LinkedIn and the user-as-the-product model: another look at the social network paradigm

Ello, the social network that exploded on the scene a few weeks ago as the user-focused Facebook alternative has a manifesto that has been widely dissected, admired and scorned at the same time. In it, the founders discuss their motivation:

Every post you share, every friend you make, and every link you follow is tracked, recorded, and converted into data. Advertisers buy your data so they can show you more ads. You are the product that’s bought and sold.

The part about the user being the product is something that’s been bandied around for years but it has never been as cynical as now. Because what the manifesto says is true not only of Facebook, but also of LinkedIn, Twitter, Google+ and even Yelp. All these sites offer their users free use of an often wonderful product in return for allowing advertisers to target them based on the information they share. It’s an exchange that most users think is beneficial.

And yet.

LinkedIn revenue breakdown. Source: Statista

LinkedIn revenue breakdown.
Source: Statista

Two weeks ago I wrote a post about Facebook and their user terms. In essence: play by the rules or get kicked out. For that post I dug up some of the usage statistics from the “other side” and what I found about LinkedIn was that in 2012 93% of recruiters used LinkedIn to find candidates. I’m sure that number in certain industries this statistic has already reached 100%. When looking at LinkedIn’s revenue breakdown, it turns out that LinkedIn “generates the majority of its revenue through talent solutions, including online recruiting of potential job candidates for companies.” Not surprising.

Based on those two stats, one, that almost all recruiters use LinkedIn and that, two, most of their revenue was from recruiters, one could say that LinkedIn’s users are the recruiters. Yet LinkedIn would be meaningless to those recruiters if it weren’t for professionals creating and updating their profiles. Meaningless without those “freeloading” users who really are the product.

LinkedIn has to walk a delicate line. On one hand, get professionals to create and update their profiles on on the other hand, build tools for recruiters to easily find the candidates they need. It’s not the professionals don’t matter, or that LinkedIn “doesn’t care” about them because they are not the paying customers. On the contrary, LinkedIn needs to care about them very much because without them, they wouldn’t have a product to sell.

Another point to consider: 85% of all candidates are considered “passive candidates” (those that are not actively looking for a job) and passive candidates are considered more attractive than active ones. Given that LinkedIn’s paying customers are recruiters and that recruiters are looking to find candidates, LinkedIn needs to find a way to attract these professionals and give them a reason to update their profile even when they are not looking. It needs to give these professionals a reason to visit LinkedIn and a reason to keep their profiles updated. Right now, even though LinkedIn has created groups, content creation and a newsfeed, it still isn’t happening. Unlike Facebook, there really is no reason to open LinkedIn on a regular basis.

LinkedIn’s users are both professionals and recruiters. Stop building products for the professionals and the recruiters will stop paying. It is this symbiotic relationship that is the crux of a successful user-as-the-product model. To succeed, both must be kept happy.

Ignore the user who is your product, and soon there won’t be a product to sell.





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