Hower, Reid Hoffman and other colleagues from PayPal started LinkedIn in 2002. Back then, Hower said, companies such as Monster.com dominated online job searches. But LinkedIn decided to add a social component to its jobs site – something Monster did not do – and that feature made the service indispensable to users, prompting them to visit more often. People created professional profiles and they linked to other people on the site for networking. “If you think of Monster or a job board, end-users only use it when they are thinking of looking for a job,” Hower points out. Not so with LinkedIn.
Making the site a social network was a risk. According to Hower, the founders believed that it would be a powerful tool, but as trailblazers, they had to invent a new business model that melded jobs services with social networking at a time when the idea was totally new.
As they innovated, they tinkered with LinkedIn’s features. They initially thought that adding photos to user profiles on the site would be a violation of privacy. “That’s something that’s changed over time,” Hower says. “As LinkedIn became more widespread and [better] known among white-collar professionals, people had a clear sense of the brand, and it was less of an issue.” Another change was to let the public access the profiles. Back then, “you could only search people you were connected to. Via the friend of a friend, you could view that person’s profile and contact them. There wasn’t a notion of a public profile.” Now, it is a common feature.
One thing that did not change was a decreased emphasis on advertising revenue, a strategy that fits well with LinkedIn’s business model.
“Unlike Facebook, people on LinkedIn visit the social network to access the ads [ie job listings],” Yildirim says. “Both from the employers’ and employees’ [point of view], it makes sense to be on LinkedIn and pay to advertise jobs and get access to people.” But LinkedIn should ensure that it can handle more growth, she notes. “Similar to Facebook, if LinkedIn grows too large too fast, it may start to suffer from the clutter of people and jobs.” Mollick agrees: “LinkedIn has shown that it can monetise, but it could still run into the limits of exponential growth that Facebook is worried about.”
Hower says that at the time LinkedIn started, the online ad market was much smaller than it is today. Online advertising had gone through an upheaval – an upsurge in the late 1990s, followed by a decline in early 2000s during the dot-com crash. Given the ad environment and LinkedIn’s purpose in connecting professionals and recruiters, the founders decided on a business model that charges workers and companies for expanded access to the site’s career services. LinkedIn would act as a repository of professional profiles for use throughout an employee’s career within a dynamic social network. It was a revolutionary concept. Hower calls it “resume 2.0.”
They were not always sure their ideas would work. “With any tech start-up, you have both confidence in what you’re trying to do and also some uncertainty,” he says. “If we look back to our original business plan, a lot of what we hoped might happen has come to fruition.” While LinkedIn decided not to rely heavily on ad revenue, it does not mean the business model will be problematic for social networks in general. As long as a site can reach millions of users, ads will come in time. “Advertisers lag,” Hower notes, “but they do come.”
