Linked in Report

Questions for Linked-In

1. Are there network effects in social networking in general, and in professional networking in particular? (25 points)

Network effects apply to social networking in general and also in professional networking in particular.

A network effect (also called network externality or demand-side economies of scale) is the effect that one user of a good or service has on the value of that product to other people. When a network effect is present, the value of a product or service is dependent on the number of others using it.^[1]

A natural setting where network effects arise is in the adoption of technologies for which interaction or compatibility with others is important.^[2] For example, when the Facebook was first introduced to Harvard students, its value to a Harvard students depended on how many others were also using the website. The value of a social-networking have the same properties: it’s valuable to the extent that other people are using it as well. Similarly, a professional website would be more useful if many other professionals are using it: the primary purpose of the professional networking is to interact with others, sharing information with each other and may also present themselves to a wilder industry area.

Based on the six degrees of separation concept (the idea that any two people on the planet could make contact through a chain of no more than five intermediaries), that means the more people you have connected that you are more valuable in the social networking system and more people are possibly connected with you through your current contacts.

For the general social networking site in web 2.0 era, users get on the site mainly because people surrounded or their target audience are on the site. Without those SNS website accounts, people would be consider as unsocial and out-of-time.

Professional networking have definitely greater network effects compare to social networking. Networking is not only for job searching and students, but also essential for professionals to developing contacts and exchanging information. Networking can offer access to information to help you do your job more effectively, answer questions you have about getting a promotion within your company, or allow you to help colleagues to do their job more effectively. In web 2.0 era with PNS, professional networking has even larger network effects, with an increasing number of professionals having their PNS account setting up, professionals with more PNS contact would be consider as competent. The PNS website which attract most professionals has the highest value.

1. Evaluate LinkedIn’s strategy to date.  What accounts for LinkedIn’s successes?  What are the risks inherent in its current strategy? (25 points)

Success:

1. Pioneer advantage

LinkedIn successfully achieved market leadership by leveraging well-targeted champions to drive early adopters. Once the company reached to certain amount of users, the network effect associated with using LinkedIn drove further market penetration, made the company as the definitive leader in professional networking.

1. Explosion of new online technologies

LinkedIn catch up the trend that SNS and PNS was becoming a huge opportunity and will be an impact to people’s daily life. PNS would become a strongly differentiated category from SNS.