LinkedIn: The Site That Likes a Bad Economy


Here's a company I wish were public so everyone could share in its success: LinkedIn, the social network for business people.

While MySpace got to critical mass first and Facebook became the poster child for the social-network generation, LinkedIn has always been the tortoise in this race. I think of it as the anti–social network. Although every savvy white-collar worker in the U.S. has a LinkedIn account — basically just a page that lists résumé and contact info — most users don't really know what it's good for or what one can "do" there.

Well, it turns out that job hunting — by job seekers and recruiters — is one of LinkedIn's main revenue streams, accounting for about 30% of its take. That's a good business these days as the economy sinks deeper into the tank and more people turn to their social networks to find jobs. In fact, job searches on LinkedIn increased 19% from August to September alone, a company spokesman told me. With unemployment expected to reach double digits next year, you can expect those numbers to continue their sorry increase.

In the meantime, LinkedIn is stepping up its game, trying to cement its role as an indispensable social network for people who still have jobs and provide an answer to the question, What can I do there? Today the company announced it was opening its network for the first time to partners, such as Google and Amazon, and offering business-focused applications created by outsiders to members. Eight applications, ranging from an Amazon book-review tool to a store-and-share space for a gigabit of files, went live Tuesday night. Expect more to come.

But this isn't your kids' social network. While Facebook became the darling of Silicon Valley in June 2007 when it created a completely open platform for developers — who quickly launched hundreds of thousands of applications — LinkedIn's plan is to carefully and slowly vet everything that goes onto its platform. "We don't want zombies and werewolves and all that," said Reid Hoffman, the brilliant entrepreneur who founded LinkedIn in May 2003, during a particularly bleak part of the dotcom meltdown. He told me that if his social network offered 60 applications a year from now, "we'd be very happy. The focus is on quality, not quantity."

That's the kind of counter-conventional wisdom and smart strategy that Hoffman is known for. He was one of those guys who obsessively played military board games as a youth. (He once told me he never lost.) Over a year ago, Hoffman starting looking for funding to ensure that LinkedIn would be able to thrive during what he then described as the coming nuclear winter. (He figured a reserve of cash would help LinkedIn buy up companies during the downturn.) All in all, the company has raised $100 million, boasts a $1 billion valuation, and last week signed up its 30 millionth member. (A spokesman told me the sign-up rate has escalated of late and now includes one new member per second.)

Jamie Templeton, LinkedIn's vice president of platform development, said the key to opening the network to outside developers is making sure every application provides value to a business user. LinkedIn's members, he said, "are professionally oriented. They want to come in and get the job done. They don't have tolerance for a signal-to-noise ratio that other populations do."

Compare, for instance, how apps spread on Facebook: When a user installs an application, that action is communicated to his friends via a news feed. That won't happen on LinkedIn. And likewise, if you recommend a book to one of your LinkedIn contacts via the "Reading List by Amazon" application, the contact doesn't need to install the Amazon app to get the recommendation.

Putting the users ahead of the developers is a smart play. It'll be riveting to see whether this approach ultimately trumps Facebook's open platform.

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