Business of LinkedIn is … business

Business of LinkedIn is … business


By Edward Iwata, USA TODAY

LinkedIn CEO Dan Nye says his company's long-term focus is a key to its success in the dot-com world.

PHOTO By Jack Gruber, USA TODAY

LinkedIn CEO Dan Nye says his company’s long-term focus is a key to its success in the dot-com world.

ABOUT LINKEDIN

2003 by Reid Hoffman, Allen Blue, Jean-Luc Vaillant, Konstantin Guericke

Employees: 154
Registered users: 14 million
Members who are senior executives: More than 1.4 million
Average new members per minute: 25
Fortune 500 companies with executives among LinkedIn members: All 500


Source: LinkedIn

MOUNTAIN VIEW, Calif. — LinkedIn CEO Dan Nye
is pacing in his plain, half-empty office here and excitedly scribbling
diagrams on a white board, like a football coach or a Pentagon general.

Nye — a former executive at Procter &
Gamble, Intuit and Advent Software — is only a few months into his job
as CEO of LinkedIn, a fast-growing start-up that runs the popular
professional-networking website of the same name.

Already he’s facing huge tasks: hiring good
people; keeping a small company of 150 employees running steadily;
warding off rumors of merger talks, or a possible initial public
offering; taking on nearby Palo Alto rival Facebook, the largest online
social-networking site and much-profiled media darling that is luring
business members from LinkedIn.

"So many dot-com start-ups are flash-in-the-pan
companies that weren’t built on core values for the long term," Nye
says. "If you want to build a great company, you need high-quality
people and high-quality products that matter to the world."

LinkedIn is drawing notice as perhaps the next
big thing in the so-called Web 2.0 space of Internet social and
professional networking companies.

With 14 million members in the USA and overseas,
the privately held LinkedIn could haul in $100 million in revenue next
year from corporate and individual subscriptions and advertisements
from Microsoft, Wal-Mart and other companies.

Recruiters from Google (GOOG), Yahoo (YHOO)
and other companies use LinkedIn to seek job candidates, while
individuals use it to broaden business networks and connect with
colleagues, alumni and industry experts.

In recent months, technology blogs have been
abuzz with speculation that large numbers of business people are tiring
of LinkedIn and migrating to Facebook — the online networking home
popular among students and twentysomethings — for their professional
networking.

Serious business

LinkedIn co-founder and Chairman Reid Hoffman
isn’t worried. While Facebook is best known for helping friends share
photos and hook up for dinner, he says that LinkedIn’s members use
LinkedIn for purely business means.

"People like to keep their work and professional
lives separate from their personal lives," says Hoffman, a graduate of
Stanford and Oxford universities. "The functions we provide make
professionals more effective. We don’t give people a way to spend their
entertainment or idle time."

Charlene Li, an analyst at Forrester Research,
says the sites still appeal to different audiences. "LinkedIn is purely
business networking," she says, "while Facebook is a strange
amalgamation of the personal and professional."

Professionals who are very busy and don’t want
to be heavily connected to an online network such as Facebook will
remain loyal to LinkedIn, Li says.

In coming years, LinkedIn hopes to attract the
twentysomethings and teenagers who will keep using Facebook for
socializing, but also try LinkedIn as they grow older and take their
careers more seriously.

Hoffman says he’s friends with Facebook
executives, and they’ve talked about teaming on business-development
deals, but nothing is in the works now. He also says the two start-ups
have no plans to merge, saying that "mergers and acquisitions are
disastrous" in general.

"We’re both very focused on building our businesses," Hoffman says.

William Morrison, a senior Internet analyst at
JMP Securities in San Francisco, says LinkedIn and Facebook aren’t
threats to each other and can coexist in a potential global market of
225 million white-collar professional employees.

In a recent research note to investment clients,
Morrison estimates that LinkedIn’s registered users could grow to 18
million by the end of this year.

"I see no reason why both Facebook and LinkedIn
can’t be successful in the professional networking space online,"
Morrison says. "It’s a big market with very little competition today."

According to Morrison’s report, LinkedIn also
will face strong rivals in Xing.com, a German-based professional site
that says it has 3.5 million users worldwide, and online recruiting
services including Monster.com, Yahoo, HotJobs and CareerBuilder.

With many hoping that the climate for IPOs will
warm up, LinkedIn executives pooh-poohed recent talk that their firm
will sell stock to the public soon. Hoffman says that "we have no
immediate plans to go public."

Nye says the best companies grow to a certain
size, building strong operations and performing well financially before
executives seriously think of going public.

"It’s the Google model," Nye says, referring to the neighboring dot-com giant in Mountain View.

Nye also would not confirm or deny that LinkedIn
has had merger talks with Yahoo or other Internet media companies that
hope to strengthen their professional-networking products. Media
reports that Yahoo offered more than $1 billion for Facebook ignited
speculation that LinkedIn also was in play.

Nye says every business looks at potential
mergers as part of long-term planning, but he wouldn’t give details of
LinkedIn’s strategies.

Starting block

The idea for LinkedIn was born a decade ago,
when Hoffman and fellow Stanford graduate Konstantin Guericke
brainstormed how they could devise an online networking service for
professionals.

In 2003, Hoffman, Guericke and three other
high-tech entrepreneurs launched LinkedIn, which eventually raised $25
million in venture capital from Sequoia Capital, Greylock Partners,
Bessemer Venture Partners and European Founders Fund.

In their first year, LinkedIn drew only a few
hundred thousand users. But by 2005, nearly 5 million people had
joined, adding their professional profiles, résumés and business
contacts to the site.

LinkedIn’s next step? To grow globally. Half its
users live overseas and use LinkedIn’s website in English, so LinkedIn
hopes to add Japanese, Chinese and other languages in the near future.

Hoffman, who just returned jet-lagged from
Tokyo, says he met with tech executives, designers and engineers — all
potential partners. How did he find them? Through LinkedIn.

Says Hoffman: "This is how modern professionals solve their tasks, through our online networks."

 

>BackTack

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