted Source of Relevant Professional Data
  • Large Customer Base
  • Proprietary Technology Platform

Our Strategy
Our mission is to connect the world's professionals to make them more productive and successful. The key elements of our strategy are:
  • Foster Viral Member Growth
  • Serve as the Professional Profile of Record
  • Be the Essential Source of Professional Insights
  • Work Wherever Our Members Work
  • Increase Monetisation While Creating Value for Our Members
  • Expand Our International Presence

So there you have it; LinkedIn's ideal future laid bare.

In one sentence, I would summarise it as: Overtake agency recruiters as the preferred way for professionals to network with their peers, expand their professional knowledge and be presented with a greater number of well-matched job opportunities.

Are you scared or excited? Is this a threat or opportunity for you?

9 comments:

  1. Definitely an opportunity Ross. They (LinkedIn) provide the tools and we become the experts in interpreting the information and applying strategies within the LinkedIn environment. In short, some organisations will adopt the LinkedIn strategy independently of recruiters but many organisation will appreciate our insight and ability to use this tool on their behalf.

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  2. Job boards were supposed to wipe out the recruitment industry as well. It didn't happen.

    LinkedIn is a good tool but that's all it is. Recruitment still needs the human element and the last time I checked, LinkedIn can't sell a role to a candidate.

    And then you have to take into account the amount of false profiles on LinkedIn too...

    If anything, LinkedIn will wipe out the job boards. I know I haven't advertised on job boards for years.

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  3. Ross,
    Thank you for this analysis. I work with mid-career professionals and coach in both traditional and non-traditional web search. I have been wondering what LinkedIn was up to _ (and still concerned what they might make a paid service in future).

    You quote LinkedIn as saying their service will be "...more efficient than traditional recruiting approaches, such as hiring third-party search firms, to identify and screen candidates."

    Identify yes. Preliminary screen maybe. But LinkedIn cannot determine fit, and I have some doubts about its ability to select "stand out" candidates. So Retained search firms will be fine. I believe LinkedIn also helps small companies who cannot afford a third-party recruiter. And it definitely helps proactive job seekers, that is, those who do not wait for an opportunity to be advertised, but identify an opportunity and go after their target client. (I think I see a parallel with the recording industry, the removal of the middle man.)

    In the US, I think there will be a love affair with the most automated aspects of LinkedIn, the harvesting of data, the matching of tasks.
    Whether employers will stick with this method in the long run depends on how tired they get of interviewing people who "match", but are not especially creative or innovative, and may not fit at all. In the interim, I think recruiters who cannot communicate their value add will suffer.

    Companies are actually really bad at defining position requirements. That is something a real recruiter cannot help with. This makes it hard for LinkedIn to narrow down the selection either sufficiently or correctly. This will wear out the people who are interviewing and a they will come back to the third-party or in-house recruiters - who will have to marry as much Internet/LinkedIn skills as they can muster, with their traditional instincts and people skills to meet the need.
    Jennifer

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  4. What's the point of having a discussion blog if if it takes forever to post the discussions?

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  5. Thanks for gleaning all of the pertinent information for us recruiters Ross, but I personally feel it is wide of mark to consider Linked In a major threat.

    Their growth and development of service offerings will provide useful tools to small firms unable to afford agency fees. It will also be a threat to lazy, transactional recruiters who rely upon flicking CVs around and hoping that some stick.

    However, good quality recruiters working with mid to large sized clients will learn to use Linked In to their advantage better than anyone else, and it will become a complement to our service. I don't see it as a threat.

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  6. Thanks for the interpretation of LinkedIn's plans, Ross.

    The speed with which we as senior recruiters consolidate a basic list of names has increased since the advent of the internet. It has been boosted yet again with the popularity of LinkedIn. But the challenges for us and our clients remains the same. LinkedIn is a wonderful tool for the networked senior HR executive and the senior recruiter alike, but as a crusty old headhunter colleague of mine said 15 years ago: 'The name itself is only 5% of the work it generates, son'. Yes, he called me 'son'.

    LinkedIn is a sophisticated tool, and a transparent means of quickly assessing a candidate's basic credentials in a discreet manner. It does in two hours what a researcher took a week to achieve in 1995. But it hasn't made the final hiring decision any easier for our clients - if anything it has sometimes made it harder by improving on the overall quality and fit of the shortlist!

