LinkedIn: Changing the Professional Recruitment Landscape
LinkedIn goes beyond professional recruiters to make the hiring process smarter and better than it ever was before.
The Digital Age has revolutionized the traditional way of reaching qualified job candidates. Within the sea of recruiting tools on the internet (Monster, CareerBuilder etc.), LinkedIn has emerged as a winner in the industry because of its unique ability to create and capture value.
Value Creation
As a dual-sided network, LinkedIn relies on carefully crafted value creation on both sides of the funnel.
For professionals, LinkedIn provides a reliable repository for your profile with the added benefit of being low risk – you can have your resume online without the risk of your employer finding out you are job searching. The low friction platform allows users to track their profile quality, seeing how many viewers search your profile and ways to improve. Unique from other services, LinkedIn also helps professionals reach a credible network of colleagues to identify potential job opportunities and make introductions. The quality networking with friends and colleagues has made LinkedIn the top professional networking community. This large number of quality professionals in turn attracts headhunters and enterprise recruiters, bolstering the other side of the network.
Professional recruiters and enterprises are able to access a large number of geographically dispersed candidates at all levels of their career. This provides so much value over the traditional headhunter approach which relied on a close network of individual contacts, generally within narrow industries, experience levels, or locations. In addition, LinkedIn helps companies identify candidates that aren’t even job searching and wouldn’t normally apply to roles at a company. This opens up a large range of potential candidates at a very low cost. Companies are able to reduce recruiting expenses that were previously dedicated to headhunters and professional search firms. This is all made possible because of a sophisticated search tools available on the company’s platform.
Value Capture
LinkedIn captures value through multiple revenue streams by exploiting their strong community. While the access for professionals is free, users can upgrade to premium subscriptions starting at $30. This provides a solid recurring revenue base of ~18% of revenue in the last quarter. Further, providing advertising access to these users can be valuable – with 20% of revenues attributed to advertisers and marketers trying to spread brand content.
However, the clear majority of LinkedIn revenues is derived from “Talent Solutions” – the bevy of tools provided to enterprise users/recruiters to access professionals. These tools help them market positions, identify candidates, and manage the hiring process. As an example, LinkedIn uses Big Data analytics to suggest potential candidates based on previous work experience or profile similarity to other employees. They can also add value to enterprise clients by identifying other insights regarding employment trends.
Not only do these tools help save companies millions on recruiting expenses, they can actually make the hiring process smarter and better than it ever was before. It drives efficiency and allows for more creative hiring practices in an increasingly competitive job market. Because of these sophisticated tools and LinkedIn’s large network, they were able to capture over $2.2B in annual revenue last year.
I think the fact that you pointed out LinkedIn’s ability to expedite the hiring process at a much lower cost to the company is fantastic. It also begs the question though, why LinkedIn isn’t utilizing its pull as a hub for qualifications to start verifying credentials. Currently, National Student Clearing House is the aggregator for verification of educational information, and uses an antiquated process of verifying records that take up to a week. In the same way that other social media sites (like Twitter, Facebook and Pinterest) are verifying their users, I feel like LinkedIn could start doing that for important moments of qualifications.
LinkedIn absolutely revolutionized the way hiring, networking, and profile sharing happen in professional settings. The major thing I worry about with LinkedIn, however, is the complete dearth of blue collar professionals on the site. The product offering LinkedIn has cultivated simply is not set up in a way to showcase blue collar work in the same way — often more skills based than simply company name based — and the marketing and targeting work done does not at all seem to address company hiring needs of being able to easily parse through data on this gigantic work force easily. It seems to me that companies like LearnUp are doing a stellar job in this area and will soon overtake as the winner. LearnUp not only creates skills-based profiles, but links directly into employers for job descriptions and pre-interview trainings to help identify truly interested candidates, and prepare the candidates to successfully go through the interview process. LearnUp then continues to offer trainings and modules to keep these candidates engaged and learning new skills, which then are also quantitatively recorded and tracked via their profiles. The company has been able to successfully prove their value proposition in slashing hiring costs, improving new hire effectiveness, and enabling long-term growth for that hire within the company. LinkedIn seems to fall short on many of these characteristics for this gigantic workforce.
Very interesting point by the previous person. True that every so often you hear about some senior person who has falsified qualifications. It would be worth LinkedIn’s time to pay for access to certain data sets to verify qualifications.
I picked up on your point about being able to post your resume and “look for a job” without declaring that to your current employer. I wonder what impact this has on the labor fluidity in the market. I know I’ve had cases where recruiters reach out while I’m perfectly happy at a firm. I respectfully turn them away but I wonder if you have more people hopping around because they have access to more opportunities. What impact does this have on company productivity since the companies have to retrain people. This situation could be compared to the national divorce rate going up with the growing popularity of online dating. I don’t mean this as a big knock against LinkedIn. More of an observation.