Business strategy, How LinkedIn makes money

Business strategy: How LinkedIn makes money

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LinkedIn has successfully established itself as a premier social networking site centered primarily on building and managing online presence and networks for professionals. With more than 300 million users and over 10 years of being in business, it is interesting to explore how the company is able to sustain its operation given the costs associated with maintaining an expansive feature-rich website. This article explores how LinkedIn makes money.

Note that LinkedIn generally makes money like any other electronic commerce website. However, what sets the company apart is that it functions likes social networking sites such as Facebook and Twitter, and also like any other typical online job portals or employment websites.

The general business strategy of LinkedIn is well demonstrated through its revenue model composed of three revenue streams coming from its three specific online products or services. These services are Talent Solutions, Marketing Solutions, and Premium Subscriptions.

Talent Solutions: Making money through a business-to-business model

One of the ways LinkedIn makes money is through a business-to-business model. Talent Solutions is a specific service that provides business organizations or more appropriately, employers and recruiters access the vast database of professionals and their profiles.

Through Talent Solutions, LinkedIn functions just like any other online job portals or employment websites that links employers and employees.

Talent Solutions is by far the biggest source of revenue for LinkedIn nonetheless. Financial reports have revealed that this service has accounted for more than 50 percent of the total annual revenues of the company.

Marketing Solutions: Making money through online advertising revenues

Another way LinkedIn makes money is through online advertising revenues. The Marketing Solutions follows a straightforward model for generating income that is similar to other social networking sites such as Facebook and Twitter.

Specifically, LinkedIn capitalizes on its 300 million individual by displaying online advertisements with different ad formats ranging from IAB standard ad banners and custom text ads.

It is interesting to note that the user base of LinkedIn is comprised primarily of white-collar professionals who are relatively well-to-do. Advertisers are naturally attracted to the demographic characteristics of these users. Targeted advertising is also possible due to accessibility of expansive target market information.

Premium Subscriptions: Making money through a business-to-consumer model

LinkedIn also makes money through a business-to-consumer model. The Premium Subscriptions service sells extended service inclusions that are not normally accessible to free users.

For example, the business pricing package includes InMail messages, limited profile search of up to 300 users, reference search, Introduction, Saved Search Alerts, OpenLink, and full profiles among others. The Business Plus package and the Executive package offer almost the similar additional services although limits are higher.

Financial reports have revealed that this service has accounted for around 20 percent of the total annual revenues of the company.

Conclusion: The business strategy of LinkedIn

The business strategy of LinkedIn centers primarily on generating online revenues. Remember that the company functions both as a job portal or employment website and a social networking site. It specifically generates revenues through online advertisement, a business-to-business model, and a business-to-consumer model. This multifaceted revenue stream of the company allows it to capitalize business and individual markets through online-enabled, electronic commerce, and social media-inspired structure and operation.