Reid Hoffman on the business of LinkedIn

LinkedIn Groups, CNBC, revenue and a future IPO

Entrepreneur interview by Bambi Francisco Roizen
May 18, 2009 | Comments (2)
Short URL: http://vator.tv/n/871

I had a chance to sit down with Reid Hoffman, CEO and LinkedIn at the TiE Conference this weekend, where Hoffman was a keynote interview. The professional network is one of the early pioneers of social networks, even though LinkedIn has always been a “business” or professional network, and not a place to throw sheep. It’s been around since launching in 2003, and after $100 million in venture funding raised, it’s reached 40 million registered users from around the world.  LinkedIn is profitable, and its last valuation was $1 billion. Hoffman's goal is to get every professional in the world to be on LinkedIn.

In this segment,  Hoffman talks about LinkedIn’s major initiatives, such as creating groups for companies, universities and conferences, and integrating them into the ecosystem, and expanding LinkedIn’s API. Hoffman talks about LinkedIn’s three revenue streams – subscription, recruiting, and advertising. The three revenue streams drive the same amount of revenue.  Hoffman also talks about LinkedIn’s relationship with CNBC and why LinkedIn is seeking partnerships to bring content to its users on LinkedIn.  LinkedIn plans on doing other partnerships like it. It already has other media partnerships with prominent players, such as the New York Times and Business Week.

As for what happens to LinkedIn in a couple years? “I care most about the growth of LinkedIn,” said Hoffman. “We have no immediate terms for an IPO, even though our economics look good… as we get more professionals in, we hope to accelerate to be relevant to every professional.”


Pierre Coupet, on May 20, 2009

I believe that partnering with a content provider that informs-educates users on how to leverage the power of the social network is a much overlooked aspect of a social network's monetization strategy.

The primary reasons for that are:

1. The social network provider does not believe that their users will ever purchase content regardless of the nature of the content.

Therefore, from a psychological standpoint, you cannot advance an agenda that you don't believe in and which you feel has no chance of success.

2. The internet graveyard is littered with information providers, including prestigious market research firms, who sought to distribute and sell "once valued" "brick and mortar content" on the web and failed miserably.

As a result, this false logic has developed in the minds of all current and aspiring information providers:

"Internet users will not buy content on the web."

This logic assumes that people are rejecting the distribution medium instead of the content. What it fails to take into consideration is that people are not rejecting the distribution medium, they are rejecting the "value" assigned to the content. Their reason is simple AND correct: This information is no longer as valued as it once used to be since most--if not all--of it can now be obtained via the internet free of charge.

Therefore, instead of lumping all content into one bag and assume that no one will ever pay for it, the challenge for a social network sitting on top of "hundreds of millions of eyeballs" is to [[ either ]] find and develop the sort of [not yet available] content that their user would be willing to pay for on an "a la carte" basis [[ or ]] partner with such information provider.

In the case of social networks, the most logical piece of "information"--not tools--that all social network members are crying out for is: How do I leverage the power of this social network to my individual or collective benefit?

For the most part, 98% of these social networkers do not have the answer and, [[for the two reasons previously stated]], no major social network is willing to step up to the plate to provide them with what they truly need. Instead they [social networkers] are being provided with more of the same: free tools, advertising, and a variety of fee-based subscription models. It's a real shame and a huge missed opportunity for all.

Lorenzo Carver
Lorenzo Carver, on May 20, 2009

I subscribe to the business version and have purchased a test run of ads there. The ads are a nice feature and make good sense (generated projected CTR using existing creative, which is a good test outcome).

I think it will be nice to see how use of the service evolves as more people signup, and also how Vator expands its use of the LinkedIn API. The API is still private now, but our indirect use of it has generated some really impressive functionality with very little effort. There are examples of indirectly accessing the API that appear in a couple of the early vator boxes from Q4 08 (where images and bios of Facebook execs are brought into Liquid Scenarios with other information about the company just by entering the name).

Very informative interview. Thanks.

Bambi Francisco Roizen, on May 20, 2009

We'd like to expand our use of LinkedIn's API. If you have any suggestions, please let me know.

Lorenzo Carver
Lorenzo Carver, on May 21, 2009

Absolutely Bambi. One relatively simple implementation is to bring in LinkedIn profiles for team members associated with companies in the vator directory (not an original use of the API, but a helpful one). Another, which I haven't seen elsewhere yet, would be to bring in LinkedIn references to your vator testimonials too. Also, allowing updates to be shared (vator.tv updates show up on LinkedIn status and vice versa) if that's a function they currently have implemented in the API. Beyond that I would say the ability to easily invite vator connections to become part of your LinkedIn network might be nice...Just some quick thoughts.

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