Professionals shared an up-to-date account of their careers mainly when they were looking for a job, and kept their business contacts in address books they had to update by hand LI1. Job boards held resumes that seekers posted in private databases, which employers paid to search by keyword; people used those boards only while they were job hunting LKX-1 LI4. Recruiters who wanted someone qualified and not looking had to find them through referrals, agencies and their own lists. The strongest candidates were often the ones who never posted a resume at all LI2.
Profiles worth maintaining made a recruiting network worth paying for
How LinkedIn won
- 1 · 2003–11Innovation: a professional profile members write and keep currentMembers wrote their own profile and kept it while employed; public profiles later ranked in search engines.User-Generated Content
- 2 · 2003–10Viral growth: every invitation adds a member and a connectionMembership stayed free; over a billion invitations in 2010, and a million new members every 10 days.Growth Loop
- 3 · 2008–12Recruiters pay for seats to reach passive candidatesRecruiter sold full-network search and InMail by the seat; members stayed free.Cross-Subsidy
- 4 · 2011–16Network effect: members stay because recruiters search, recruiters pay because members are thereHiring revenue grew 136% in a quarter when Monster's grew 2%; by 2015 it was about 63% of revenue.Marketplace network effects
Versus Monster: Monster sold employers a database of resumes posted by people already looking for work. LinkedIn gave employed professionals a profile worth keeping, spread it free by invitation, and sold recruiters seats to reach them, so the recruiting budget followed the passive candidates.
Arena: Market Conditions Before LinkedIn
How each step happened
Step 1 of 4 · 2003–11
Innovation: a professional profile members write and keep current
LinkedIn's innovation was a professional record that the professional writes and keeps. Monster held a confidential database of resumes that seekers posted free and employers paid to search by keyword, more than 31 million of them by late 2003 LKX-1. A resume went in when someone was looking for work and went stale once they found it. Hoffman's 2004 pitch named the flaw: 'In old-school resume databases, most talented professionals didn't want or need to participate' LI2. LinkedIn asked members to write their own profile of jobs, education and skills and connect it to the people they knew, what founding team member Lee Hower calls 'resume 2.0' LI4 LI1.
The profile mattered because it gave employed people a reason to be there. 'If you think of Monster or a job board, end-users only use it when they are thinking of looking for a job,' Hower says LI4. A profile served its owner between searches, for keeping track of contacts and being found LI1. The first version was narrower: members could see only people they were connected to, and public profiles and photographs came later LI4. By 2011 members chose which details anyone could see, and those public profiles often appeared at or near the top of Google, Bing and Yahoo! results for a person's name LI1. LinkedIn gave employed professionals a reason to maintain a profile between job searches.
Rivals Monster’s resume offer centered on people looking for work: seekers posted resumes into a confidential, access-restricted database, about 48,000 a day in 2003, and employers paid to search it LKX-1.
Step 2 of 4 · 2003–10
Viral growth: every invitation adds a member and a connection
The profile gave people a reason to stay; invitations were how they arrived, from the first year. Anyone who accepted an invitation became a member already connected to the person who sent it, so each new member arrived with a first connection and a reason to invite others LI1. Membership stayed free, and Hoffman says the company spent its first funding round building the network rather than chasing revenue LI2. The first members got little from it: in Hoffman's account the network was worth 'zero' to its first 500,000 or so members, and that 'a combination of curiosity and a viral game mechanic' would carry it to a million, the point where it became valuable LI2.
After that the loop compounded. LinkedIn took nearly 500 days to reach its first million members; in the second half of 2010 it added more than a million every 10 days, members sent over a billion invitations that year, and the company credited its growth mainly to word of mouth LI1. Public profiles from step 1 added a second free channel, because a search for a person's name often led to their LinkedIn page LI1. By January 2011 it had more than 90 million registered members LI1.
Rivals Monster’s core resume database grew as active seekers posted resumes LKX-1. When it answered in June 2011 with BeKnown, a professional networking app built on Facebook, it drew nearly 60,000 users in its first week, against LinkedIn's more than 100 million LKX-3.
Step 3 of 4 · 2008–12
Recruiters pay for seats to reach passive candidates
LinkedIn charged the people who wanted to reach members, not the members. Hoffman says the team knew in 2004 that most revenue would come from recruiting LI2. The product that captured it was Recruiter. It let a recruiting team search and view every profile on the network, message candidates directly through InMail (members decide whether to answer), and share project folders and notes across the team LI1. LinkedIn said a substantial majority of its members were passive, not actively looking to change jobs LI1. Recruiter made access to passive candidates central to its paid offer.
Sales won an account, then widened it. LinkedIn split its field sales team between account executives who won new customers and relationship managers who renewed contracts and sold additional seats LI1. In 2010 nearly 3,900 companies, including 69 of the Fortune 100, used its hiring products, and hiring revenue rose from $23.8M in the first nine months of 2009 to $65.9M in the same period of 2010, from 29% to 41% of revenue LI1. Brian Perry of the Strider Group, a recruiting firm, says passive candidates rose from about 25% to about 40% of its candidates after it bought Recruiter, and more than half of its InMails drew a reply LI6. In 2012 Talent Pipeline, free inside Recruiter, let teams manage candidates from any source in one place LI7. Members stayed free, and each seat paid for access to them.
