LinkedIn. An overall analysis of the company.

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A.A. 2015/2016 - UNIMORE, International Management
LinkedIn. An overall analysis of the
company.
Borsari Marco
Zanichelli Francesco

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INDEX
INTRODUCTION ...........................................................................................................................................3
1. COMPANY OVERALL PROFILE............................................................................................................5
1.1 Company history ............................................................................................................................5
1.2 Corporate governance and Organizational structure .....................................................................6
1.2.1 Board of directors.........................................................................................................................6
1.2.2 LinkedIn’s IPO..............................................................................................................................6
1.2.3 Investors........................................................................................................................................8
1.2.4 Organizational structure..............................................................................................................8
1.3 Company’s portfolio ............................................................................................................................8
1.3.1 For LinkedIn members ................................................................................................................9
1.3.2 For LinkedIn Customers............................................................................................................10
1.4 International presence......................................................................................................................12
2. CORPORATE STRATEGY....................................................................................................................14
2.1 Mission................................................................................................................................................14
2.2 Strategic goals...................................................................................................................................14
2.3 Corporate culture ..............................................................................................................................14
2.4 Strategic model..................................................................................................................................15
2.5 Horizontal development....................................................................................................................15
2.5.1 Acquisitions.................................................................................................................................15
2.5.2 Joint-Venture ..............................................................................................................................16
2.6 Vertical development ........................................................................................................................16
3. BUSINESS ANALYSIS AND COMPETITIVE POSITIONING...........................................................17
3.1 Industry analysis (concentration analysis, market shares, market penetration rates) .............17
3.1.1 Concentration analysis and market shares ............................................................................18
3.1.2 Market penetration rates...........................................................................................................19
3.2 Porter’s five forces analysis .............................................................................................................19
3.3 Key success factors..........................................................................................................................20
3.4 Competitive positioning ....................................................................................................................22
3.4.1 Competitors’ short analysis ......................................................................................................23
3.4.2 Maps of the competition positioning in PNS market (2014) .................................................25
3.4.3 Competitors’ growth...................................................................................................................25
4. COMPETITIVE STRATEGIES AND RESOURCES...........................................................................27
4.1 Generic competitive strategies........................................................................................................27
4.1.1 Differentiation strategy ..............................................................................................................27
4.1.2 B2B focused ...............................................................................................................................27

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4.2 Resources and Competencies analysis.........................................................................................28
4.2.1 Internal analysis .........................................................................................................................28
4.2.2 Social loyalty...............................................................................................................................28
4.2.3 Switching costs...........................................................................................................................28
4.2.4 Cost disadvantages ...................................................................................................................29
4.2.5 Company profile and internal analysis ....................................................................................29
4.3 Value Chain analysis ........................................................................................................................30
5. INNOVATION AND COMPETITIVE ADVANTAGE............................................................................32
5.1 Product and process technology-based innovation......................................................................32
5.1.1 Product (service) innovation.....................................................................................................32
5.1.2 Process (supply) innovation .....................................................................................................33
5.1.3 Technology - based industries: classification........................................................................33
5.1.4 Incremental and radical innovation..........................................................................................33
5.1.5 LinkedIn and the innovation process.......................................................................................33
5.1.6 LinkedIn and lead user innovation...........................................................................................34
5.2 Strategic, organizational, and marketing innovation.....................................................................34
6. PERFORMANCE ....................................................................................................................................34
6.1 Financial performance (3-4 years analysis; comparative analysis)............................................35
6.1.1 Financial Analysis ......................................................................................................................35
6.1.2 Financial comparative analysis, from 2008 to 2011 ..............................................................40
6.2 Financial performance (growth analysis) .......................................................................................41
6.3 Financial performance (risk analysis).............................................................................................42
7. FUTURE SCENARIOS...........................................................................................................................42
7.1 S.W.O.T. analysis .............................................................................................................................42
7.2 Future perspectives ..........................................................................................................................45
APPENDIX ...................................................................................................................................................47

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INTRODUCTION
LinkedIn is an international business founded in Mountain View, California (USA) in December
2002, which operates in the Professional Networking Service (PNS). It is mainly used to built
professional network in a business-oriented ambit. Up to now, as a free-website, most of their
incomes come from the provision of services for professionals both individual and firms.
The aim of this paper is to examine LinkedIn under several aspects.
At the beginning it is presented the company’s overall profile, with its history, corporate governance
and organizational structure, focusing also on LinkedIn IPO, a very important fact for the company.
Therefore, in the same section Company’s portfolio is explained, with the distinction between
members and customers. The section concludes with company international presence.
The second section deals with corporate strategy and it is described through an analysis of
mission, strategic goals, corporate culture and strategic model. Moreover, also in this section it is
explained LinkedIn horizontal development, while vertical development is not considered in
particular for the company.
In section 3, we concentrated our focus on the business analysis and the competitive positioning.
In particular we defined at the beginning the industry, with an analysis of the concentration, a
comment of the market share and of the market penetration rates. Then we discuss the Porter’s
five forces model of the industry of PNS and for LinkedIn. Very important is also the attention for
the key success factors which have been analyzed for the industry and the strongest point for
LinkedIn.
Finally, fundamental is the examination of the competitive positioning in PNS. Competitors’ short
analysis and competitors’ growth rates are the latest paragraph of this section, in which we briefly
discuss and analyse the two major competitor of LinkedIn: Viadeo and Xing. A final part concern a
cause of reflection for the possible future scenario in the competitive positioning with the emerging
of new possible actor in the PNS as Facebook for instance.
The fourth part describes LinkedIn competitive advantage. Generic competitive strategies are
briefly explained, mainly focusing on the differentiation of the business social network company
and its strong presence in B2B markets. Then, there is a detailed analysis of company resources
and competences, described in order to clarify LinkedIn competitive advantages. Then, value chain
analysis concludes this section.
In the following section we discuss about innovation and competitive advantage.
In particular we put the focus on the product and process technology-based innovation, and we
investigate both the product innovation and the process innovation in a company as LinkedIn. Then
we try to classify the industry of PNS on the base of the technology.
After that, it follows a discussion on the positioning of LinkedIn compared with innovation. It
emerges that the Company could be consider an incremental innovator. Next, we try to
contextualize LinkedIn in the innovation process and in the concept of lead user innovation.
Finally the last paragraph concerns a discussion on strategic, organizational, and marketing
innovation for LinkedIn.
The 6th section is about performance. We analyse the performance of LinkedIn with a financial
point of view through a 3-4 years analysis, considering the key metric values adopted by the
company. Then, under financial figures, we try to compare the Company with one of its major
competitors: Xing.
The last section regards the possible future scenarios of LinkedIn. In particular we focus on the
S.W.O.T. analysis, discussing about the strengths, weaknesses, opportunities, and threats. Finally,
we try to identify the future perspective of this international firm, in a slightly different approach for
a “high-growth” company as LinkedIn.

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1. COMPANY OVERALL PROFILE
1.1 Company history1
2002-2003
LinkedIn was originally founded in Santa Monica, California, in 20022
and launched on 5th May
2003 by Reid Hoffman, former CEO and current Chairman of the Board, and colleagues coming
from companies related to online business as PayPal and SocialNet.
LinkedIn was developed under the idea that a network focus on business can connect the world’s
professionals to make them more productive and successful providing them with better
opportunities3
.
2004
Growth accelerates with the introduction of address book uploads in late 2003. LinkedIn introduces
new features like Groups and partners with American Express to promote its offerings to small
business owners.
2005
LinkedIn introduces its first business lines: Jobs and Subscriptions. The company also moves into
its fourth office in three years.
2006
With the launch of public profiles, LinkedIn begins to stake its claim as the professional profile of
record. In 2006, the company achieves profitability, and core features like Recommendations and
People You May Know are introduced.
2007
After four years as CEO, Reid steps aside to run product and brings in Dan Nye to lead the
company. LinkedIn moves to Stierlin Court and opens the Customer Service centre in Omaha.
2008
LinkedIn becomes a truly global company, opening its first international office in London and
launching Spanish and French language versions of the site.
2009
Jeff Weiner joins LinkedIn first as President, then CEO, and brings focus and clarity to LinkedIn's
mission, values, and strategic priorities.
2010
Company shifts into to hyper-growth. By the end of the year, LinkedIn has 90 million members and
nearly 1,000 employees in 10 offices around the world.
2011
LinkedIn celebrates its eighth anniversary, becomes a publicly traded company on the New York
Stock Exchange, and hosts a town hall with the President of the United States.
1
LinkedIn website: https://www.linkedin.com/about-us
2
LinkedIn. A valuation assessment of the fair value of LinkedIn:
http://studenttheses.cbs.dk/bitstream/handle/10417/4816/henrik_lysgaard_jensen_og_bartosz_sm%C3%B3lczynski.
pdf?sequence=1
3
N.Aliaksey, C. Cafure, 2013. LinkedIn, six degrees of separation: http://www.slideshare.net/bialorusin/id-57830-
narko-aliaksey-id-57822cafurecristian-linkedin-written-assignment-strategic-management-sgh-spring-semester-2013-
v2?from_action=save

