LinkedIn, widely known as the #1 professional networking website globally, has a large and rapidly growing base in India and is now establishing a local presence in the country as well. Alexa (a source I would at best consider indicative), ranks it in the top 15 websites in the country in terms of traffic and ~15% of the traffic on the website seems to be from India. What I really like about the company is a very enviable Revenue per employee ratio, something that definitely speaks of scale in the internet industry.
Very logically, it is also pulling down the cost of its subscription packages, which so far, clearly mirrored a US-centered pricing strategy. This should definitely make it a lot more popular among the monetizable segments of its customers viz the recruiters. It will be interesting though to see how LinkedIn makes its way into the country.
Why Orkut or Facebook are not the biggest threat!
This Mint article, in my humble opinion, rather naively suggests Orkut and Facebook (with a professional networking app, of course) as principal competitors to LinkedIn. I disagree on the points made there on more than just a few counts.
1. One third-party app out of a million, focusing on professional networking, will not transform either of these products overnight into a professional social network
2. I have my doubts on the success of a professional networking app on Facebook/Orkut. Utility apps exist on both these networks even now but the majority of the users continue to be obsessed with social gaming (think Zynga) and quizzes
3. Facebook has a better shot at monetization with a Cyworld-like virtual currency model and is already headed in that direction. I don’t see professional networking as being the #1 money spinner for them anytime in the near future.
4. The absolute lack of clutter is something that appeals to me as a serious professional networker, an aspect notably missing in Orkut or Facebook. While that may work for a general purpose social network, I want to keep my navigational challenges at a minimum while networking professionally.
5. Finally, there is that minor point about brand perception. No number of professional networking apps on Facebook is going to make me start perceiving Facebook as the place to network professionally.
The real competition
I don’t see Indian professional social networks (TooStep, PeerPower) as any competition for LinkedIn. I don’t even see them as candidates for alliances. I still can’t understand the need for launching so many carbon-copy social networks when the first mover advantage has clearly been taken by a player.
LinkedIn is a social network all right but rather curiously, it doesn’t monetize the way most other social networks do. Ultimately, competition really kicks through when it comes to the monetization model and the segment whose monetization model is most similar to LinkedIn is the online jobs segment.
I see Naukri and Monster as the real competition for LinkedIn. LinkedIn monetizes through recruiters in much the same way that these job portals do. Yes, the business models are very different; we have active job seekers on one site and at best, passive job seekers and non-seekers on the other; but at the end of the day, both will be competing for the same wallets with the same segment of end users (recruiters and HR professionals). Principally, LinkedIn is a social network with greater engagement than any jobs site and solving for a lot more use cases but purely on its current monetization model of charging recruiters for access to candidates, it is directly competing with Naukri. LinkedIn might do it with a P2P model but any online jobsite with a P2A (Peer to Application) on one side and an A2P on the other side is essentially solving for the same use case.
How could the market change?
This could signify a change in the online jobs market with referral based jobs increasing in number and background checks being engineered on LinkedIn itself. However, the basic market dynamic of the middleman will probably not change. The online jobs market (indeed, the entire online classifieds space as a whole) in India is interestingly different from its counterpart in many western countries in the fact that the middlemen (recruitment agency in case of jobs, real estate brokers in case of real estate and, ahem, family / well-meaning relatives in case of matrimonials ) continue to exist even on a platform that is supposed to aggregate the end users. The entry of LinkedIn doesn’t seem to visibly challenge that scenario and all the so-called value creation associated with disintermediation is unlikely to kick in.
The Asian prospect
It will be interesting to see LinkedIn’s progress in other emerging markets, especially South-East Asia, where the rules of social networking and social gaming are being redefined. There are 2 factors in particular that could really work for the company:
1. The mobile angle: Friendster, having failed in most geographies, was the #1 social network in many Asian countries, until Facebook launched its mobile version and took over many of these markets overnight. Indonesia, in particular, is a case study worth exploring. LinkedIn will have to have a relevant mobile strategy (and I don’t just mean a WAP site or an Iphone app) to cater to this market.
2. The online jobs scenario: A sizable number of S.E. Asian professionals, especially those in the information and/or services economy look for jobs across S.E. Asia. Their needs are underserved with there being not even a single online jobs marketplace that consolidates all S.E. Asian markets. JobsDB probably comes closest but is largely used in the principal markets of Philipines and Singapore. LinkedIn could be that one unifying professional networking and job-sourcing website that S.E. Asia currently lacks.
It’s tricky for an American internet company to succeed in these markets. Outside search, portals and general purpose social networking, the only internet company that has succeeded notably in terms of traffic in these geographies is Ebay. However, Ebay grew entirely through acquisitions.
It remains to be seen which of the internet majors entering these geographies can really succeed not just in generating traffic, but more importantly in monetizing them in a manner that justifies all the hoopla around the emerging markets.
What do you guys think?
(The author, when not going trippy with other guitarists or reading random literature, is a leader in the New Ventures group at Intuit and is rather intolerant of poorly-cooked chicken, well-cooked spinach, too little focus on business model and too much focus on powerpoint. THe views expressed in this post are the author’s personal views.)
Author: Sangeet Paul Choudary