While Facebook struggles to feed ads to 900 million fickle members enjoying its free services, LinkedIn is working on selling paid services to its 175 million professional participants. Its fastest growing products, accounting for more than half of the company’s revenue, turn the serious social network into a giant job mart.
“[LinkedIn] is the best tool to come out so far for recruiters,” said Glenn Newman, a headhunter for Berkeley, Calif.-based Management Recruiters, an affiliate of global recruiting firm MRINetwork.
The Place For Headhunters
Fully 90% of recruiters use LinkedIn to seek candidates, according to a recent survey by MRINetwork. By comparison, the same study found that only 15% of recruiters use Facebook and 11% check out Twitter.
Revenue from LinkedIn’s hiring services rose 107% year over year in the second quarter, to $122 million, or 53% of the site’s total revenue. LinkedIn’s success has put pressure on traditional online job sites, like Monster Worldwide.
Impact on Job Sites
In the second quarter, Monster’s profit fell by more than half, mostly due to the weak job market in the U.S. and Europe. But in a recent interview with Dow Jones Newswires, Monster chief executive Salvatore Iannuzzi acknowledged that LinkedIn is likely hurting his business - especially at the high end of the job market where positions pay more than $80,000 a year.
Monster doesn’t provide much help for recruiters trying to fill executive positions. That’s because most people using the service are unemployed, and the most desirable executive candidates usually have jobs.
“Sometimes you find a diamond in the rough, but the candidates recruiters are looking for are those that are working, that are really good at what they do, that are happy and are sitting at their job doing what they do,” Newman said. “Not people who are out of work and have their resume posted somewhere.”
Why Recruiters Like LinkedIn
Recruiters turn to LinkedIn for leads on people they may be able to convince to jump to a competitor. But while the site is a good place to start, the search seldom ends there.
“It’s the lazy recruiter that uses LinkedIn as their bible,” Newman said. Recruiters often take the information on LinkedIn and use it in conjunction with their company’s database of potential candidates.
LinkedIn can also be helpful in finding people for specialized positions, he said. For example, Newman is looking for a western regional sales manager for a tea company. LinkedIn might avail me in accessing some names and companies that I wasn’t aware of."
More Than Just Jobs
LinkedIn’s focus on professionals is driving more than just its hiring services. Advertisers spent $63 million on the site in the second quarter, 64% more than a year ago. Revenue from people signing up for paid subscriptions rose 82%, to $43 million.
In the first half of the year, LinkedIn reported a 94% increase in overall revenue, far outpacing the growth of tech giants Apple, Facebook, Amazon and Google, according to figures compiled by Statista. LinkedIn topped Statista’s
LinkedIn’s revenue growth has also gotten a high five from investors. Its stock has more than doubled since its $45-a-share debut in 2011, while Facebook’s has been cut almost in half since its May initial public offering.
Which isn’t to say LinkedIn doesn’t face challenges. Herman Leung of Susquehanna Financial Group estimates the company is trading at 102 times 2013 estimated earnings, which is far higher than other Internet companies. How long LinkedIn can sustain that ratio remains to be seen.
But for now, investors don’t seem to worry, as LinkedIn’s revenue streams show no signs of slowing.
Lead image courtesy of Shutterstock.