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2012
Project Inversion and a completely re-architected site enabled an unprecedented pace of product
innovation and transformation of the site and the company, which focused on three concepts:
simplify, grow, everyday.
2013
By the end of our first decade, the company has reached 225 million members, and is growing at
more than two members per second.
2014
Beginning the next decade of LinkedIn, we sought to create a map of the digital economy, its
participants, and every facet of opportunity linking these nodes together.
1.2 Corporate governance and Organizational structure
Corporate governance is described by Board of Directors, investors and Management Team.
1.2.1 Board of directors
The Board of Directors of LinkedIn sets high standards for the Company's employees, officers and
directors. Implicit in this philosophy is the importance of sound corporate governance. It is the duty
of the Board of Directors to serve as a prudent fiduciary for shareholders and to oversee the
management of the Company's business. To fulfil its responsibilities and to discharge its duty, the
Board of Directors follows the procedures and standards that are set forth in these guidelines.
These guidelines are subject to modification from time to time as the Board of Directors deems
appropriate in the best interests of the Company or as required by applicable laws and
regulations4
.
Board of directors is composed by: Reid Hoffman, A. George Battle, Leslie Kilgore, Stanley J.
Meresman, Michael J. Moritz, David Sze and Jeffrey Weiner5
.
Before talking about investors it is useful to introduce how LinkedIn became public.
1.2.2 LinkedIn’s IPO
LinkedIn’s initial public offering (IPO) was not just an event for the firm, its founders and early
investors. LinkedIn's IPO became a spectacle for Silicon Valley start-ups and investors. Its IPO
was viewed as a litmus test for Wall Street's appetite for future offerings. LinkedIn’s shares were
traded on a private market. In July 2010, Tiger Global Management LLC purchased a 1% stake in
LinkedIn for $20 million meaning a valuation of approximately $2 billion. It provided the first test of
whether the public markets can sustain the soaring private-market valuations of social-media
companies. Silicon Valley entrepreneurs were also following LinkedIn's fortunes for a signal as to
how well investors will receive future IPOs of Internet consumer services. In the table below is
listed the steps of early private venture funding. By the end of 2008 LinkedIn received $103 million.
Venture funding of LinkedIn until 2008 are explained in the following table.
4
LinkedIn website: http://investors.linkedin.com/governance.cfm
5
LinkedIn website: http://investors.linkedin.com/directors.cfm

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Table 1 - Venture funding of LinkedIn until 2008
6
LinkedIn said it has been operating cash flow positive for the last couple of years, and has not
even needed to use money it raised in 2008. In January 27, 2011 LinkedIn filed to go public.
For the IPO LinkedIn was priced at $45 a share by Morgan Stanley, Bank of America Merrill Lynch
and JPMorgan Chase, raising $352 million for the company.
Though LinkedIn warned that revenue will slow and it will be unprofitable in 2011, the stock leapt
more than 100% in its first day of trading, generating hundreds of millions of dollars for special
clients of the underwriting banks. Shares of LinkedIn opened at $83 on the New York Stock
Exchange, up 84% from its initial public offering price of $45. By the market's 4 p.m. close, the
stock had soared 109% to $94.25.
At the end of the day, LinkedIn was worth $8.9 billion. It was the biggest Internet IPO since Google
Inc.'s debut in 2004. LinkedIn's offering marked the first time a company that has been actively
traded on a private market will go public.
The public-market investors had little data about the company, obviously a case of information
asymmetry.
On balance, according to Yahoo LinkedIn’s stock price were $123.79 (Jan. 2, 2013), and $153.47
(April 1, 2014). It is interesting to know that LinkedIn was launched before MySpace (2003),
Facebook (2004), YouTube (2005) and Twitter (2006).
The following bar chart illustrates the stock price from 2011 to 20147
.
6
http://etm.entechnon.kit.edu/downloads/LinkedIn_Corp.pdf
7
http://etm.entechnon.kit.edu/downloads/LinkedIn_Corp.pdf

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Chart 1 – LinkedIn’s stock price from 2011 to 2014
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1.2.3 Investors
In the link below there are several tables, which explained very well how the company shares are
distributed. Moreover, it is clarified the role and the importance of the investors, in particular major
holders9
.
1.2.4 Organizational structure10
LinkedIn functional organizational structure is composed as the next picture illustrates.
Jeff Wiener is the LinkedIn CEO, under him there are three main subdivisions Steve Sordello
(CFO), Steve Crane (Vice-president of Marketing) and David Henke (Vice-president Engineering
and Operations). Under them there are the other functions, which coordinate the organization and
development of the company.
Picture 1 – Organizational structure
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1.3 Company’s portfolio
The company offers different solution services relating to the use of the social network. The main
subdivision is between members and customers.
8
LinkedIn website: http://investors.linkedin.com/stocklookup.cfm
9
https://finance.yahoo.com/q/mh?s=LNKD
10
http://www.cogmap.com/chart/linkedin
11
http://www.cogmap.com/chart/linkedin

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1.3.1 For LinkedIn members
LinkedIn wants to help its members to be more productive and successful. So they offer tools to
help them tell their professional story and identity, in order to attract opportunities and be more
successful. Moreover, they offer tools useful to build and nurture their networks so they can unlock
future opportunities. Furthermore, they provide a guide to learn and grow professionally with the
new professional needs. Following there are explained the three services, which LinkedIn provides
to all its member: Identity (tips), Network (as problem solution) and Knowledge.
Identity (Tips)
Firstly, in order to achieve these purposes LinkedIn suggests different tips directly to the members
while they are logging in the business social network. For instance, it teaches to the members that
just by adding a photo to the profile or sharing a specific article with the network, LinkedIn Profile
would be eleven times more likely to be viewed and potentially attract more professional
opportunities. Furthermore, LinkedIn introduces the new Who’s Viewed Your Profile, packed with
new visual analytics and actionable insights designed to give more ways to manage professional
identity and increase members’ visibility across LinkedIn.
Moreover, the most exciting new feature LinkedIn’s developers have added are the real-
time personalized tips on actions that allow to make members’ identity more discoverable to other
like-minded professionals, potential employers or business partners on LinkedIn. The personalized
tips on Who’s Viewed Your Profile provide suggestions on everything from actions members can
take to complete themselves profile to industry relevant articles that they can share to
professional groups they can join, as well as how those actions can potentially increase views of a
profile. Ultimately, this takes the guesswork out of how members can continue to build their own
professional brand and manage their professional identity to make themselves even more
productive on and off of LinkedIn12
.
Network (as problem solution)
Secondly, LinkedIn can also provide solutions to some problems, thanks to the enormous data
bank that it owns, in order to satisfy personal member needs. For instance, if a user wants or have
to make a career change, it would be grateful for him having more information about this topic.
In fact, making a career change can be one of the more difficult professional challenges to face. In
many cases, LinkedIn networks help make these decisions. LinkedIn networks can also help
provide insight on potential career paths and put in touch with the relevant knowledge to decide
which career path to take or when to make a career transition.
To help people looking to make a career transition, the business social network mined the data
found in millions of LinkedIn member profiles, isolated instances where members made career
jumps, and put together an interactive graph that shows the most common transitions that occur
between careers. With this information, anyone can see what transitions are possible for his
career, and perhaps find the right person to talk to in the network to get some advice13
.
Knowledge
Finally, LinkedIn provides to its members the possibilities to improve their knowledge with the use
of different tools. LinkedIn invests in these (acquiring and developing) in order to improve the use
of the business social network by its members14
.
For instance, LinkedIn bought Pulse newsreader for a figure of more than $ 50 million in 2013.
LinkedIn Pulse is a professional news application. It enables its users to customize their news-
12
LinkedIn website: https://www.linkedin.com/
13
LinkedIn website: http://blog.linkedin.com/2014/12/08/charting-your-next-career-move-with-data-from-linkedin/
14
LinkedIn website: https://www.linkedin.com/pulse/top-8-ways-3d-printing-disruptive-michael-spencer

10
reading experiences, easily explore compelling professional content, and share stories on their
favourite social networks15
.
1.3.2 For LinkedIn Customers
For the members that decide to become LinkedIn customers, the social business network provides
tools to hire, market, and sell, plus unique insights that will help businesses succeed.
The company has a diversified business model with revenue coming from Talent Solutions,
Marketing Solutions and Premium Subscriptions products16
.
Chart 2 – 2015 Q3 revenue distribution
17
This pie chart shows that LinkedIn works on the constant diversification and improvement of the
top line performance. The three main categories of products contributing to the overall revenue are
hiring solutions, marketing solutions and premium subscriptions18
.
Marketing solutions
This part of the revenue is derived primarily from the fees that are being received from the
advertisers displaying text and visual advertisements on the LinkedIn site. The recognition of the
revenue happens when the advertisement is being displayed on the site and not before. On a
general level, there are no warranties given to the users of the marketing solutions. This means
that there is no revenue, which is considered a future provision for the customers that have not
used the purchased advertisement. In this relation, the dynamic of churn is unfortunately unknown,
making it impossible to know whether the sale is being made through the acquisition of the new
customers only or whether recurring customers are considered a base for the revenue19
.
The aim of all marketing products is to deliver the right content to the right people and boost quality
leads. The products are:
15
https://www.crunchbase.com/product/linkedin-pulse#/entity
16
LinkedIn website: https://www.linkedin.com/company/linkedin
17
LinkedIn website: https://press.linkedin.com/products
18
pdf?sequence=1
19
pdf?sequence=1

