An interview with Konstantin Guericke, Co-Founder and VP of Marketing for LinkedIn on what it takes to reach profitability, how to stay there, and how Social Networking usage has evolved within LinkedIn.
MP3 File
Complete Transcription follows:
Dan Keldsen: This is Dan Keldsen, Senior Analyst and Consultant with the Delphi Group in Boston, Massachusetts, where we can be found at www.DelphiGroup.com.
This interview is with Konstantin Guericke, cofounder and V.P. of Marketing for LinkedIn. We are going to discuss LinkedIn, which is nearly three years old coming up on May 5th 2006. If you happen to celebrate it, that is also Cinco de Mayo.
Konstantin, it has been a while since we last spoke. What has transpired for you folks at LinkedIn?
Konstantin Guericke: Well, it’s been an exciting time. Last year we were really focused on building some of the premium services out which we launched in August. I’m happy to report that as of two days ago we reached profitability in March.
I think it is validation that subscription models can work on the internet, so the premium services are sold on a transaction and subscription basis.
Often we find some people initially try a few times on a transaction basis and once they realize it works or they have an ongoing need, they quickly move to a subscription.
Dan: Right, and let’s make sure that everybody knows what the transactions are that we are talking about.
Konstantin: The free service we will basically keep free on LinkedIn. It is very important to have a large offering that is free-of-charge because that is what makes LinkedIn grow. People want to share things that are valuable.
When you find people and contact people inside your network which is three degrees from you, that is free-of-charge.
If you want to contact people outside of your network, right now we have 5.4 million users, so the average user has a network of 30,000 or 40,000 people. For every good person they find in their network there are actually 100 people outside the network.
If they want to contact these people, we have a mechanism called InMail to contact them. You can either do it on a transaction basis where it is $10 per InMail. Or you can buy the Business or Pro Account which gives you a certain number of InMails per month.
Dan: Okay, and InMail has been around since when?
Konstantin: InMail has been around since August 8th, 2005.
Dan: Okay, okay. And then subscription, the general subscription model once you step outside of the free world, are there other features that people get along with InMail?
Konstantin: There are. You see more information about the people outside your network. You also get a reference checking capability, so you can find former co-workers and bosses of people that you are talking to. That is good if you are doing due diligence or reference checks.
We also offer our job listing service on a subscription basis. Again, that can be bought on a transaction basis. You can go to LinkedIn and for $95 list a job for 30 days.
If you are hiring or you have a specific opening, if your H.R. recruiting department is using it, they will probably not want to whip out their credit card for every job posting they do.
They tend to buy subscription where they have a certain number of jobs, 20 or 30 jobs they can have open on LinkedIn throughout the year. Usually people graduate from the individual job posting transaction to buying a subscription which gives them job slots. They then just rotate out the different jobs that show up on LinkedIn.
Dan: Now as far as the size of the network, obviously that does matter. The bigger the network the more likely that there is to be a path through on the user standpoint.
You said you had 5.4 million users now. Where does that compare to a year ago?
Konstantin: A year ago it was just shy of two million, so it has almost tripled in a year. That is pretty significant growth rate and we are targeting to get to ten million by the end of the year. There are not a lot of signs of it slowing down.
Dan: Okay, ten million by the end of the year. Interesting.
Konstantin: If all goes well.
Dan: Okay. So back up to the profitability front, a couple of years ago the concern of a lot of people, including myself, was that this was a market that was ready to go nowhere except down, basically.
So congratulations on reaching profitability.
Konstantin: Happy to have proved people wrong.
Dan: It is just like the B2B days. There was a gigantic explosion; billions and billions of dollars there in theory, in paper money, and everybody wants to say that that all failed and was a total mistake. But there are actually still large B2B exchanges that are around.
It is great to have some good proof points of these various technologies too make sure that people can say, "Oh yeah, it is still actually valuable. It’s not all smoke and mirrors."
It is coming up on three years here, so something is going well.
Konstantin: Yeah, and I think when you look at it back in time we have the typical curve where at some point there is an influx of money; if there’s been shown something to work.
Usually too many companies get funded and then many more entrepreneurs kind of have similar ideas and start something and maybe never even get funding.
There are some lists at Web Blogs, Inc. where they list 300 or 400 social networks. Not all of them could really survive. People can’t simply deal with that many.
I think, frankly, people pick one that they belong to based on either your social needs. It used to be Friendster, now it’s more MySpace or Facebook. They’ve put up the profiles there in the professional sphere.
Again, there used to be quite a few of them. I think now we are estimating ten times larger than any of the other professional ones out there. It’s got a lot of good network effects where people say, "Look, if I’m going to do a professional network, I’m going to be where all the other people are already. That way I don’t have to convince my connections to join one."
It also feels safer; they feel like, "Okay, five million people are here and I haven’t heard anything about major privacy concerns, then these people must be looking out for me."
Dan: Yeah, back in the hey-day, you know, you had the social network phenomenon and it was getting kind of tiring when I was covering the space to have to go on Yet Another Social Network.
But that doesn’t happen much anymore, and I’m not in the right demographic for MySpace or Facebook, so I don’t have to worry about that.
Otherwise, we talked about InMail as a new addition to the capability there or a relatively new addition, almost a year I guess.
Now there has been a bit of an arms race with people who want to claim that they have the biggest LinkedIn network. You’ve made some changes there in not showing if people have over 500 connections.
Do you want to talk about that a little bit?
Konstantin: Yes, the way we devise it there is the icon [that shows how many connections someone has] because one of the things on the internet is how do you know who is the dog on the internet?
Figuring reputation is very important, and Google does it by saying how many sites link to you, on LinkedIn we designed it so that a link actually has meaning. On a lot of social networks you just link but there is nothing really that happens with that link.
On LinkedIn, if you are linked it means you actually have to be willing to take the time to introduce people to the people you know and most professionals are quite guarded with that. They don’t want to make the wrong introductions; they don’t want to take the time for introductions they don’t know well or trust.
So we felt that the number of connections is one indicator of how many people are willing to recommend this person. We’ve used that as an indicator of that.
Now what happens is that whenever you have a metric and you are doing something valuable, some people try to find ways to gain the system and try to say, "Look, if I have 5,000 connections you should trust me more than someone with 500 connections."
In reality I don’t think many people buy that. It just means you tried harder and maybe you spammed more people than if you only had 500 connections.
We basically picked 500 as the cut off point saying, "Look, up to that point it is meaningful. After that, it is not really."
Some users are very intent and they still put it into their profiles saying, "I have this many connections." Now you don’t know if they are lying or if it is true. We want to give the minimum information about a person that is relevant. That is why we chose that.
Dan: Thanks again, Konstantin, for a quick update. We will be doing another podcast as well talking about your upcoming presentation at our Information Intelligence event.
Of course, by the time people may get around to listening to this through in one night, it could be well after that event. We will give a little nugget there so people have some food for thought.
Thanks again, and talk to you soon.
Konstantin: Thanks, Dan.
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