Written by Daniel Latto in Latest News

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December 4, 2013

Running a recruiting firm, I thought that LinkedIn would dominate our industry and put staffing agencies like ours out of commission. They were supposed to change the entire HR platform and become the one and only place HR representatives need to find employees.

In the first week of LinkedIn rolling out their recruiting platform, KAS Placement lost 4 clients. Their initial sign-on was impeccable. Two years after, I see nothing but decline for the site on multiple levels. In order to analyze how and where it may crumble, we must take an in-depth look at what was once touted as the HR and recruitment game changer.

Facts Behind the Website

Started in 2002, LinkedIn became the first social site to successfully allow users to create, manage and share their professional identities online. Founder Reid Hoffman built LinkedIn from the ground-up based on the assumption that Corporate America had a desire for its own Facebook.

He envisioned a place where people could build and engage with their professional networks, access shared knowledge and insights, as well as discover new business opportunities. His assumption was spot-on with what the market desired.

According to socialbakers.com, since inception LinkedIn has acquired over 92 million users in the United States. To generate revenue from that user base, LinkedIn offers hiring solutions (under the brand names LinkedIn Corporate Solutions and LinkedIn Jobs), enhanced prospecting abilities and a marketing platform (LinkedIn Ads) that allows self-service advertising where firms can directly target their desired audience.

Currently, the company employs nearly 5,000 people. Their year end revenue for 2012 was just shy of one billion dollars (nearly double 2011’s revenue results). 2013 should top those numbers by another 25% – 45%. LinkedIn is publicly traded on the Nasdaq under the ticker symbol LNKD. As of November 2013, the stock trades at $220 per share.

Wall St.’s Opinion

Analysts on Wall St. openly predict it, technology companies fear it and the average web browser is impervious to it. I’m referring to the unsustainable social media bubble we currently are in.

When discussing the true value of the social media vertical, according to Bloomberg analysts and traders are highly skeptical.

49% believe that internet and social media stocks are already in a bubble citing examples such as Twitter’s IPO (TWTR) where the equality nearly doubled in value on its first day.

Sooner or later, the party will be over. Eventually, all bubbles must burst. The million dollar question is whether LinkedIn will remain a viable user-option once the dust settles.

Facing Strong Headwinds Going Forward

The bigger they are, the harder they fall. History shows us that regardless of a high stock price, a strong employee base and favorable revenue trends, no      organization is untouchable. While it may appear otherwise, LinkedIn is probably near its peak. Here are the factors that will prevent sustained growth:It’s a site full of business professionals, though is devoid of any money. The majority of people who make money, don’t spend significant amounts of time on LinkedIn. When executives do visit the site, they typically are bombarded by salesmen attempting to push everything from software to phone service. Because of this, fewer and fewer business development professionals are paying for special access, as their sales attempts consistently come up empty.Their advertising platform is nothing new and nothing special. Running an executive search firm, I am familiar both with LinkedIn’s recruiting and web-ad offers. While I initially found the site to have some intriguing features such as being able to target certain people within certain companies, it fails to innovate.There are few non-cosmetic distinctions between Facebook’s advertising and LinkedIn’s. However, one advantage FB has over LinkedIn is that, technologically speaking, it is much more advanced.Their email theft turned off many older business professionals. Even though it denies the accusations, LinkedIn appeared to hack into many users’ email accounts in an attempt to increase connectivity and thus increase user engagement.In September of 2013, the site was sued by customers who claim the company appropriated their identities for marketing purposes. Currently, LinkedIn faces hundreds of formal complaints due to less than ethical email practices.  While many younger professionals are accustomed to sharing their profiles, older users clearly feel that the social media giant crossed the line. Whether the allegations are proven, the fact that they’ve been made at all speaks for itself in many professionals’ minds.

Honorable Mentions for the Supporting Thesis

1. Their recruiting launch fell short and failed to put away job boards. If LinkedIn truly beat sites such as Monster.com andCareerbuilder.com, a resume would no longer be needed to apply for a job. A simple LinkedIn bio would be suffice. Obviously, this is not the case.

2. It’s not as fun as Facebook, not as user-friendly as Twitter and not as crucial as Google+. Currently, LinkedIn only allows one photo and room for some video, which does not allow users to get to know each other. It makes the site impersonal and much less entertaining than Facebook.

Moreover, the usability of the site is becoming outdated. In comparison sites like Twitter are seamless in nature.

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