LinkedIn CEO: The economic map of social networks

Among business social networking sites, LinkedIn is far from being comparable to Facebook in terms of fame and scale, but in terms of operations, LinkedIn is far superior to the latter. After Facebook's IPO, its operations have never met expectations and have been controversial. In contrast, after its IPO, LinkedIn's stock price has been soaring. As of now, it has exceeded its IPO issue price by more than two times, becoming the darling of Wall Street. The difference in performance between the two is closely related to their respective business models, and the reason behind LinkedIn's brilliant performance is that LinkedIn's CEO Jeff Weiner, a business leader who is good at making money, has creatively developed a new business model for social networks...

The darling of Wall Street appointed in times of crisis

Jeff Weiner has been obsessed with e-commerce for a long time, and this obsession has deeply influenced his career planning. In 1992, when he was a senior student at the University of Pennsylvania, he tried to build a teleconferencing company. Two years later, the 24-year-old Jeff Weiner entered the strategic planning department of Warner Bros., where he submitted a detailed report suggesting that Warner adopt a bold digital strategy, which attracted widespread attention. Jeff Weiner said in an interview with Forbes last year: "I was just a fledgling little guy at the time, but they liked the report."

Jeff Weiner was later promoted to vice president of Warner Bros., responsible for the company's online business. Together with two other executives, Jim Banister and Jim Moloshok, he launched a new website, Entertainmentdom. Under Jeff Weiner's leadership, Warner Bros. began to get involved in original Internet content early on.

Jeff Weiner's career was smooth sailing at first. In 1999, Time Warner (Warner Bros.' parent company) planned to spin off Entertainmentdom and list it separately. Employees received stock options, and Jeff Weiner was appointed COO. But his wish was dashed: AOL announced the acquisition of Time Warner, putting an end to the spin-off of Entertainmentdom. Jeff Weiner also chose to leave Warner Bros.

Former Warner Bros. CEO Terry Semel invited Jeff Weiner to work at his investment company Windsor Media to help find development opportunities in the digital field. In 2001, Yahoo appointed Terry Semel as CEO, and Jeff Weiner followed Terry Semel to join the then-robust Internet giant. He was responsible for search and content business at Yahoo, and during his tenure, he acquired several hot startups at the time, such as Flickr. People regarded Jeff Weiner as a popular candidate for Yahoo's next CEO. But he announced his resignation in 2008.

Jeff Weiner remains popular on Wall Street. In an extremely rare arrangement, Accel and Greylock, two of the largest venture capital firms on Wall Street at the time, hired Jeff Weiner as executive-in-residence. Greylock-invested LinkedIn was in trouble at the time, and Jeff Weiner was appointed in 2009 to serve as the company's interim president.

In June 2009, Jeff Weiner was promoted to CEO of LinkedIn. Under Jeff Weiner's leadership, LinkedIn began to focus on selling high-end recruitment tools as well as advertising and subscription services. By 2011, LinkedIn was ready to go public, and Jeff Weiner finally realized his dream of leading a company to start the IPO process 10 years later.

Focus on the core

When Jeff Weiner joined LinkedIn in 2009, the company was a fast-growing startup whose aimless engineering projects took the site in a variety of directions.

Jeff Weiner immediately realized the problem - he had witnessed the consequences of too broad a business early in his career. Jeff Weiner worked at Yahoo and felt the crisis when he saw that some resources that could have been used to focus on developing Internet technology were scattered to too many business units, from email to news. Jeff Weiner believed that Yahoo lacked "a clear mission and core focus." Tired of the escalating internal struggles, he chose to leave Yahoo.

At LinkedIn, Jeff Weiner showed his meticulous side. When he first took office, he met with 338 employees. He learned from Yahoo's lesson of spreading itself too thin, and at LinkedIn he focused on a few points: debugging the website so that it would not break down frequently; understanding user needs through a large number of tests; rigorously analyzing data; and producing the right products and then selling them.

Therefore, after Jeff Weiner took office at LinkedIn, he decisively canceled several projects with bleak prospects, including a B2B expert dating service, and made "recruitment solutions" his top priority, providing services to the human resources departments or headhunting companies of enterprises. Before inviting Jeff Weiner to join, LinkedIn was led by co-founder Reid Hoffman. Hoffman said: "I can gather a large number of capable talents, but not necessarily an effective team. Jeff Weiner brought this philosophy: do less and do it better."

In Jeff Weiner's eyes, LinkedIn is not focused on the performance of a company's market value in a certain day, week or quarter, but on the long-term accumulation of the company. More importantly, it has the patience for slow growth, and one of its accumulations is the accumulation of high-end people.

Therefore, LinkedIn has been cultivating a top-level, high-end atmosphere, and the company tries to network as many well-known companies, well-known executives, and elites as possible. The goal is to move all business elites to LinkedIn, use top people to attract top people, and finally realize this desire of "networking everything".

Because Linkedin is a gathering place for "almost all" high-end elites, it has a huge platform value. It is also because of this brand value that Linkedin has earned a high-end reputation. Therefore, many people are very happy to print Linkedin, which is "used by everyone", on their business cards, hang it on their websites, and exchange it with each other in daily conversations. Therefore, LinkedIn exists to a large extent as a "business card" and "culture".