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SPONSORED UPDATES
Sponsored updates can get the content in front of the world’s professionals on desktop,
smartphone, and tablet.
DISPLAY ADVERTISEMENTS
Display advertisements reach the world’s largest professional audience with display
advertisements that drive brand awareness and keep the customer on prospects’ minds, wherever
they go online.
SPONSORED INMAIL
With this tool, customers can send targeted messages directly to the people who matter most to
your business.
LEAD ACCELERATOR
Lead accelerator allows to drive more quality leads blazingly fast.
TEXT ADVERTISEMENTS
Text advertisements allow to drive new customers to business with LinkedIn easy, self-service pay
per click (PPC) advertising platform20
.
LinkedIn Sponsored Updates – YouTube video:
https://www.youtube.com/watch?v=oCkCmZQYRgo
Hiring solutions
Furthermore, this part of the revenue is derived primarily from the sale of the products allowing
enterprises and organizations in need of professionals, to identify job candidates based on the
characteristics such as: industry, past job functions, geography, experience, education and so on.
Job slots are also available to use the LinkedIn site as an interactive job posting panel. The
revenue is recognized pro rata on the basis of the current subscription binding, such as monthly,
quarterly or yearly. As analysts, it is assumed that the churn dynamic on this product can be driven
by and dependent mostly on the job market dynamics and the demand for new employees. Even
though we are unable to establish the correlation between the two, it is highly anticipated, that in
years of bull development, the top line will increase significantly as a result of a rise in revenue
coming from this area. This product should impact the balance sheet, as the provision should be
recognized for the potential of the customer cancelling the subscription for the service21
.
These products are ideal for any company with a recruiting strategy, in growth mode, or frequently
in need of new talent. There are five different products.
RECRUITER
With the recruiting tool that transformed recruiting it is possible to view and contact anyone on
LinkedIn, find the right talent faster and stock talent pool.
JOB SLOTS
This product is able to automatically recommend the right job to the right candidate through
LinkedIn, email, and LinkedIn Job Search app.
CAREER PAGES
Career Pages allow to build employer brand and attract top talent with a LinkedIn Career page.
WORK WITH US ADVERTISEMENTS
With this product, customers are able to attract more top talent to customer company by putting job
advertisements right an employees LinkedIn profiles.
REFERRALS
20
LinkedIn website: https://business.linkedin.com/marketing-solutions
21
pdf?sequence=1

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With introducing LinkedIn Referrals, automatically uncover quality hires by engaging customer
employees, unlocking their networks, and inspiring everyone to recruit22
.
Find and Engage the Best Passive Talent with LinkedIn Talent Solutions – YouTube video:
https://www.youtube.com/watch?v=FicFVDgNzWo
Premium subscriptions
In conclusion, this part of revenue is derived primarily from the sale of the upgraded individual
membership subscriptions to the platform. With the tools made available by a premium
subscription, individuals are having much greater access to the functionalities and features of the
platform needed for the purposes of networking, scouting and searching. LinkedIn lists the
enhanced search results, communication capability and improved organizational functionality as
core features of the premium subscription feature. Members are offered monthly or annual
subscriptions, which provide the provisions sensitivity, which should be recognized on the balance
sheet23
.
The social selling era starts with LinkedIn Sales Navigator and nowadays social selling leaders
create 45% more opportunities.24
LinkedIn Sales Navigator taps into the power of the LinkedIn network to help Sales professionals to
establish and grow relationships with prospects and customers25
.
In the age of social media, leveraging professional networks like LinkedIn to drive customer own
sales leads is becoming increasingly important, because today social media generate more sales
leads.
Utilizing social selling for lead generation enables LinkedIn customer to find and connect with their
potential sales leads, who are already on those social platforms, engaging with others and content.
With access to over 400 million members on the world’s largest professional network, LinkedIn
creates sales lead generation success by enabling sales professionals to easily and quickly find
the right prospects.
LinkedIn customer can use advanced search and filtering system to quickly identify influencers and
decision makers and save them as leads to create high quality lead lists26
.
Start your day with LinkedIn Sales Navigator - YouTube video:
https://www.youtube.com/watch?v=jZtIk7Za4YQ
Make the Connection – YouTube video: https://www.youtube.com/watch?v=5gV8e48Q8as
1.4 International presence
LinkedIn wants to have an international footprint as a global leader of business social networks. In
order to success in this challenge LinkedIn has more than 9,200 full-time employees with offices in
30 cities around the world. Moreover, LinkedIn is currently available in 24 languages, more than
Viadeo (8 languages) and Xing (2 languages). Thanks to these characteristics LinkedIn operates
the world’s largest professional network on the Internet with more than 400 million members in
22
LinkedIn website: https://business.linkedin.com/talent-solutions
23
pdf?sequence=1
24
LinkedIn website: https://business.linkedin.com/sales-solutions?u=0
25
LinkedIn website: https://business.linkedin.com/sales-solutions/site-forms/request-free-demo-
gc?icp=lsshpwd&u=0
26
LinkedIn website: https://business.linkedin.com/sales-solutions?u=0

13
over 200 countries and territories. In addition, Professionals are signing up to join LinkedIn at a
rate of more than two new members per second.
The next picture summarizes information about LinkedIn members around the World, explained
before27
.
Picture 2 – Members distribution
28
27
https://press.linkedin.com/about-linkedin
28
https://press.linkedin.com/about-linkedin

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FOCUS ON LINKEDIN OFFICE IN MILAN
An interesting article, which is linked below, explains how was built and designed LinkedIn Milan
office in connection with company’s values. Il Prisma has designed the new offices of LinkedIn
trying to recreate “The Places of Trasformation”.
The complete article: http://officesnapshots.com/2015/08/18/linkedin-milan-offices/
2. CORPORATE STRATEGY
In this section there is described briefly LinkedIn corporate strategy. So to have an insight on this
topic, below there are described about the company: mission, strategic goals, corporate culture,
strategic model, horizontal and vertical development.
2.1 Mission
“Our mission is simple: To create economic opportunity for every member of the global workforce.
When you join LinkedIn, you get access to people, jobs, news, updates, and insights that help you
be great at what you do.”29
2.2 Strategic goals30
LinkedIn’s strategy is based on three main pillars.
Simplify
Making the product easier for members in order to unlock value from core products and services.
Grow
LinkedIn growth is characterized by two main purposes: to expand global membership and extend
monetization efforts to benefit both members and customers.
Everyday
Delivering value to members everyday by helping them build out their professional identities and
gain valuable insights. The goal is for professionals to use the platform as the main professional
profile worldwide.
2.3 Corporate culture31
The company culture is intended to reflect who LinkedIn and their staff are and where the company
aspires to be. There are five main points:
Transformation
People who work at LinkedIn are there because they seek to make a positive and lasting impact on
the world, help realize the full potential of LinkedIn and fundamentally alter the trajectory of their
careers.
Integrity
LinkedIn does not believe the ends justify the means. Rather, employees are expected to do the
right thing no matter what.
29
30
“2012 LinkedIn Annual Report”: http://investors.linkedin.com/annuals.cfm
31

15
Collaboration
Much like the network effects inherent in LinkedIn’s business model, the company believes that as
valuable as they are as individuals, they are all exponentially more valuable when aligned and
working together.
Humor
Fulfilling LinkedIn’s mission and vision requires an intense focus, so the company believes it is
important to not take themselves too seriously and try to have some fun while doing it.
Results
LinkedIn set clear, actionable goals and have high expectations for the company’s performance,
counting that employees consistently deliver excellent results, seek leverage through greater
efficiency and effectiveness, and demonstrate leadership at all levels.
2.4 Strategic model32
LinkedIn’s strategic model is based on 3 elements:
International expansion
As explained before, LinkedIn acts in a way to promote international expansion, through building
offices outside US, more variety of language availability and international sales force.
Closed platform
The website is a closed platform in the sense of no links to other networking sites are promoted.
Pre-empt competitors
LinkedIn provides new services to avoid actual and potential competitors to try to enter the market.
2.5 Horizontal development
The aim of this section is to identify the horizontal development of the company, analysing the
direct acquisitions and the joint venture in the same relevant markets.
2.5.1 Acquisitions33
One of the main purposes of LinkedIn is to provide the largest number of services and products
useful for its members, in order to improve their business social networks management.
The following table shows LinkedIn acquisitions, the date and the amount that the company has
paid.
32
33
https://www.crunchbase.com/organization/linkedin/acquisitions

