Is LinkedIn Ready To Face Competition?

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LinkedIn (NASDAQ:LNKD) could face intense competition from “Facebook at Work”, which was launched in beta version in the beginning of this year and might be rolled out by the end of 2015, [1] and other new entrants such as Connectifier. [2]. While currently LinkedIn competes with other local players such as Xing in Germany and Viadeo in France, given its nearly 400 million strong user base and global presence (spread across 200+ countries), it does not face a serious threat from these local players. However, Facebook@Work and innovative product offerings by smaller start- ups could have the potential to grab a piece of LinkedIn’s pie.

See our complete analysis for LinkedIn

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At the end of Q3 2015, LinkedIn had 396 million members while Facebook has more than a billion monthly active users. As Facebook prepares to launch its professional version, Facebook@work, the popularity of the social networking site can give a head start to its professional version by attracting more corporate users and employees. Although Facebook is banned at several workplaces, the professional version, if separated from its social counterpart, has the potential to become highly popular. If successful, it might be easier for Facebook@Work to surpass LinkedIn’s user base. While Facebook at Work will allow users to connect with professional contacts, its recruiting features are not known. [3]. Currently LinkedIn is the most popular social recruiting website, [4] and we expect it to reach 100,000 corporate clients by the end of our forecast period.

Facebook@Work is still in initial stages and is yet to prove its potential, specially in the social recruiting space. Its success depends on user preference to use the same platform for social and professional networking, engagement levels and innovative features offered. However, it does pose a threat to LinkedIn given Facebook’s wider reach and a better product offering would be key for LinkedIn to counter this threat.

Attractive Innovative Products From Other Players

Talent Solutions is the most valuable division for LinkedIn, and we estimate nearly 60% of the company’s valuation to come from this segment. Revenues of this division depend on the number of corporate customers using the LinkedIn recruitment platform. While the company is using various innovative ways such as using its huge network to identify “known” candidates and ways of tapping passive candidates, other players are redefining the social recruitment space via innovation. A new start-up, Connectifier, is using artificial intelligence and a powerful search software that can search across sources to build several online profiles to find the right candidate.  Connectifier has the capability to crawl across various social media sites to build the most current profile of a person, thus resolving stale data issues faced by LinkedIn.  Both Connectifier and LinkedIn have a similar number of people in their databases but Connectifier claims to have 30 percent more data points per person and hopes to have 100 percent more data points at the end of 2015. [5]. Stale data is one of the challenges LinkedIn faces where Connectifier can capture market share by providing more up to date information. For LinkedIn to be ahead of the game, it has to focus on constant innovation and improve its product offering in the recruitment space.

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Notes:
  1. Facebook is About to Take the Training Wheels off Facebook at Work, recode.net, September 2015 []
  2. Ex Googlers Raise $6M for Connectifier, An AI Approach To Recruitment Search, Techcrunch.com, June 2015 []
  3. What is Facebook at Work? Can it survive in the workplace ?, alphr.com []
  4. 2014 Social Recruiting Survey, Jobvite []
  5. Is Connectifier the Next LinkedIn For Recruiters?, CIO.com,  November 30, 2015 []