In Part I of this series on Linkedin, I talked about how traditionally corporate recruitment has been driven by job boards – which are a combination of job postings and resume books – and the professional headhunter offering. The third and fast-growing juggernaut in the recruitment space is, of course, Linkedin. In this post I’ll talk about how Linkedin is disrupting traditional recruiting.
As a professional, Linkedin is one of my favorite web services. For work, I probably use it more frequently than any other service besides Gmail. As a work utility, it outshines Facebook by miles. The ways in which it helps business professionals to meet and to interact is clear to anyone who uses the service. If you don’t follow the company or recruitment industry closely, though, Linkedin’s impact on the recruitment space isn’t as obvious.
Linkedin’s primary innovations vis-a-vis the recruitment space are really two-fold. The first is that Linkedin has basically created a public resume book. Your Linkedin profile is the modern-day resume. It has all of the same information, but it’s there for all to see. When you submit a resume to Monster or some other job board, it goes into a proprietary resume database. Once submitted, there’s no real incentive for you to continue to resubmit your resume as it gets updated. Your Linkedin profile, in contrast, is public and therefore there’s an incentive to have up-to-date information.
So now individual or corporate recruiter has access to the same set of public profiles. The proprietary resume databases of the job boards and the value of the “proprietary networks” of the headhunter are now highly diminished, some exceptions of course withstanding (e.g., board level retained search). Not only is the Linkedin “resume book” public, but it’s also more up-to-date than the traditional resume sources. Linkedin therefore scores on two fronts.
Linkedin’s second and related innovation is it’s emphasis on social, which is all based off the fact that profiles are public and have a real life identity attached to them. You come back to Linkedin again and again because of the social features – seeing who’s connected to who, commenting on messages, following companies, joining groups, etc. The traditional job board tries to bring people back with industry news, which is less valuable, easier to replicate, and less frequent a use case than social.
What all of this creates is a rich database of professional profiles that are generally up-to-date. This, of course, is fertile hunting ground for recruiters. With a subscription to Linkedin Talent Solutions, a recruiter gets the ability to search Linkedin’s entire database of profiles and to message anyone on the network. This shifts significant power into the hands of recruiters and away from the job board and the headhunter. Talk to any corporate recruiter and they’ll talk about how Linkedin has become an indispensable tool. It shows up in Linkedin’s financial results as well. Last quarter, nearly 60% of revenue came from Linkedin’s recruiter focused SaaS offering vs. <40% of revenue in Q1 2010 (see chart below from Linkedin’s Q1 2013 earnings slides).
Whether large or small, it’s harder now for a company to justify the cost of using a 3rd party recruiter or heavy use of job boards, though the latter is still quite prominent (see Part I where I discuss how the “death of job boards” is really the death of Monster/CareerBuilder/other generalists). Companies are increasingly favoring hiring of in-house recruiters versus paying contingent search fees. After all, it’s not just in-house recruiters who are using Linkedin but headhunters as well. Everyone’s fishing in the same pond now.
Linkedin is now the tool for recruiting passive candidates. Recruiters signed up for Linkedin’s Talent Solutions have the ability to message any person on Linkedin’s network. Linkedin’s network is stronger and more up-to-date than any resume book. It also allows recruiters to see who’s connected to who, which is important as companies increasingly try to turn their current employees into recruiters.
All of this has created an awesome revenue trajectory for Linkedin and really put pressure on traditional recruitment offerings. Having said that though, Linkedin’s success and some of its product design choices are creating challenges for both users and recruiters. This is creating opportunities for startups to try to address some of Linkedin’s shortcomings. In Part III of this series, I’ll go into some of the challenges that I see Linkedin facing in the recruiting world and some brief thoughts on how they might go about addressing these.