16
Table 2 - Acquisitions
34
2.5.2 Joint-Venture35
Focus on China Joint-venture
Besides the acquisitions, LinkedIn has also Joint-ventures. For instance, LinkedIn launched a
Chinese version of its site through a joint-venture.
The expansion has taken place as a joint venture with Sequoia and CBC Capital.
Now that it has a local presence, the company also opens up itself to greater monitoring from the
Chinese government.
In a blog post, CEO Jeff Weiner stated that the company disagrees with China’s approach to
censorship, but it will abide by any necessary laws in order to operate in the country. Weiner also
outlined the following three guidelines that LinkedIn will maintain for the venture:
 Government restrictions on content will be implemented only when and to the extent required.
 LinkedIn will be transparent about how it conducts business in China and will use multiple
avenues to notify members about our practices.
 The company will undertake extensive measures to protect the rights and data of our members.
Based on the company’s launch post, LinkedIn appears to be treading carefully as it enters China.
Foreign Internet companies have historically struggled to gain traction in mainland China, even as
they faced criticism in their home countries for submitting to government censorship.
Weiner noted in his post that LinkedIn consulted with human rights organizations as it weighed
whether to enter China. In the end, the company decided that the venture would have greater
benefits for its user, both in China and abroad, than the downside of increased regulation.
2.6 Vertical development
In our opinion, vertical development is not considered in LinkedIn’s corporate strategy. Because
LinkedIn type of industry and type of product/service are not suitable for vertical development. On
the other hand, these characteristics fit better horizontal development, as explained before.
34
https://www.crunchbase.com/organization/linkedin/acquisitions
35
http://thenextweb.com/asia/2014/02/25/linkedin-goes-china-new-joint-venture-localized-chinese-language-site/

17
3. BUSINESS ANALYSIS AND COMPETITIVE POSITIONING
In this section of the paper our objective is to investigate the business sector of the Company and
the performance and positioning of the competitor, through an overall industry analysis, the
disclosure of the key success factors for the industry and for LinkedIn, and the competitors’ growth
rates and trends in this years.
Firstly, is important to distinguish between the so called Social Networking Service (SNS) and
Professional Networking Service (PNS). SNS is defined as an online community that allows users
to construct a profile, create a personal network, search and share interests, invite and
communicate with other users, within a private ambit. While, PNS is a variation of the SNS model,
which concerns business and professionalism rather than personal relationships36
.
The principal differences between SNS and PNS are the following:
Social networking is the process of using websites or mobile application to connect with other
people especially friends and family and to share interests and opinions . Instead, professional
networking is the process of using websites or even mobile application to connect with businesses
and other professionals (which also post the profile of their company) to look for employment
possibilities or to share one’s knowledge.
“Although social networking sites are also used to promote products and services, they are mostly
used for personal interactions whereas professional networking sites are used for professional and
business interactions.”37
For example to connect with enterprises and companies of your interests, to connect with business
people or colleague, to look for possible job offers, etc.
According to the definition that LinkedIn gives of itself as “ the world's largest professional network
with more than 400 million members in 200 countries and territories around the globe”38
and also in
our opinion, the industry sector in which the Company operates is the PNS. In spite of the clear
positioning of LinkedIn in this market, one should bear in mind the constant effects that SNS have
on PNS and all the possible consequences.
3.1 Industry analysis (concentration analysis, market shares, market penetration rates)
The first step at this point is the industry analysis. It will concern the discussion about the
concentration analysis of the sector, then we will move to analyse the market share, and finally the
paper will focus on the market penetration analysis.
Graph 1 – Industry life cycle
39
36
LinkedIn presentation: http://www.slideshare.net/jkwong5/linkedin-presentation-5150716
37
http://www.differencebetween.net/business/organizations-business/difference-between-social-networking-and-
professional-networking/
38
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This graph clearly define the industry life cycle of PNS. First of all, it is a quite recent industry which
is started in the last decade, as a variation of SNS that was establishing worldwide. Therefore, this
industry has just begun the growth stage. This means that PNS has an enormous potential both in
terms of revenues and in terms of future members (every worker of the globe!) and the maturity
stage is far from be reached. Naturally, the characteristics of PNS have attracted many potential
new entrants and so the competition could become quite high, in spite of the concentration very
low, due to the totally leading of LinkedIn. However, this scenario could change rapidly with the
entrance of competitors which are leader in SNS as Facebook and Twitter, because of the
similarity between industries.
3.1.1 Concentration analysis and market shares
The concept of industry concentration is strictly related to the market types. For instance the
industry concentration is high when we face a situation of oligopoly because the market demand is
satisfied just by few large firms. Thus the higher the concentration degree of an industry, the
greater the market power of part of the firms of that industry. Consequently, we can assert that
concentration degree of an industry has an effect on the market power of a firm, in other words on
its ability to influence customers and suppliers behaviours, that is on firm’s ability to influence price
level and quantity. In the case of LinkedIn, if we consider the SNS (social networking service) as its
core business industry, the concentration is not really high due to the fact that there is a consistent
number of firms such as also Facebook or Twitter.
Otherwise, if PNS (professional networking service) is assumed as the industry of the Company,
the concentration increase because the less number of actors and in this situation LinkedIn plays a
very strong market power.
We decided to consider PNS as the most fitting sector for LinkedIn, without forget SNS.
Usually for the computation of the concentration indices, there are some data needed. Firstly,
firm’s turnover or sales volume, which in the case of LinkedIn we can translate it in the number of
its total products sold/ services provided (marketing solutions, talent solutions, and premium
subscriptions). However, because not all the competitor sell the same products or provide the
same services, we decided to translate the sales volume in the sales revenues, which are though
related each other. We decided also to consider for this analysis LinkedIn, Xing and Viadeo, the
majors actors in the PNS industry.
Quarterly speaking, for the Q3 of 2015, LinkedIn signs revenue for 780 million $, Xing 30,5 million
$ and Viadeo 6 million $.40
Then we have to consider the industry total sales (industry turnover), which is the aggregate sales
value at industry level. The total sum of the revenue of PNS industry is equal to 780 + 30,5 + 6 =
816,5 million $.
Finally we can compute the market share for each firm, from firm’s turnovers and industry turnover.
Chart 3 – PNS Market share 2015 (million $ revenue)
40
LinkedIn corporate website: http://investors.linkedin.com/results.cfm, Viadeo corporate website:
http://corporate.viadeo.com/en/investors-2/, Xing corporate website:
https://corporate.xing.com/index.php?id=339&tx_ttnews[tt_news]=0&tx_ttnews[pointer]=0&tx_ttnews[backPid]=0&
cHash=0&cat=0&L=1
96%
4% 1%
LinkedIn
Xing
Viadeo

19
Naturally we have to consider some limitations for this study. First of all we have considered just
few actors of the PNS. However, if we strictly follow the definition, the PNS industry itself is
composed by these few actors, where LinkedIn due to many factors, has always prevailed.
Consequently, if we change the point of view, considering also some SNS actors, the scenario
would change completely. Finally, we considered revenue for computing market share but similar
analysis could have been done considering the registered members.
Talking about concentration ratio, because of the few number of actors and the high concentration
in PNS, substantially we can assert that the largest firms of the market represent the 95-100% of
the total industry revenues.
For the same reason the computation of the Herfindahl Index would not be very useful, because of
the few number of firms that we could consider. We could foresee a value near 1 which means
monopoly, because of the supremacy of LinkedIn, even if the PNS industry is not a situation of
monopoly.
3.1.2 Market penetration rates
Because the difficulty to find the precise datum of the growth rate, we tried to foresee the market
penetration rate. We assumed that PNS is a relatively “young” and continuously increasing
industry. However, given the dramatic performance of LinkedIn, in our opinion the firm’s growth
rate is probably higher. Due to this, LinkedIn is enhancing his market share.
3.2 Porter’s five forces analysis41
Industry rivalry - Competition
In the PNS industry, LinkedIn is the leader, with a great distance from competitors like Viadeo and
XING. However, its leadership can rapidly change in a short period of time, because the
peculiarities of this market, and how fast customers preferences can evolve. “Additional features,
new services and the variety of options provided by the company, both with free solutions and
monetized solutions, offer users different choices, and with that, attracts many different segments
on the industry of professionals as individuals, companies, marketing agencies, etc.
Both Viadeo and XING are planning on reformulating their strategies from “glocalization” to
internationalization as they realize how connected the global market is and that presence only in
Europe is acceptable but not enough in the future.”
Competitors have less available languages than LinkedIn, showing a less internationalized strategy
and also a focus on the European market. For example, Viadeo is present in China with the brand
Tianji.
Threat of new entrants
If start a business in the field of PNS is not so difficult, likewise cannot be said to success, which
take many years to be built, with several investments and brand identity awareness. Then there
are the economies of scale of big player to fight. LinkedIn also has a first mover advantage in the
professional networking industry, which is a strong competitive advantage.
The threat of possible new entrants could come “from SNS such as Facebook, Twitter or from job
portals like Monster (www.monster.com), customer relationship management market
(www.salesforce.com) or even companies involved in the IT market in general, for example
Microsoft and its interest in Yammer (recently launched PNS).“42
For SNSs, which have experience in manage a wider range of users and internet traffic of data,
just adding new services would be easy to “take a share on the market, or creating alliances,
joining efforts with smaller companies already providing additional features and therefore, although
41
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http://www.neowin.net/news/microsoft-shows-interest-in-buying-yammer

