How LinkedIn Make Money

Posted on April 21, 2010. Filed under: Uncategorized | Tags: , , , , , |

One of the most common questions I get asked is “Will LinkedIn start charging me for an account?” and my answer is that I think it is highly unlikely and this is why;

LinkedIn are already a profitable company (unusual for an internet business!) and they have 3 revenue streams;

  1. Corporate Accounts – these are largely recruitment orientated packages that businesses buy which allow them full access to the whole LinkedIn user base (amongst other things). Whilst these are expensive, they will easily pay for themselves via the savings made by not paying recruitment agency fees. This is LinkedIn’s largest AND fastest growing revenue stream.
  2. Advertising – We are all familiar with seeing advertising on LinkedIn which falls into 2 categories – ‘Corporate’ for large spends and ‘User’ which anyone can do by simply entering credit card details. Advertising revenues increased in 2009 by 50% over the previous year so this stream is becoming increasingly important to LinkedIn.
  3. Upgraded User Accounts. There are 4 levels of user accounts ranging from free (which most people stick with) to Pro which is $500 a month. You can find a breakdown of the different features of each account here but it is fair to say (given the way the site has developed) that LinkedIn are quite happy if users stay on a free account.

Here is an interview that LinkedIn CEO Jeff Weiner gave recently talking about this subject;
Vodpod videos no longer available.

So it seems obvious to me that LinkedIn’s first 2 revenue streams are fairly dependent on there being  a high number of active users and this would not be achieved if they removed free accounts.

LinkedIn have made it quite clear that they will go for a flotation when the market is favourable so it makes sense to adopt a revenue strategy that depends on high value/low volume customers (i.e. corporate accounts and advertising). This way they can increase their sales without building the huge staff cost overheads that would come with having to service 65 million+ paying customers.

So there you have it – my crystal ball tells me that LinkedIn will always be free to all (for most features).

Does anyone else see it differently?


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2 Responses to “How LinkedIn Make Money”

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Interesting. How would you say those revenue streams break out? I’d assume ads is 90% more. What do you think?

Hi Josh,
Advertising is important and growing but not their largest revenue stream. They are privately owned and so there is no access to data to be able to confirm this but I suspect their largest and fastest growing product is their corporate recruiting packages – Talent Advantage.

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