    A big subject.

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  7. Thanks everyone for your comments and I agree with many of them. I certainly think that Linkedin offers many more advantages than disadvanatges for recruiters and that job boards are much more likely to be negatively impacted by Linkedin's aggressive growth rather than recruiters.

    It's one thing to find and connect with a suitable candidate. It's another thing entirely to actually RECRUIT them into a suitable job. Linkedin will never be able to replace this skill.

    High value-add recruiters who genuinely *consult* will rejoice in Linkedin's growth while low value-add resume-referring recruiters will dread its progress and success.

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  8. Ross you put it expertly. “High value-add recruiters who genuinely *consult* will rejoice in LinkedIn’s growth while low value-add resume-referring recruiters will dread its progress and success”.

    LinkedIn is certainly an opportunity for recruiters, but longer term - only for those recruiters truly building ‘social’ networks and a means to engage with their talent communities. By that I mean keeping close to your passive candidates (and Clients) and engaging in the conversation - not just using it as a static database to search! The active candidates (looking and available now) are mostly found on the jobboards but response from that web1.0 stream is rapidly diminishing. Nor should the LinkedIn networks be used by recruiters to ‘interrupt’ the active conversations - broadcasting and shouting jobs and spam type invites to connect. Ultimately potential candidates are building online presence and profiles and will longer term inbound attract and connect to a couple of their favourite/ best recruiters (which very much are still seen as outsiders at least so long those recruiters are doing push pull and not ‘social’ recruitment!).

    OK there are lots in internal HR getting busy on LI too and we will no doubt see some recruiters going in-house. But they too must also respect and nurture networks by engagement and conversation. Someone is going to have to match wants and needs and at the moment, still pick up the phone and talk. That is not automated and neither was it in the 90’s - the beginning of the ‘era of the en mass CV’ aka the ‘era of the poor candidate experience’. So the future is going to get back to as before as social recruiting will be the enabler for the conversation to get back into recruitment, engagement and relationship building with the passives (whom will one day be applicants and indeed clients if not already). LinkedIn is an opportunity (socialrecruiting and its tools alike) but that’s not the half of what good recruiters do nor half of what their systems and processes can achieve. A recruiter cannot however come into the future without understanding the opportunity ahead as the sea change is not only a technology shift such as LinkedIn but also a generation shift at the same time. The future then is not finding people but engaging with whole communities. Recruiters will be around for a long time I suspect!. Carpe diem.

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  9. HI Ross,
    I hope you don't mind we wading into this discussion.

    Between recruiting roles I have been in a few different industries and seen both the embracing and rejection of technologies have come to the opinion that consultative recruiting will never be replaced.
    Saying that technology "linkedin" that promises to add effective tools that complement what we already do will happen and the Consultative Recruiters that embrace, adopt and implement effective technology will leave the non-adopters behind if not knock them out of the market.

    My view on linkedin right now - its an advertising channel that is worthy of exploration and may be part of the service offering for roles and clients that match their demographic ...I can't see many labourers being "linkedin success stories" but technology rich employers who employ technology adept personnel - sure.

    It also has good potential for validating candidates and clients - perhaps lead generation but in my view is an advertising channel...which I haven't used yet...but getting more relevant!

    When we wear our marketing hats for our clients then we owe it to our clients to use the marketing tools that their BEST applicants will use...and avoid those that they won't. I think the greatest recruiters will continue to be able to make sound recommendations on why/not to use the various communication channels - for each client and role.

    Right now our local paper is being proactive and talking nicely to us ...I think most of your readers will acknowledge their tools have been superceded by the online tools.

    My priorities for sourcing candidates:
    -referral/networking
    -our site
    -other job boards
    -linkedin
    -the newspaper

    This is based on our cost vs benefit approach to advertising here in New Zealand ...I'm keen to hear if others see it differently in their markets.

    Watch out for out for the Australian Rugby Coaches role on Linkedin ...it will appear shortly after the MIGHTY ALL BLACKS CRUSH THE WALLABIES 31 - 10 in the 2011 Rugby World Cup!

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