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LinkedIn is very-well-positioned, and its approach of updating functions is accurate, preventive
measure are key.”
Threat of substitute products or services
“Possible substitutes can include SNSs, depending on the fact that networking [...] can be done
refering to Facebook or Twitter if they want to know about opportunities in a company and they do
not use or know PNSs. For example, Online Marketing features can be used both to position a
company and also to attract new candidates and promote opportunities.”
Bargaining power of customers/buyers
Because customers as individuals, enterprises or professional organizations are not concentrated
their power to bargain is low.
However, because of the continue dynamics on businesses like PNS or SNS, a downturn can
create an immediate negative reputation and movement to other options. The absence of
innovation or the adaptation to the change in customers’ needs means a loss of market share.
All this scenario with no switching costs for users that can easily join other options.
“Overall, users might switch to competitors but LinkedIn provides good quality services (and
consequently, has good reputation), adds new features and responds to market needs, plus the
current membership support available, makes it well-positioned against this force.”
Finally, since LinkedIn is directly selling its services to the customers, there is no dependency on
the external distribution channels which further strengthens its bargaining power.
Bargaining power of suppliers
There are many services for this industry (from data storage to applications for mobile phone) and
providers often are bought as a common strategy to internalize. For example the acquisition of
SlideShare by LinkedIn in 2012 for $119.
“Overall, the position of LinkedIn is solid, as it is the clear leader, there are no strong followers, it
has international presence and provides many services to attract different segments inside the
market of professionals looking for online features. [...] The approach of LinkedIn of buying
suppliers, adding new services and adapting the websites’ feature to each customers’ needs
places then in a favourable position.”
In general, since professional supplier are spending significant amount of time and efforts to build
their network and personal brand on LinkedIn, it would be extremely expensive for them to switch
to another professional network in the future, enhancing the dependency of them on LinkedIn in
the long term and providing substantial competitive advantage to LinkedIn over its competitors.
3.3 Key success factors
For business (SNS and PNS)
According to the definition of PNS and its industry, the key success factors could be summarize as
follow:
 Number of registered members: more the members that have signed in, more the extension
of the network. Thus, companies should promote the subscriptions.
 Products and services offered: this is the core of PNS companies’ revenue. With a wide
range of products the firm will be able to satisfy every customers’ need and for every need
satisfied there is an income. Therefore, the higher the number of premium subscriptions,
the higher the revenues. Companies have to be able to offer the right solutions for
professional, and having a diversified revenue streams means key success factor.
 Internationalization: the growth of a networking site, both social or professional, depend on
the international role and scope which the company has. If the firm is able to extend is
competitiveness and largeness abroad, becoming the model to follow, it will be easier to
succeed.
 Specific investments: in order to be able to continuously satisfy the mutant customers’
needs and to follow the technological changes, companies have to invest parts of their

21
incomes. In particular in the earlier stages of the business, when, for example, there is the
gap of new comer. Moreover, the acquisition of some SME which express a great potential,
is fundamental to provide a new service to the members.
 Innovation: be able to innovate, also in an incremental way, is fundamental in a sector as
PNS. The threat of new entrants, should lead firms to differentiate, to provide specific
services, and to create a strong brand identity. This is possible through a constant attention
to the market and its evolution, which required a constant development.
 Clear differentiation from SNS: professionals who are looking for new opportunities know
that the services of a PNS company is the right solution. This is due to the strong
differentiation from SNS that companies in PNS industry underline building their business
and identity. Thus, actors in PNS should enhance the difference between their specific
activities and the more general of a social network. However, adding some SNS’s features
could pre-empt efforts for example by Facebook to enter PNS market. For instance, in a
PNS is important to give the possibility to built your profile which appear as a CV and to
construct your own network with professionals, and the chance to utilize tools useful also
for your job.
Strongest point of competition for LinkedIn43
Number of Registered Members: number of individual users who have created a member profile
on the website. The company believes is a key indicator of the growth of the network and reflects
how successfully services and solutions offered to professionals have attracted new members.
LinkedIn realizes than registered members are different from actual members (due to falsification,
etc) but still considers it a valid metric.
Unique visitors: users who have visited the website at least once during a month regardless of
whether they are a member, based on data provided by comScore, (provider of digital marketing
intelligence). For the company, this measure shows the growth in brand awareness among users
and whether useful products and services are provided, thereby increasing engagement of
members and that increasing the sales of the monetized Solutions.
Year 2010 2011 2012 2013
Unique Visitors 65000000 92000000 116000000 139000000
% increase / 41,5% 20,6% 19,8%
The figures for the chart finish in 2013, because from this year up to now it has been changed the
metric (unique visiting members).
Page views: number of pages on the website that users view. Similar to unique visitors, it is an
indicator for gaining insight about members engagement and effective-value-delivery of the
services provided.
Year 2010 2011 2012 2013 2014 Q3 2015
Page views 5,5 7,6 15 22 30 38
% increase / 38,2% 97,4% 46,7% 36,4% 26,7%
Number of LinkedIn Corporate Solutions Customers: number of enterprises and professional
organizations that are under active contracts for Talent Solutions. This indicator shows the market
43
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Year 2010 2011 2012 2013 2014 Q3 2015
Registered Members 90000000 145000000 202000000 277000000 347000000 396000000
% increase / 61,1% 39,3% 37,1% 25,7% 14,1%

22
penetration in the online recruiting market, the productivity of the field sales organization and the
value that these products bring to large and small enterprises and professional organizations.
Sales Channel Mix: Talent and Marketing Solutions can be sold offline through LinkedIn’s field
sales organization or online through the website. The majority of Premium Subscriptions are sold
online. The offline channel is characterized by a longer sales cycle where price can be negotiated,
higher relative average selling prices, longer contract terms and higher selling expenses.
3.4 Competitive positioning
The examination of the competitive positioning of LinkedIn could start with its placement in
compliance of the product, the internationalization, competitive position and market.
“LinkedIn is ahead of its competitors as it is providing new services, reaching more users
internationally and creating a bigger professional network than the rest. It is also understanding the
importance of being available everywhere, especially with the raising of usage from users of mobile
applications and also differentiating customers inside the PNS market as a whole, with the Talent
Solutions, Marketing Solutions and Premium Subscriptions and making profits based on them
while at the same time attracting users with free services which, on the other hand, represents a
bigger membership and stronger presence on the Web.”44
Strategic group map
LinkedIn provides a wider range of products than competitors in a highly internationalized
geographical scope. However, In the future, also competitors will adopt a more globalized strategy
while at the same time an even wider product range from LinkedIn.
Graph 2 – Strategic positioning
45
Position in the market - Grand strategy
Considering the market growth and the competitive positioning as variables, we could classified
LinkedIn as a company in a rapid market growth with a strong competitive positioning. Instead, its
competitors could be seen in a weak competitive position.
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Graph 3 – Position in the market
46
Ansoff matrix
According to Ansoff matrix, LinkedIn products could be classified “new” only at the beginning of its
business. While up to now, without forgetting the investments in research of new tools and
application for its customers, it is providing already existing product, in a substantially recent
market as PNS is.
Graph 4 – Ansoff matrix
47
3.4.1 Competitors’ short analysis
LinkedIn is the biggest professional social network in the world, both in term of members and in
term of revenues. In few years the company has taken off, and now it is leading in the world. But,
naturally, due to a growing industry as PNS, many are the competitors (and followers, if we
consider LinkedIn an innovator).
Viadeo
The linking service Viaduc was created in 2004, becoming Viadeo in 2007. Now the Group, with 65
million members worldwide, the firm is the world’s second-biggest professional social network. It is
leader of PNS in its home country, France, with 10 million members and first-provider in China with
25 million48
.
“Adopting a multi-local approach to business, the Viadeo Group has focused its development
particularly on France, China, Russia, and North Africa. The Group is now a major leader in each
of these regions and currently operates under two different brand names: Tianji in China and
Viadeo in the rest of the world.
Today, the Viadeo Group has 450 employees spread across five cities: Beijing, Casablanca,
Moscow, Paris, and San Francisco.”49
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Viadeo corporate website: http://corporate.viadeo.com/en/about-us/group-fact/
49
Viadeo corporate website: http://corporate.viadeo.com/en/about-us/the-group/

24
As a reminder, Viadeo’s total revenue consists of three different types of revenue:
 Revenue from Recruitment and Training Services, an area of strategic focus for the Group,
incorporating three main product families: job offers on the Group’s website and mobile
applications, access to the member database via a specialized interface to meet recruiters’
requirements, and “Employer Brand” communication products;
 Revenue from Marketing and Advertising Services, which includes marketing in the form of global
communication campaigns of advertising products such as banners published on the Group’s sites
and emails sent to members. These operations target members based on certain profile criteria;
 Revenue from online memberships. Based on a “Freemium” model, the Group offers members
the option of purchasing an online subscription, which provides access to a broader range of
features reserved for “Premium” members.”50
Picture 3 – Viadeo’s figures
51
Xing
Xing is another competitor of LinkedIn. It is the largest business network in German-speaking
countries with already 15 million members worldwide.
“XING is the social network for business contacts. XING has 9.7 million users in its core German-
speaking market, 9.2 million of whom are XING platform members. XING is a platform where
professionals from all kinds of different industries can meet up, find jobs, colleagues, new
assignments, cooperation partners, experts, generate business ideas and get informed about latest
industry topics. Members can meet and exchange views in over 74,000 specialist groups, while
also getting together at networking events. The platform is operated by XING AG, which was
founded in Hamburg, Germany, in 2003, has been publicly listed since 2006, and listed on the
TecDAX since September 2011. In December 2010, XING acquired Amiando AG, a Munich-based
company and Europe’s leading provider of online event management and ticketing. Since the end
of 2013 the company has been trading under the name XING EVENTS GmbH. The acquisition of
Kununu, the leading platform for employer reviews in German-speaking countries, allows XING to
extend its position as the social recruiting market leader. At the start of 2015 XING also acquired
50
2015 Q3 releases from Viadeo financial webpage: http://corporate.viadeo.com/wp-
content/uploads/2015/11/PR_VIADEO-Q3-2015-VF-EN-03112015.pdf
51
Viadeo corporate website: http://corporate.viadeo.com/en/about-us/group-fact/

