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More and more, we are seeing the emergence of “vertical” professional social networks: networks dedicated to a specific type of occupation with specialised tools. Here are two examples:
- Academic networks. These networks help researchers and scientists get together to share data and information, and help companies tap networks of researchers to solve problems. One such network, Kaggle, recently added Silicon Valley and technology heavyweight Max Levchin as chairman. Another example is Paris-based Hypios.
- Investor networks. These networks help investors conduct private financial transactions like M&A and asset sales. An example of a contender here is CapLinked, but also investors that connect entrepreneurs and investors like AngelList.
Are these a threat to LinkedIn, the biggest, and more generalist, professional social network?
As we argued in our study of network effects, generalist networks can be undermined by more focused vertical upstarts. Is this going to happen to LinkedIn?
In the short-to-medium term: no. From a market opportunity standpoint, LinkedIn is a giant resume database, which gives it a unique asset to attack the multibillion dollar global recruiting industry, which it is already doing as the chart above shows. That is an enormous opportunity, and whether these networks succeed or fail won’t make a difference to LinkedIn’s execution in this market.
That being said, it is a big missed opportunity, because it shows that LinkedIn can’t become a platform. Facebook’s greatest insight, and what guarantees its dominance of the web over the next 5 years, was its crucial early realisation that it couldn’t do everything “social”–but that it could provide tools to third parties to do it through their social graph, thereby improving the value of their company (and allowing them to take a tax later on).
Building platforms seems to be a “DNA thing.” It’s a core competency, and companies either can or can’t do it. And LinkedIn, so far, has been in the latter category. It has certainly tried to become a platform by allowing third-parties to build apps on top of LinkedIn and providing tools like an equivalent of Facebook’s Connect feature, which allows user to log in to third-party sites with their Facebook credentials. But so far the applications are very limited. And several third-party LinkedIn developers have told us, on condition of anonimity because they are partners with LinkedIn, that LinkedIn’s third-party tools are limited and technically frustrating.
LinkedIn is often referred to as a “professional” or “grown-up” Facebook, but that misses a crucial difference. Like Facebook, LinkedIn is a social network; unlike Facebook, LinkedIn is not a platform. This is a missed opportunity, and even though it shouldn’t affect LinkedIn in the short-to-medium term, it remains a long-term weakness because in the future vertical professional networks just might undermine LinkedIn.
Therefore, even though LinkedIn has a big opportunity ahead of it that it is uniquely positioned to grasp, its incapacity to turn itself into a platform puts a lid on its potential future value.
This note was published as part of BI Research, a new industry intelligence service from Business Insider. The service is currently in beta and is free. To learn more and sign up, please click here.
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