Impact on the job market

When Jeff Weiner came to LinkedIn, the company was losing $4.5 million a year, with its only sources of revenue being online advertising and a low-priced subscription service of $9.95 per month, mainly targeting journalists or fund managers.

Since then, Jeff Weiner has developed a core strategy - focusing on enterprises and providing services for enterprise recruiters, which has brought LinkedIn a profit. Each LinkedIn enterprise account is sold at $8,000 per year, and now thousands of companies use LinkedIn's flagship product Recruiter to recruit experienced employees. For the human resources department, having a Recruiter account is like a bond trader having a Bloomberg terminal. This account is expensive but essential, and more importantly, it shows that you are an insider.

In 2011, the number of LinkedIn sales staff doubled, and the company spent 33% of its revenue on sales and marketing, compared to 20% for Oracle and Microsoft, 15% for Facebook, and only 12% for Google, which preferred to recruit software engineers.

Jeff Weiner thinks this is normal. He said: "Every time the company expands the sales team for Recruiter or other products, it will achieve good results. Sales continue to increase, and the enthusiasm of existing customers for LinkedIn's services continues to rise. Once the sales are successful, LinkedIn does not need to spend too much to retain customers. According to people familiar with Recruiter sales, the annual renewal rate of large companies can reach 95%, and small companies can reach 80%. Jeff Weiner said: "I am very happy to invest in sales. I am more concerned about how to quickly hire good sales staff."

LinkedIn has had a significant impact on the $27 billion job market, as evidenced by the stock price swings of other headhunting firms. Heidrick & Struggles, a traditional headhunting firm, has seen its stock fall 67% over the past five years, while the S&P 500 has fallen 13% over the same period. Recruitment site Monster Worldwide has fared even worse, with a 81% plunge. (Its stock briefly rose in March on rumors that it would be acquired by LinkedIn.)

Recruiting executives such as CEOs is the high-end of the job market, and LinkedIn's automatic search service is replacing traditional interview recruitment; at the other end of the job market are low-tech jobs such as cashiers and truck drivers, and LinkedIn's job information board provides a faster search method. In between these two extremes are high-tech positions, which are the homepage of LinkedIn. The salaries of these positions range from $50,000 to $250,000, and some may be more.

"LinkedIn data is very important to me," said Vijung, director of recruiting at Adobe, in its downtown San Jose, California, office building. Adobe has 10,000 employees and normally has about 750 job openings worldwide. Agencies used to help Adobe recruit 20% of its software engineers. But Vijung was never satisfied with this approach. "We saved a lot of money through LinkedIn," Vijung said.

Creating an economic map for the future

On August 2, LinkedIn released its second quarter financial report for the fiscal year 2013 ending June 30. The financial report shows that LinkedIn's second quarter revenue was $363.7 million, compared with $228.2 million in the same period last year, a year-on-year increase of 59%; net profit was $3.734 million, compared with $2.811 million in the same period last year, a year-on-year increase of 32%.

Jeff Weiner said, "In the second quarter, accelerated membership growth and strong business performance drove LinkedIn's operating performance to record levels. We will continue to increase investment across the entire LinkedIn platform to fully realize our long-term potential goals."

The continuous performance improvement did not go to his head. Jeff Weiner clearly realized that LinkedIn still had hidden dangers and more opportunities. At the LinkedIn fourth quarter earnings conference call earlier this year, Jeff Weiner proposed five major measures to be taken in 2013, including expanding the global market; opening up new revenue channels through sales personnel, integrating exclusive special news and comments on the LinkedIn homepage, increasing service prices and continuing large-scale recruitment.

In the second half of 2012, LinkedIn began publishing commentary articles commissioned by the company from 200 executives, consultants, scholars and journalists. Jeff Weiner said he was very pleased to see the participation of users in this project called "Influencers", and the most popular commentary articles were read more than 1 million times. Richard Branson, chairman of the British Virgin Group, became the most popular special contributor in LinkedIn's project. Other famous contributors who have recently joined include Internet industry executives and sports tycoon Mark Cuban and General Electric CEO Jeff Immel. Jeff Weiner said that thousands of users have applied to become "Influencers".

For LinkedIn, the opportunities in overseas markets outweigh the challenges. Currently, 60% of LinkedIn's customers are outside the United States, but only 36% of its revenue comes from overseas. Narrowing the gap between these two figures will bring huge profits to LinkedIn, so last year LinkedIn opened sales offices in Germany, Japan, India, Spain and Hong Kong.

Jeff Weiner has a more ambitious plan. He hopes to use LinkedIn's data to draw an economic map, which can show the degree of matching between talent supply and demand worldwide. Jeff Weiner said: "This may take five to ten years. All of this must be supported by data to maximize the balance between talent supply and demand. By then, 3.3 billion working people in the world will have their own career information. If there is such a map, how much shock will it bring to the world." Compared with Zuckerberg's idea that everyone in the world can connect with each other through Facebook, Jeff Weiner's plan is undoubtedly more ambitious.