25
Intelligence Competence Center AG, including its Jobbörse.com website which is the largest jobs
search engine in German-speaking countries with over 2.5 million jobs.
The company currently employs more than 700 people and is still on the lookout for new talent to
join the team.”52
Xing offers to Premium members many professional features for their professional network: see
profile visitors along with detailed statistics, access the advanced search, enjoy prominent
placement in member searches, take advantage of great partner deals, and much more.
Among the services of Xing you can find marketing (ProJobs), hiring (E-Recruiting) and advertising
(Display ads, Cooperations, XAS) solutions, which help professionals and firms to develop.
3.4.2 Maps of the competition positioning in PNS market (2014)
Picture 4 – Competition positioning map
53
To build this competition positioning map for PNS have been analyzed “127 countries with Alexa’s
data in order to obtain the top professional network in each one of them. LinkedIn is leading in 91
countries. Xing is the main one in Germany and ties up with LinkedIn in Austria. Viadeo is the top
one in Cameroon, Madagascar, China (through Tianji) and Canada (through Unyk). Poland’s top
professional network is GoldenLine.
LinkedIn’s kingdoms are painted with blue (darker as it is closer to the top 10 sites). Viadeo’s ones
are coloured with orange, while green was reserved for Xing’s (Germany) and yellow for
GoldenLine’s (Poland). We did not include Mixi as it’s not exactly a professional network.”54
For details:
http://blogs.alianzo.com/socialnetworks/2014/03/20/world-map-of-top-professional-network-
linkedin-xing-and-viadeo/
3.4.3 Competitors’ growth
Viadeo
From the latest Viadeo’s quarter financial release of 2015 we can find out that, as stated Dan
Serfaty, Viadeo CEO, “Viadeo’s corporate activities (B2B activities involving both companies and
professionals) outside of China were up by 14.4% in the third quarter of 2015. Within this area of
activity, marketing/advertising services grew by an impressive 53.2% in relation to the third quarter
52
Xing corporate website: https://corporate.xing.com/no_cache/english/unternehmen/xing-ag/
53
http://blogs.alianzo.com/socialnetworks/2014/03/20/world-map-of-top-professional-network-linkedin-xing-and-
viadeo/
54
http://blogs.alianzo.com/socialnetworks/2014/03/20/world-map-of-top-professional-network-linkedin-xing-and-
viadeo/

26
of 2014. [...] Turnover outside of China was down 4.4% compared with the third quarter of 2014
and this drop is closely linked to the continued decrease in online subscriptions. This loss will be
countered by the development and commercialization of our new, “vertical” paid services (such as
the launch of our platform dedicated to freelance professionals in September 2015). Overall, we
are still taking strides to align our business model with the latest developments in the professional
world. As such, the emphasis placed on corporate development activities and the mobilization of
our business capabilities represent our key areas of focus for the coming months. [...] With the
continued development of company and professional-centred B2B activities, both of which
represent important areas of growth for Viadeo, we have complete confidence in this model’s
ability to generate results, firstly as a complement to and subsequently as a replacement for our
subscription activities and services to individuals.”
Table 3 – Viadeo’s 2015 Q3 revenue
55
The group’s consolidated revenue levels to the end of September 2015 remained fairly stable (-
2%) compared with the same period in 2014.56
http://corporate.viadeo.com/wp-content/uploads/2015/11/PR_VIADEO-Q3-2015-VF-EN-
03112015.pdf
Where Group stands for Viadeo + Tianji (China).
Xing
“XING AG is the leading social network for business professionals in German-speaking countries
(DACH) with close to nine million members.” Paid memberships (subscriptions) are the core
business, and allow them to tap into new markets while retaining high levels of profitability. They
have expanded the e-Recruiting and Events divisions and established XING in these markets. In
German-speaking countries (DACH), far fewer people use online business networks than in
neighbouring countries, thus Xing foresee excellent potential for growth.57
XING AG, increased its third quarter revenues of 2015 by 17 per cent to €30.5 million (Q3 2014:
€26 million), where every segment of the business contributed to this growth.
“The company’s core segment, paid memberships, continued to grow strongly with an 18 per cent
increase from €15.6 million in Q3 2014 to €18.5 million in Q3 2015. During the first nine months of
the current financial year, XING acquired more than 34,000 new paid members, which is an
increase of over 30 per cent compared to the same period in 2014 (25,800). This increase means
that a total of 869,000 members were using XING’s paid B2C products (Premium and ProJobs) in
the DACH-region as of the end of September.”58
XING CEO Thomas Vollmoeller said: “We grew in every segment of the business again during the
third quarter. What’s particularly pleasing is the fact that more and more people are opting for our
55
56
57
Xing financial webpage: https://corporate.xing.com/english/investor-relations/
58
Xing financial webpage: https://corporate.xing.com/english/investor-relations/

27
Premium products, which is reflected in our strong growth figures for that segment. Our sustained
member growth also shows that an increasing number of people see XING as a fundamental part
of their everyday life.”59
Others
Analysing the possible competitor of LinkedIn is quite complicated. First of all, because the concept
of PNS is not clearly defined, and there is not a substantial difference with SNS as for example
Facebook. Then, due to the fact that ever more new competitors arise in the market, and the
possibility to grow is rapid.
Connected with the interrelation of this two point there is the new service which Facebook has is
program to launch. “Facebook at work” is the name of the new professional version of the social
network. “It is expected to launch in the coming months, after spending a year in tests. [...] The
new service, geared towards workplace collaboration, is nearly identical to its ubiquitous social
network, with a scrolling news 'feed', 'likes' and a chat service.
However, Facebook at Work users will maintain special profiles that are distinct from their existing
Facebook profiles.”60
The great potential of the PNS market has lead also giant as Facebook to intervene. The possible
scenario of the competition for LinkedIn seems to be upward.
4. COMPETITIVE STRATEGIES AND RESOURCES
4.1 Generic competitive strategies
LinkedIn’s competitive strategy focuses mainly on a strong differentiation with other social
networks, and also with other business social networks. In order to success in this challenge the
company has created a very strong and differentiated image of itself. Moreover, has already
explained before, LinkedIn’s competitive strategy consists also in adding value with a larger
products/services disposability for its members, through acquisitions and joint-ventures.
The following two paragraphs describe briefly the differentiation strategy.61
4.1.1 Differentiation strategy
LinkedIn has created a niche for itself in the professional world over the last few years. It has
differentiated itself from other social networks, such as Facebook and Twitter. In fact, it focuses on
professionals with specific business purpose in mind rather than just social network. It employs a
“fermium” business model wherein it spent its initial years to build up the user network by offering
free services and LinkedIn Jobs and Paid Subscription to start make revenues. LinkedIn’s free
services, in a sense act as a base for its premium services. Fostering viral member growth and
creating a professional record of all its members is critical for the success of its premium services.
Moreover, LinkedIn expanded partnerships with Twitter, CNBC, Business Week and New York
Times. Wanting to be seen as the hub for professional conversation. LinkedIn is also continuously
innovating itself through acquisitions for enhancing its services and adding of new features to its
repertoire.
4.1.2 B2B focused
The table below shows the effective social media platforms, according to marketing operators of
US, sales channel primary, April 2011.
59
Xing financial releases: https://corporate.xing.com/no_cache/english/press/press-releases/details/article/xing-
continues-growth-course-in-third-quarter/339/33e0ec0ff5e662cf142919cc7fcf6f42/
60
http://www.dailymail.co.uk/sciencetech/article-3353822/Facebook-service-aimed-professionals-launch-coming-
months.html
61
LinkedIn presentation: http://www.slideshare.net/jkwong5/linkedin-presentation-5150716