Rivals Monster's employers paid to post jobs and to search seekers' resumes by keyword LKX-1; Hoffman saw job listings as a business of constant churn and costly sales LI2. BeKnown did not let recruiters search for candidates by qualifications or work history unless they were already connected LKX-4.
Step 4 of 4 · 2011–16
Network effect: members stay because recruiters search, recruiters pay because members are there
By 2011 each side kept the other there. LinkedIn's filing said it competed with Monster+HotJobs and CareerBuilder on the usefulness of its recruiting products, which were 'influenced by the number and engagement of our members' LI1. Recruiters paid because the passive candidates were there, and members kept profiles current because recruiters, colleagues and clients looked at them. Hoffman: 'As LinkedIn grew, so did our competitive edge, as more and more members invested activity and data into our network' LI2. This is the profile from step 1 doing two jobs: the record a member keeps for their own career is the record a recruiter pays to find.
The recruiting budget moved. In the fourth quarter of 2011 LinkedIn's hiring revenue grew 136% to $84.9M, while Monster's recruiting revenue of $250M grew 2% LKX-2. Hiring was about half of LinkedIn's 2011 revenue LI4. In 2015 Talent Solutions, as the hiring business was by then called, brought in $1,877M, up 41% and about 63% of revenue LKX-6. By 2016, the hosts of the Acquired podcast said, a full Recruiter seat cost $900 a month and a recruiter without one would be 'hamstrung from day one' LI9. That June Microsoft agreed to pay $26.2B for LinkedIn and its more than 433 million members, and it completed the purchase in December LI8 LI5.
The advantage rests on active, accurate profiles, not on the member count. LinkedIn noted that registered members outnumbered actual members because of duplicate and fictitious accounts, that Xing in Germany and Viadeo in France offered local professional networks, and that customers could stop renewing without significant disruption to their business LI1. What kept recruiters paying was the pool itself, and the invitation loop from step 2 kept refilling it.
Rivals Monster folded BeKnown into its job board in May 2012 so seekers could see their connections at employers LKX-5. Its revenue fell 5% in 2014 and 7% in the first half of 2015, and in 2016 Randstad bought it for $429M, its CEO naming LinkedIn as the threat LKX-7 LKX-8.
Marketplace network effectsCollaboration & exchange network effects
Key dates
- 2003A professional network built on member-written profiles
- 2003-10Monster's resume database passes 31 million, 48,000 added a day LKX-1
- 2004Series B pitch: build the network first; recruiting the largest market LI2
- 2005Job listings, subscriptions and advertising tested
- 2009$36M hiring revenue Full year, 30% of revenue LI1
- 2010Over a billion invitations; a million new members every 10 days LI1
- 2010Nearly 3,900 hiring customers Full year, including 69 of the Fortune 100 LI1
- 2011-01Registration statement: more than 90 million members LI1
- 2011-06Monster launches BeKnown on Facebook LKX-3 LKX-4
- 2011-12$84.9M hiring revenue Fourth quarter, +136% year over year; Monster's recruiting revenue $250M, +2% LKX-2
- 2012-04Talent Pipeline added free to Recruiter
- 2012-05Monster folds BeKnown into its job board LKX-5
- 2014A recruiting firm reports passive candidates up from 25% to 40%
- 2015$1,877M Talent Solutions revenue Full year, +41% year over year; about 63% of revenue LKX-6
- 2015-10Monster's revenue down 5% in 2014 and 7% in early 2015 LKX-7
- 2016-06$26.2B acquisition price Microsoft agrees to buy LinkedIn; more than 433 million members LI8
- 2016-08Randstad buys Monster for $429M LKX-8
- 2016-12Microsoft completes the acquisition
Sources
Oldest first.
- LKX-1 Monster Worldwide, Inc. Form S-3/A (business description). Filing
- LI1 LinkedIn registration statement. Filing
- LKX-4 Without Proper Recruiter Search, Monster's BeKnown Facebook Professional Networking App Lacks Value. Trade press
- LKX-3 The War between LinkedIn, Monster's BeKnown, and BranchOut. Industry analyst commentary
- LI4 Money from friends: finding the right revenue model for social media. Outside analysis
- LKX-2 LinkedIn is Disrupting the Global Recruiting Market. Industry analyst commentary
- LI7 LinkedIn rolls out Talent Pipeline. Product announcement
- LKX-5 Monster Brings Networking into Core Site with the Integration of BeKnown. Company press release
- LI2 LinkedIn Series B pitch to Greylock. Founder account
- LI6 Strider Group: recruiting passive candidates. Vendor-published customer interview
- LKX-7 Key Challenges For Monster Worldwide's Business. Outside analysis
- LKX-6 LinkedIn Announces Fourth Quarter and Full Year 2015 Results. Earnings release
- LI8 Microsoft to acquire LinkedIn. Transaction announcement
- LI9 LinkedIn. Outside analytical podcast
- LKX-8 Randstad to buy US rival Monster for $429 million. Trade press
- LI5 Microsoft completes LinkedIn acquisition. Transaction announcement