The Internet sector is rife with companies that seem to have great product ideas, but can’t seem to monetize their offering. Strategically, this is almost embarrassing. I honestly can’t think of another industry that has this issue (feel free to clue me in if you know of one). While most small businesses and startups fail to ultimately turn a profit, Internet startups seem to stand alone in not having a clue as to what they intend to sell in the first place. It seems the only exit strategy for these startups is to be bought by a larger, cash rich company that offers something others are actually willing to pay for, like Microsoft, Google or Amazon, where they become a permanently free service or are absorbed into some larger tech stack as simply another feature. At any rate, because this blog is about strategy, many of the posts can be very critical. So, in the interest of balancing things out with a little optimism, I’ve decided to start a series called “Joel’s Picks” The companies I plan to highlight in this series are those that IMHO have real substance (read not hype) to their business model and exemplify sound business strategy and execution (and only time will tell if my judgment is sound).
LinkedIn recently announced it’s first baby step into the open social network platform game, and received no end of criticism in and around the social network futurist blogosphere. So, I’d like to go on the record as saying that while this criticism may be accurate from a technology evolution viewpoint, it is absolutely wrong from a business strategy point of view. LinkedIn is right to move slowly, because, a) their target audience is not using it for entertainment and doesn’t need all the newest gadgets now, b) isn’t on the bleeding edge of Web tech sophistication, and c) will not be as forgiving as Facebook’s if they screw up (and they could still screw up…social networking trust and privacy are risky business.)
So, why LinkedIn? Find me another social network that has a real chance right now of becoming huge based on subscription revenue alone. When I think of the recent trials and tribulations of Facebook, my first reaction is that “you get what you pay for.” While I know that most users do not pay the subscription fee on LinkedIn, this does not damper my optimism. The fact that some do exemplifies the value of the service. I can remember when Salesforce.com was free for licenses of 5 users or less; it isn’t anymore, in fact the license price is higher across the board. Too many social networks are going after target markets that simply don’t pay. Or at least they think they won’t. Haven’t these guys ever heard of market segmentation??!! I am talking to you Facebook.. My main point here is that it is strategically important to put a pricing structure in place that maintains a very low barrier to adoption, but does not preclude future revenue, i.e., users expect that once Facebook is free, it should always be free.
Rather than go on and on…here is a list of some of the things I really like about LinkedIn.
- A HUGE target market that truly leverages the inherent global reach of SaaS.
- A segmented, balanced revenue portfolio based on recruiter posting, limited advertising, and user subscriptions.
- Solves a problem for users, and it not simply entertainment that is used to capture users to solve the problems of marketers (like me).
- 2 and 3 imply that LinkedIn has all of its stakeholders coming and going and they LIKE it.
- Balanced revenue, plus a professional target audience encourages a proactive approach to privacy and trust, limited risk and liability.
- Social relationships/processes mirror their real-world counterparts, i.e., recruiting, networking, getting and giving advice, etc. These processes are enabled, not distorted by the technology or the business model.
- SIMPLICITY in design ala Google
So, please LinkedIn, don’t prove me wrong.