28
B2B B2C B2B/B2C
LinkedIn 65% 23% 46%
Blog 63% 69% 63%
Twitter 53% 58% 59%
Facebook 47% 77% 80%
YouTube or other shered video 47% 51% 64%
Slideshare or other shared presentations 21% 12% 18%
Delicious or other social bookmarking 14% 29% 24%
Flickr or other shared foto 9% 21% 13%
Scribd or other shared possibilities 9% 10% 9%
Table 4 – Effective social media platform
62
As it is possible to see in the table, LinkedIn is the more effective social platform for B2B
commerce. But it is not the best for the B2C commerce. This is in line with the strategic choices of
differentiation that the company has operated.
4.2 Resources and Competencies analysis63
4.2.1 Internal analysis
In this section, there are identified the internal resources of the company in order to determine the
value creation in LinkedIn. So, with value creation being the key goal in at the company, return on
invested capital (ROIC) is widely assumed to be one of the core components driving the value in
any company. One of the key drivers of a high ROIC, is the company’s competitive advantage.
Therefore, identifying the available resources (physical, human, intangibles, financial) in the
company, along with the uniqueness of these resources, will be useful in assessing LinkedIn’s
competitive advantage.
4.2.2 Social loyalty
Firstly, product differentiation plays a significant role in raising entry barriers. Research show that
users of different online social networking sites are increasingly spending more time on the same
site through social interaction features and sites from advertisers. One out of every six minute
spent online is now used on social networking sites alone, confirming the overwhelming presence
of sites such as LinkedIn, Twitter and Facebook. These sites have created massive customer
loyalty among their member bases with continuous development in specialized features and
applications. Moreover, all of these sites were first‐movers on a global level within each of their
field. As history shows, getting there first means absolutely everything in the online social
networking industry. Already in 2006, the online social networking industry was comprised of
significant players with strong brand awareness. This strong brand awareness has led to a high
degree of customer loyalty globally through 2009 up until today. Thus, with highly differentiated
products, established firms with a high degree of brand awareness and customer loyalty
characterize the industry requiring potential new entrants to spend heavily in order to overcome
existing customer loyalties. This effort will most likely involve severe start‐up losses and great risk
of failing.
4.2.3 Switching costs
Although switching costs traditionally involves a one‐time financial cost for the buyer in switching
from one supplier to another, this concept can be applied to the online social networking industry in
terms of both economic switching costs as well as one‐time switching costs in time. Since features
on online social networking sites can be vast and functionalities usually are rather diverse, users
will be required to learn and interact on an entirely new interface. This might result in a significant
cost in terms of amount of hours. Moreover, with advertisers constituting an immense amount of
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MarketingSherpa “2012 Search Marketing Benchmark Survey – SEO edition” August, 18 2011
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Global strategy of LinkedIn: http://www.slideshare.net/muneetbhatia/global-strategy-linkedin

29
revenue for most online social networking sites, the requirements of these advertisers to learn a
new advertising system might also result in severe switching costs. This is obviously also a result
of strong
loyalty, which has been built through years.
4.2.4 Cost disadvantages
A third dominant factor applies to cost disadvantages. Established firms in the online social
networking industry may have cost advantages, which are not replicable by potential entrants
regardless of their size or potential attained economies of scale. One apparent and significant
factor, which has been characterizing the industry during the past years falls within the category of
“proprietary product technology” described as “product know‐how or design characteristics that are
kept proprietary through patents of secrecy”. With the foundation of Facebook in 2003, growth in
patents that applies to social networks has exploded. More specifically, the patents apply to online
social networking applications. Obviously, this development makes it harder for potential new
entrants to imitate current online social networks since the different applications and features are
increasingly being protected by patents. Applications and features which, combined, constitute the
actual platform and product.
In conclusion, there are several issued patents being owned by significant players in the industry.
This poses as a significant entry barrier since the cost of developing a product fulfilling the same
need, as other online social networks would be immense due to the fact that applications and
functions cannot be imitated easily due to patent protection.
4.2.5 Company profile and internal analysis
A description of LinkedIn’s overall strategy can be useful in identifying the company’s future
direction and essential components in obtaining excess returns. According to LinkedIn, the very
cornerstone of their strategy is to first and foremost focus on their members. The company
emphasizes the fact that it provides the far majority of its solutions to its members and no cost and
LinkedIn believes this approach provides the optimal path for continuing to increase their mass of
users resulting in beneficial network effects. These network effects are believed to promote a
larger utilization of the company’s solutions and, hence, high level of engagement for all individuals
and corporations involved with the company meaning that the value increases for the members
when making use of the platform. Some key elements in LinkedIn’s strategy include:
- Faster viral member growth
- Work wherever its members work
- Increase monetization while creating value for members
- Expand its international presence
With the number of members currently more than 400 million, LinkedIn wishes to boost growth in
its member base virally through initiatives such as registration optimization, enhanced search
engine optimization and integration with different applications online and on smartphones.
Secondly, LinkedIn will employ more developers to make LinkedIn accessible on an increasing
number of online platforms and devices making the products available everywhere. Thirdly, the
company intends to increase its monetization through increasing efficiency and effectiveness in
identifying potential candidates for companies purchasing hiring solutions. As a final key
cornerstone of the strategy, LinkedIn Corporation expresses a great desire to expand its
international presence and currently sees significant growth in its international member base. The
international expansion strategy should be achieved through making the platform available in more
languages and develop the brand through expanding its operations, sales and technical support to
more international locations.
Human resource aspects of the company determine potential competitive advantages for the
company. In this regard, the founding team of LinkedIn consists of extremely experienced and
skilled entrepreneurs and executives with experience from establishing some of the most
successful companies in Internet history. With Reid Hoffman being characterized as one of the
greatest company builders of our time along with lead developers and executives from both PayPal
and SocialNet, LinkedIn is believed to have an enormous competitive edge in this area. Moreover,
a direct consequence of a strong team of developers is that LinkedIn has developed and

30
possesses advanced technology entailing sophisticated algorithms, which directly increases the
value creation for users, advertisers and firms looking to hire.
Addressing the intangible resources at LinkedIn’s disposal, it is obvious that the company quickly
has managed to build a strong brand awareness and equity on a global scale. The LinkedIn brand
is widely recognized making it extremely difficult for potential new entrants attempting to capture a
share of the market revenue.
Lastly, about the financial resources of the company we have already described before. On
financial resources it is possible to affirm that LinkedIn financial edge will enable the company to
continue to leverage its online platform and network worldwide and potentially develop new
products and expand into new markets where beneficial opportunities arise.
4.3 Value Chain analysis64
First of all, for a firm whose business relies on social media, it is possible to talk of Value Chain
which puts the consumer in the heart of this model.
Social Media enables the consumer as an actor of the firm’s development and he or she becomes
part of the company’s value chain.
The following picture sums up the main points of LinkedIn Value Chain:
Picture 5 – Value chain
65
As the picture depicts, primary activities in their value chain are the following:
Open Inbound Logistics
In LinkedIn’s case, the raw materials are the different members of its website. LinkedIn members
are professionals or students looking to increase their network in order to enhance their
opportunities. The more the quantity and the quality of the members they attract, the more they will
possess relevant data which will become the core of their business model in order to develop their
three offers: premium subscriptions, marketing solutions and hiring solutions.
Co-operations
In a social media company, the Value Chain is responsible for creating value by networking with
other professionals. As mentioned above, the Value Chain will generate relevant data and
information which will give value to the firm’s offers.
Outbound Logistics by Customers
64
65

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Regarding how its service is distributed, LinkedIn does not manage this part of the value chain
directly. In fact, it is not part of its core business to deliver the package which contains their
service. This activity is being handled by complementary industries such as computer
manufacturers or phone, tablet manufacturers and service providers for mobile use of the service.
Moreover, these stakeholders might offer complementary services to consumers and add value to
LinkedIn’s services. What they provide to these stakeholders is the technical platform that
members and other customers use in order to enjoy their services.
Viral (Marketing and Sales)
LinkedIn hired an external firm to work on sharpening its positioning, expanding marketplace and
public perception of the site. However, we cannot consider that this activity is outsourced as it was
more a consulting work. LinkedIn has own marketing offices in many markets.
LinkedIn does not focus only on subscriptions in order to earn revenue. The other activities that
create their revenue are sales, hiring and marketing solution.
The key of their business model is to attract consumers, not necessarily premium subscribers.
Indeed, enhancing their customer base will make their hiring and marketing solutions more
valuable to potentials clients.
Communities of Practice (Services)
For LinkedIn, this activity is critical to developing their member base. As a result of poor service,
they could indeed decide not to be active on their platform and that would damage the viral effect
for enhancing their value.
Multi-stakeholders infrastructure (Firm infrastructure)
LinkedIn Corporation performs such activities as finance, accounting, auditing, general
management, strategic planning mainly by itself. Although there are functions, which the company
prefers to outsource. For instance, the company hired Atomic PR to provide public relations
services. Also, LinkedIn outsources legal services with the acquisition of law firm Cooley LLP,
which also helped LinkedIn to go public in 2011. All mentioned services are outsourced in the USA,
because the location of headquarters.
Customer network management (HRM)
LinkedIn Corporation recruits employees using its own recruitment team. The majority of LinkedIn’s
recruiting efforts take place on LinkedIn.com. Also the company head-hunts some persons for
crucial positions from big, international technological and consulting companies such as Google,
Yahoo, Booz & Company.
Co-Creation development (Technology development)
LinkedIn Corporation provides opportunities to customers of LinkedIn and even to people all over
the world to create new and develop existing features of its social network. The company maintains
a LinkedIn Engineering Blog and LinkedIn Labs. The goal of the blog is to share the latest
technological developments at LinkedIn, discuss them and update. LinkedIn Labs hosts a small set
of projects and experimental features built by the employees of LinkedIn. It solicits feedback from
people in order to improve these projects. These are bright examples of co-creation development.
Design of LinkedIn is developed by internal specialists as design is considered to be one of the
main factors of success in e-business.
LinkedIn’s team works on and develops special systems, which facilitates processes for flow and
storage of information: information retrieval systems, the social graph system and supporting data
infrastructure.
Open procurement
Procurement activities of LinkedIn mainly principally include purchasing of different computer
equipment, especially data centres. All data servers, which are purchased by LinkedIn, are
produced by Oracle Corporation, the world leader in database management systems.
Material data centre facilities are provided by Equinix Operating Co.
Moreover, it is possible to consider LinkedIn’s raw materials as each of its members, who will add
relevant information in their profile and by linking with other members, enabling the other activities

