Businessmodel of LinkedIn

Customer Segments

LinkedIn is a mult-sided platform, meaning that it offers different services to a range of customer segments. It operates on a so called “freemium” business model, whereby its main services are free, but users may pay for a premium service with extra features. LinkedIn therefore has four key customer segments:

• Regular users, who use the site for free but still help generate advertising revenues
• Premium users, whose annual subscription fees constitute a large portion of LinkedIn’s revenue.
• Marketing professionals, who pay to use LinkedIn as an advertising platform.
• Recruitment professionals, who pay to use the various premium services that LinkedIn offers headhunters. ### Value Proposition

For regular users, it offers a free service that helps people working in all different fields to develop a network of contacts and help manage their professional identity.

For premium users who pay the membership fees, LinkedIn offers the same thing, but with the addition of a range of other services that can help individuals manage, analyze and develop their professional lives.

Advertisers are drawn to LinkedIn, because, like most social networks, they can offer a high rate of user interaction with adverts, by tailoring them towards individual users personal and professional interests.

Recruiters using LinkedIn’s premium talent-finding features are drawn to LinkedIn because, with its hundreds of millions of users, it provides an unparalleled compendium of professionals around the world where headhunters may search for employees with the specific skills they require.

Channels

The website linkedin.com is LinkedIn’s primary channel but in recent years its mobile app has also proved extremely popular. This online platform is also where ad revenue is generated and where users may purchase premium subscriptions.

A key channel for its recruitment products is field sales, as LinkedIn employs many teams and agencies to advertise and promote its services to recruiters around the world. About half of its recruitment products are sold through field sales.

Customer Relationships

LinkedIn’s focus is not on cultivating personal relationships with its sites users, but enabling them to cultivate relationships with users of the platform. LinkedIn’s relationship with its free and premium users is largely automated. LinkedIn provides a platform that gives them all the tools they need for their networking needs. They take subscription fees from premium users and also target users with sponsored content to generate advertising revenue.

For advertisers and headhunters, LinkedIn offers a range of more personalized services to help them reach people with the qualities they are looking for.

Key Activities

Platform development and field sales are LinkedIn’s key activities.

LinkedIn invests substantially in ensuring their networking platform is reliable, efficient and user-friendly. All they have to do is ensure this, and professionals the world over will continue to flock to LinkedIn.

The other key activity, which generates around half of all sales, is their field sales of their recruitment products. They do this with a direct sales force, but also through partnering with other agencies to expand their global marketing reach.

Key Partners

LinkedIn’s key partners include the content providers who own the content that users may link to from their profile. Third part content greatly enhances the user experience on LinkedIn, so these are important partners.

Another key partner is Equinix, who manage the datacenters that are crucial to LinkedIn’s functioning. Equinix is the world’s largest provider of datacentre services, and LinkedIn relies on their services rather than maintaining their own datacenters in-house.

Key Resources

LinkedIn’s key resource are its people and the platform it has developed. With offices in 30 cities, LinkedIn employs about 6000 full time staff. Amongst these are a lot of very experienced software engineers who help create the LinkedIn platform.

Cost Structure

LinkedIn’s largest expenditures are web hosting, marketing and field sales, and the maintenance and improvement of the platform.

Revenue Streams

LinkedIn’s revenue comes from selling its hiring solutions products, selling premium subscriptions, and advertising.

The sale of hiring solutions has historically comprised about 50% of LinkedIn’s revenue, although advertising income has grown to be an almost equally important revenue stream in the last few years.

Premium subscription fees normally constitute about 20% of LinkedIn’s annual revenue.