When LinkedIn released their Q4 and 2012 results about 2 months ago, not too much was noted about the impressive increase of HCM related revenue. This marks the first full financial year in which LinkedIn's HCM solutions have brought in more than 50% of overall revenue.
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| From LinkedIn's Earnings call (Slideshare) |
Who is LinkedIn?
So what kind of company is LinkedIn? We all know (and use it) as a professional social network. If you work in the high tech industry, it's almost impossible not to be present on LinkedIn. The network passed the 200M member milestone late in 2012 and now claims that its adding a member every 2 seconds, almost two thirds of them coming from outside the US.LinkedIn makes money by selling advertisement (Marketing Solutions), Premium Subscriptions (which give a user more access to work the social network) and Talent Solutions (basically recruitment on the social network) .
So if you only take it narrowly with the Talent Solutions - LinkedIn is more a HCM company than anything else. If you take a more progressive view of HCM - where social is part of the fabric, then clearly the premium subscriber content should be part of a next generation HCM system, making LinkedIn a full and square HCM company - with 80% of revenue coming from HCM related data and processes. If you then think it through to the ultimate step - if a social network is part of the HCM fabric, then it needs to be externally available, making it a candidate for targeting, marketing, advertisement etc. So you could even argue the marketing revenue is related to LinkedIn's HCM business, but for the sake of this post I won't go there.
How big a HCM company is Linkedin?
If you compare LinkedIn to recent HCM stock market rockstar Workday, the comparison was a big surprise to me:
Metric (all inMUS$) | LinkedIn | Workday |
Q4 2012 RevenueLinkedIn: Excl. Marketing Workday: Only Subscription | 243 | 59 |
Last FY Revenue LinkedIn: Excl. Marketing Workday: Only Subscription | 776 | 190 |
Effectively LinkedIn is running 1.5 years ahead of Workday in HCM revenue... and is profitable.
So why a media company?
The declared direction of LinkedIn has been over and over to become a media company. The recent acquisition of Pulse goes in that direction. But why try to be a media company, when you are effectively a HCM software company, potentially the market leader in next generation recruitment software?
I see two options:
(1) Media is the cheese in the social network mousetrap
To attract professionals to keep their resumes up to date and to come back to LinkedIn, content is key. LinkedIn has paid for some content creation recently, but makes it also easier and easier for members to publish their content. This drives page views, which the company still sees as a key metric.
(2) The executive DNA is not enterprise software
Check out the bios of the executive teams - they are all more media then software, not to mention even enterprise software. Especially where it matters - with the CEO, CTO and product heads. Not that they are not smart enough to figure enterprise software out - but it may not be the instinctive path they have travelled on before.
If you look for proof - checkout the reviews of the pretty much botched Skills & Expertise rollout. While a brilliant idea, have members attest capabilities of other members and build a skills profile - the implementation was a little bit to simplistic is the common verdict. LinkedIn may counter that with the crowd sourcing of the skills you still get a somewhat valid picture - but it remains questionable. Similar for the recommendation / endorsement functionality.Great idea, essential for a professional network - but a little bit too little to really work. Has anyone used the recommenders as references in a serious job interview?
Maybe Weiner is just smarter...
But then there is another option: Maybe Jeff Weiner is just too smart to enter the enterprise software fray and start battling around with the SAPs., Oracle and newer entrants like Workday and Ultimate. Right now I am sure the budget for the payments for talent solutions are flying under the IT radar screen and are paid because it's Linkedin. And with close to half a billion in yearly revenue, that's a lot of money spend on software subscriptions. Why compete with the enterprise vendors when you can get this revenue anyway, with no competition?But longer term...
Longer term I see a challenge for LinkedIn, if they do not extend their HCM functionality. While their core - the professional social network, will remain intact, there will be simply no runway to sell more talent (aka recruitment) licenses. The audience will be saturated, too - you have your members, and your professional users - no growth for the marketing solutions, as no more eyeballs.What would be low hanging fruits for LinkedIn? Performance Management, 360 degree reviews are a natural extension to what LinkedIn has already. eLearning would be an easy add on and plug in, too. Complement and upgrade your skills, get a LinkedIn accreditation, certification.
More risky, but also more rewarding would be forays in Compensation. Why not have members confidentially share salaries and benefits and return them to them (and their employer) in a benchmark? My hope would be also that LinkedIn would make a stab at the portable Employee Profile. With that I mean the capability to maintain a web identity of a professional's skills and abilities, and be able to plug that back into the transactional systems for the information that matters.