LinkedIn, the world’s leading professional social network, seems to be losing investors’ confidence. According to an article from TechCrunch, LinkedIn stocks lost half its value in little over a month.
The fears were largely due to a concern over the different revenue streams of the company that are undermining LinkedIn’s business value.
The current revenue streams for LinkedIn include sponsored content, paid advertising, sales and recruitment solutions. The investors believe these revenue streams are contributing to a poor user behaviour from the LinkedIn community, stifling the network growth which is the ultimate goal of LinkedIn.
Spamming the Users with Recruitment Solutions
LinkedIn, as it claims, is not a business network. Its main revenue stream is in the recruitment space and this creates a great conflict for the LinkedIn users who use the social network to build a strong professional network and consume interesting business content. These users not frequent job-hoppers. They are not looking for a job change all the time.
But LinkedIn’s focus on user-generated content compels users to create self-promoting content driven by recruitment or sales motive. Hence the conversations on LinkedIn are mostly one-directional and spammy in nature.
As TechCrunch describes it, LinkedIn, at best, has now become synonymous to a business card holder or at worst, a delivery service for spam. This is the reason why only 25% of its Monthly Active Users (MAU) use the site every month.
Top performers in the tech industry avoid logging into LinkedIn as they are bombarded with recruitment spams.
Traditionally, investors have believed in LinkedIn’s potential. In the past, the company’s shares have been valued at 50x its revenue.
But now, LinkedIn seems to be losing the investors’ confidence. In order to gain investors’ trust, LinkedIn needs to put an end to the spammy behavior of certain users.
At this point of time, the spammy behavior is linked with their revenue streams which is the reason why LinkedIn is incentivizing this behavior.
The company needs to develop new revenue streams which go parallel with their ultimate goal of engaging users on the network with valuable content and fostering good business relationships. The revenue streams need to work in concert with the company’s growth plan and not against it. It must also provide users with an option to mute/block content which they aren’t interested in.
In order to be a more viable Enterprise solution, LinkedIn needs to start focusing on businesses too, rather than individuals. For starters, the company needs to open up its API to allow smoother integration with business workflows.
LinkedIn is still the preferred channel for professionals to network. It has a user base of over 400 million active users and a wealth of content to utilize. However, the company needs to realign its business model so that it stops stifling its growth prospects and ultimately serves the organizations in a better manner.
Update: Since this article was written, LinkedIn has been acquired by Microsoft. More details in this article here.