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LinkedIn, widely known as the #1 professional networking website globally, has a large and rapidly growing base in India and is now establishing a local presence in the country as well. Alexa (a source I would at best consider indicative), ranks it in the top 15 websites in the country in terms of traffic and ~15% of the traffic on the website seems to be from India. What I really like about the company is a very enviable Revenue per employee ratio, something that definitely speaks of scale in the internet industry.

Very logically, it is also pulling down the cost of its subscription packages, which so far, clearly mirrored a US-centered pricing strategy. This should definitely make it a lot more popular among the monetizable segments of its customers viz the recruiters. It will be interesting though to see how LinkedIn makes its way into the country.


Why Orkut or Facebook are not the biggest threat!

This Mint article, in my humble opinion, rather naively suggests Orkut and Facebook (with a professional networking app, of course) as principal competitors to LinkedIn. I disagree on the points made there on more than just a few counts.

1. One third-party app out of a million, focusing on professional networking, will not transform either of these products overnight into a professional social network

2. I have my doubts on the success of a professional networking app on Facebook/Orkut. Utilitarian apps exist on both these networks even now but the majority of the users continue to be obsessed with social gaming (think Xynga) and quizzes

3. Facebook has a better shot at monetization with a Cyworld-like virtual currency model and is already headed in that direction. I don’t see professional networking as being the #1 money spinner for them anytime in the near future.

4. The absolute lack of clutter is something that appeals to me as a serious professional networker, an aspect notably missing in Orkut or Facebook. While that may work for a general purpose social network, I want to keep my navigational challenges at a minimum while networking professionally.

5. Finally, there is that minor point about brand perception. No number of professional networking apps on Facebook is going to make me start perceiving Facebook as the place to network professionally.

The real competition

I don’t see Indian professional social networks (TooStep, PeerPower) as any competition for LinkedIn. I don’t even see them as candidates for alliances. I still can’t understand the need for launching so many carbon-copy social networks when the first mover advantage has clearly been taken by a player.
LinkedIn is a social network all right but rather curiously, it doesn’t monetize the way most other social networks do. Ultimately, competition really kicks through when it comes to the monetization model and the segment whose monetization model is most similar to LinkedIn is the online jobs segment.
I see Naukri and Monster as the real competition for LinkedIn. LinkedIn monetizes through recruiters in much the same way that these job portals do. Yes, the business models are very different; we have active job seekers on one site and at best, passive job seekers and non-seekers on the other; but at the end of the day, both will be competing for the same wallets with the same segment of end users (recruiters and HR professionals). Principally, LinkedIn is a social network with greater engagement than any jobs site and solving for a lot more use cases but purely on its current monetization model of charging recruiters for access to candidates, it is directly competing with Naukri. LinkedIn might do it with a P2P model but any online jobsite with a P2A (Peer to Application) on one side and an A2P on the other side is essentially solving for the same use case.

How could the market change?

This could signify a change in the online jobs market with referral based jobs increasing in number and background checks being engineered on LinkedIn itself. However, the basic market dynamic of the middleman will probably not change. The online jobs market (indeed, the entire online classifieds space as a whole) in India is interestingly different from its counterpart in many western countries in the fact that the middlemen (recruitment agency in case of jobs, real estate brokers in case of real estate and, ahem, family / well-meaning relatives in case of matrimonials ) continue to exist even on a platform that is supposed to aggregate the end users. The entry of LinkedIn doesn’t seem to visibly challenge that scenario and all the so-called value creation associated with disintermediation is unlikely to kick in.

The Asian prospect

It will be interesting to see LinkedIn’s progress in other emerging markets, especially South-East Asia, where the rules of social networking and social gaming are being redefined. There are 2 factors in particular that could really work for the company:

1. The mobile angle: Friendster, having failed in most geographies, was the #1 social network in many Asian countries, until Facebook launched its mobile version and took over many of these markets overnight. Indonesia, in particular, is a case study worth exploring. LinkedIn will have to have a relevant mobile strategy (and I don’t just mean a WAP site or an Iphone app) to cater to this market.

2. The online jobs scenario: A sizable number of S.E. Asian professionals, especially those in the information and/or services economy look for jobs across S.E. Asia. Their needs are underserved with there being not even a single online jobs marketplace that consolidates all S.E. Asian markets. JobsDB probably comes closest but is largely used in the principal markets of Philipines and Singapore. LinkedIn could be that one unifying professional networking and job-sourcing website that S.E. Asia currently lacks.

It’s tricky for an American internet company to succeed in these markets. Outside search, portals and general purpose social networking, the only internet company that has succeeded notably in terms of traffic in these geographies is Ebay. However, Ebay grew entirely through acquisitions.

It remains to be seen which of the internet majors entering these geographies can really succeed not just in generating traffic, but more importantly in monetizing them in a manner that justifies all the hoopla around the emerging markets.

Social networking is at a point where a lot of us are almost bored to death with the daily launch of new networks. Strangely enough, not many of these social networks, boasting enviable usage and engagement metrics, can really claim to be running on a revenue model which really monetizes off the user engagement on the product. Many have taken the advertising path and it’s clearly not been the best. In the middle of all this, Cyworld from South Korea stands out as an important example of how one can make money off a social network.

South Korea boasts the highest household penetration of broadband internet in the world and online shopping is a huge fad out there with nearly 80% of internet users having shopped online. Cyworld seems to have united the best of both trends by combining social networking with online shopping and emerging as a highly profitable business in a field where Facebook, as the leader, is struggling to break even.

More than 90% of South Koreans in their 20s and more than one-third of the entire population of South Korea are registered users of Cyworld with more than 25 Mn unique users per month. Great stats but not out of the world as far as social networks are concerned. What absolutely bowls one over, though, is the degree to which they’ve monetized this user base.

Cyworld is a lot richer on features than many social networks. Somehow feature-rich seems to have worked for them. Interestingly, Google doesn’t have any significant market share in South Korea and it’s possible that users actually prefer feature-rich and heavy websites, what with the top notch broadband infrastructure that all Koreans have. On Cyworld, every member has a homepage, referred to as a mini-hompy in the Korean Internet world. Basic services on the site are free (as with most social networks) but the site generates close to $250 Mn in annual revenues following a very unique revenue model and makes nearly $10 per user per year (MySpace makes $2-3 per user per year, largely from advertising). Most of these revenues come from the sale of Cyworld’s virtual currency (dotori) which then users use to buy virtual objects to decorate their homepage and accessorize their avatars. Since these digital goods are micro-priced, there are a lot of transactions happening on the site, and given the huge user base, a lot of revenues flowing in.

The craze for virtual goods has resulted in a lot of online vendors setting shop on Cyworld to sell virtual goods. Given the richness of content that the mini-hompy service offers, Cyworld also has a sister service called Cyworld Town where SOHO (Small Office Home Office) owners display their offline goods through videos and graphics on their mini-hompy resulting in online order and offline conversions.

Given low online shopping outside the travel category and low connectivity (thus ruling out feature-rich sites), the model might not necessarily be directly relevant to the Indian scene. There are, however, pertinent points that one can note form Cyworld’s success:

1. A revenue model that monetizes actual actions that user must do to interact with the community can provide a more steady stream of revenues than one where the user has to perform a non-central action (like clicking on an advertisement) for the site to make money
2. Value added services like accessorizing one’s page etc. can be used to good effect on social networks. There is an inherent tendency to go one-up on friends on a social network, especially in showing off popularity, and if a value added service can help users do that, it could prove catchy