32
of the value chain to increase their value. The more this viral effect will occur the more LinkedIn’s
hiring and marketing solutions will become valuable, therefore driving the customers’ willingness to
pay up.
The following picture summarizes the most important points of the LinkedIn Value Chain analysis
above.
Picture 6 – Detailed value chain
66
5. INNOVATION AND COMPETITIVE ADVANTAGE
LinkedIn has revolutionized the point of view about the concept of social networking service: from
SNS to PNS. No longer just a virtual place where images, video and news about the private life,
but the Company has been focused on the business area, bringing in the spotlight the professional
figure of the individual. In our opinion, this is the real innovation made by LinkedIn, which has been
achieved through the enormous potential of a business sector like this: an industry that has just
begun the growth stage of its industry life cycle.
The following paragraph of this paper will try to define and identify the product and process
innovation of LinkedIn, with the correlated technology-based classification. Then we move to
describe the potential strategic, organizational, and marketing innovation for the Company.
5.1 Product and process technology-based innovation
5.1.1 Product (service) innovation
Among the services offered, LinkedIn could be considered innovator because it has found the way
to make profits through a virtual platform completely free, as a social network site is. In particular,
offering additional paid services for users (clients) who desire to utilise specific instruments for
specific purpose in the professional field. As already discussed in this paper, LinkedIn’s services
are sales solutions, hiring solutions and marketing solutions, which allow us to state that LinkedIn
could be considered an innovator in PNS industry.
66

33
5.1.2 Process (supply) innovation
In the process innovation, we have analysed the situation of LinkedIn and we have found some
interesting point of discussion. In we consider LinkedIn as a supplier of services, the professional
social network could be seen as a new way to employ, a platform through which firms can hire new
workers with the payment of a certain sum for the utilise of LinkedIn’s services. Therefore, we see
in LinkedIn a process innovator, for its specific industry sector.
The combination of the two mentioned innovation (product and process) lead to the competitive
advantage for the Company, despite not having any technological innovation.
Picture 7 – Management of innovation
67
5.1.3 Technology - based industries: classification
If we should classify the PNS industry on the technology-based view, we could state that this is a
medium-low tech industry because the competition is based on many key success factors, and
technology and capability to innovate are included but not so determinant as for other industry.
Naturally, new technologies can influence and modify the key success factors in some way, and
make the capability to innovate more important.68
5.1.4 Incremental and radical innovation
LinkedIn can also be classified as an incremental innovator, due to the fact that its industry, PNS,
has arisen from the SNS, improving some features and enhancing existing practises. A new sort of
social networking service with a professional point of view.
5.1.5 LinkedIn and the innovation process
According to the innovation process proposed by Joseph A. Schumpeter, after the diffusion of the
innovation follow the adoption by the demand side, and the imitation by the supply side.
In the case of LinkedIn, its efforts to spread itself as much as possible have been paid back by its
dramatical diffusion and adoption among professional users all over the world. This reward has
been confirmed by the constant increase in registered members.
However, this relatively new and growing market of PNS has attracted contemporarly also many
competitors already present (Facebook) or not (Xing, Viadeo) in the SNS industry.
The result of the imitation in PNS industry are successful cases like Tianji.com (then bought by
Viadeo), the major PNS in China, but also some failure cases like edWeb.net, a PNS for
educators, which has not really got a great success. Here, as regards the barrier to imitations from
67
Private slides from an academic lecture by prof. G.Marchi at UNIMORE
68
Private slides from an academic lecture by prof. G.Marchi at UNIMORE

34
LinkedIn, they seem to be substantially economical, with the IPO which has probably laid down the
foundations for a wealthy future. Nevertheless more other factors have to be bear in mind like
multidimensional competitive advantages and complex bundles of resources and capabilities. The
success of LinkedIn has to be found in constant investments to maintain its competitive advantage,
and is confirmed by its mission and its vision.
Up to now, it seems that comparing the success of LinkedIn, considered an early mover, and the
followers, the former has not yet strong rivals. But the future of this industry is still to be written.
Moreover, in the PNS, a standard has not yet been well established, despite the quite common
practice to offer the same type of services: premium subscriptions for users and to enter hiring and
marketing solutions for firms. But this can be seen as a natural consequence of a loose control on
some kind of standards to maximize the market acceptance.
5.1.6 LinkedIn and lead user innovation
In the case of LinkedIn, we cannot observe a case of firm which utilize the lead user innovation.
Otherwise, is the Company itself that help the firms to find the right lead user for them.
LinkedIn provide also a tool, which we have described in previous sections, called LinkedIn Lead
Accelerator which “allows you to deliver high-quality leads to your sales teams by engaging
prospects anywhere online with relevant ads and content”.69
5.2 Strategic, organizational, and marketing innovation
Definitely, we can assert that LinkedIn has discovered, or better, exploited a new sector.
PNS has became a real alternative for those who were looking for professionalism in social
network. Due to this evolution of SNS into PNS, LinkedIn got the opportunity to develop new
sources of competitive advantage has already discussed. In this element we found the strategic
innovation of LinkedIn, which is part of the organizational and marketing innovation.
Finally, LinkedIn should have also been considered as marketing innovator, in particular if we
consider the marketing both a locus and a source of innovation.
In the former case, is interesting both the “who to market to” view and the “what to market to” view.
On one hand, LinkedIn has innovated changing the position in the market from the classic SNS
industry to the PNS industry, segmenting more the market of the social network and identifying the
professional figure worldwide. On the other hand, LinkedIn has innovated also the content, in
particular with the already mentioned product/service innovation, and also with some new kind of
promotion innovation with lot of possibilities for the interested firms.
6. PERFORMANCE
In this section of the paper will be discussed the financial performance of the company with an
analysis of the recent years, a comparative analysis with its major competitor (Xing) for the period
2008-2011, a growth analysis, and a risk analysis.
This analysis aims to create the overview of the historical trends and performances that have taken
place serving as the very foundation for creating profound hypotheses about future performance in
conjunction with the strategic analysis.
The analysis will start with the financial performance of the past years following the official
publication on the corporate website of LinkedIn, in the financial section, of the Quarters’ results
from 2009 to 2015. This will include Revenue, Adjustment EBITDA, Margin, Key values metric, and
Guidance.
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LinkedIn corporate website: https://business.linkedin.com/content/dam/business/g/en-us/pdf/lms/linkedin-lmn-
en-us.pdf

35
Next, the section will turn to focus on the financial comparative analysis versus Xing, with a trend
analysis, and common‐size analysis for Income statement and balance sheet.
In this point are very important the differences between IFRS (International Financial Reporting
Standards) and GAAP (Generally Accepted Accounting Principles) which have to be considered to
spot the potential differences in the presentation of the data that should be kept in mind during the
company’s evaluation. This is especially important given that Xing, main competitor to LinkedIn is
delivering results in the IFRS standards. Due to the unavailability of data from Viadeo, for the
period considered for the comparative analysis (from 2008 to 2011), the company’s performance
and, hence, accounting standards will not be considered in the financial analysis. Moreover,
LinkedIn mentioned explicitly the German firm Xing AG to be a competitor.
As previously stated, the comparative analysis (from 2008 to 2011) will be performed according to
GAAP principles.
Subsequently, the reorganization of the income statement and the balance sheet will take place
where the operating, non‐operating as well as financing elements will be reclassified (see
Appendix 4).
Before moving forward with forecasting of future performance, we will make sure to include
comments regarding the general level of growth in the case of LinkedIn.70
The final sections of the financial analysis is consisting of the growth analysis and risk analysis,
with an overall view of LinkedIn. The first is very important to foresee the canvas of the next years
through a look of the growth pace. The second gives insights concerning the various risk factors
that LinkedIn could face.
6.1 Financial performance (3-4 years analysis; comparative analysis)
6.1.1 Financial Analysis
The financial analysis is based on the Quarters’ results from 2009 to 2015, which are released on
the corporate website of LinkedIn, in the financial section.
Every LinkedIn Quarter Earnings Call is composed by: key value metrics, revenue, adjusted
EBITDA and margin, Non-GAAP adjusted EBITDA reconciliation, and guidance.
Revenue
By merging the data from LinkedIn Quarter Earnings Call, from 2009 to 2015, it clearly emerges
that LinkedIn faces a continuous growth in its revenues.
In fact, expect for the Q1’15 where the figures were less than the Quartile before instead of major
expected revenues, it can be stated that LinkedIn has incessantly increased them, as shown in the
Figure 1.
It is also interesting to notice that after the IPO (2011), its revenues’ growth rate became higher,
while the attack on the LinkedIn website and platform in 2012 seems to have had no effects.
70
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