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The Trouble with LinkedIn: Grey Goo

by Dec 7, 2011, 5:40 am ET

As much as we in recruiting enjoy the many benefits of LinkedIn, there is trouble in paradise. I’ve been a member of LinkedIn since the early days, to which my user ID (59572) will attest. Because LinkedIn numbers its members sequentially, if you do the math, you’ll find me counted among the first .06 percent of LinkedIn users. However, lately, I’ve noticed that what began as a business networking site is starting to feel more like a marketing and recruiting site dressed up as a social network.

Others suggest it more resembles the proverbial wolf in sheep’s clothing, a digital beast that devours our contacts and serves them up to large corporate clients willing to pay for what was once our data.

One cannot really blame LinkedIn for monetizing its business model. It does need to generate revenues to keep the lights on. But as it pursues recruiting revenues, as it encourages business professionals to use LinkedIn more as a marketing platform for “brand you,” as it prods users to pay for the privilege of networking and recruiting on LinkedIn, it is fair to wonder what value we get in return for that investment. While LinkedIn may remain a shiny object to which many recruiters feel inextricably drawn, we are in serious need of a reality check.

Earlier this year, LinkedIn reached two impressive milestones. It went public and it surpassed 100 million registered users. However, before LinkedIn went public, the social network filed a document with the SEC reporting a significant risk factor to LNKD investors: just how unreliable that 100 million figure is.

The number of our registered members is higher than the number of actual members, and a substantial majority of our page views are generated by a minority of our members. The number of registered members in our network is higher than the number of actual members because some members have multiple registrations, other members have died or become incapacitated, and others may have registered under fictitious names.

In other words, LinkedIn’s 100 million number is wildly inaccurate. However, attempting to pin down a more meaningful number is like nailing Jell-O to the the wall. That is why, dag-nab-it, LinkedIn is sticking with the 100 million member figure. Flawed though it may be, it contends it’s the only number it’s got.

Given the challenges inherent in identifying these accounts, we do not have a reliable system to accurately identify the number of actual members, and thus we rely on the number of registered members as our measure of the size of our network. Further, a substantial majority of our members do not visit our website on a monthly basis, and a substantial majority of our page views are generated by a minority of our members.

Recruiters: are you paying attention? A substantial majority of LinkedIn members rarely visit LinkedIn. That’s according to LinkedIn itself. Seriously, if that’s the case, one has to wonder how viable LinkedIn is as a social network. LinkedIn wonders as well:

If the number of our actual members does not meet our expectations or we are unable to increase the breadth and frequency of our visiting members, then our business may not grow as fast as we expect, which will harm our operating and financial results and may cause our stock price to decline.

The investor website Seeking Alpha has expressed concern about LinkedIn’s Marketing Solutions business — an advertising business unit that provides about a third of LinkedIn revenues — because “a website’s value to advertisers is directly proportionate to its number of active users.” Seeking Alpha accuses LinkedIn of being intentionally vague about its active user base and suggests we examine Quantcast reports on audience size instead. Only 1% of LinkedIn users are “addicts” who visit the site 30 or more times a month compared to Facebook’s 76%.

That disconnect may be starting to unsettle investors. The Wall Street Journal has taken note of recent drops in share price as early investors and executives unload shares in the wake of its May IPO. While many stocks weaken once employees are free to sell their shares after a company goes public, this appears to be much worse. In fact, Bloomberg contributing editor and investor Paul Kedrosky recently opined that LinkedIn’s precipitous decline is because LinkedIn has been broken from the beginning.

Kedrosky, who is also the editor of the popular financial blog Infectious Greed, notes that LinkedIn’s institutional investors make up only about 12% of its ownership, about half the percentage of stocks that enjoy strong institutional support.

Kedrosky’s article was called to my attention by Gary Stock, a longtime friend, technologist, and former code-breaking cryptanalyst with the National Security Agency. Stock participates in an invitation-only discussion group called “The TBTF Irregulars.” The group was formed by technology journalist/physicist Keith Dawson and also features the likes of David Weinberger, co-author of the seminal book on social networking The Cluetrain Manifesto and author of Small Pieces, Loosely Joined. It other words, this is a group that takes social networking theory very seriously.

Gary noted there has been growing chatter among The Irregulars about how LinkedIn may be losing its way. They observe that it is behaving more aggressively and hyperactively. Popup wizards online nag us to enhance our profiles, to give up more and more pieces of ourselves. One Irregular noted an email from LinkedIn to confirm a connection suddenly mistook him for a new user, though he’d been a member for years, and attempted to raid his address book to send out new invitations to connect on LinkedIn. When he demurred, his friends still strangely get hit with those email invites. In other words, even though he said “no,” LinkedIn’s technology apparently said “yes.”

Those hiccups may be due, in part, to the problems with iterative development, of rules and algorithms run amok as large platforms scale. However, it may be that LinkedIn is undergoing a personality change.

Stock theorizes that LinkedIn may have an “all-things-to-all-people” problem. He observes that LinkedIn once insisted we limit our networks to those whom we know and with whom we do business.

Gary being Gary, he took building quality connections in the beginning so seriously that when a college student that he knew attempted to connect with him on LinkedIn, he visited that student to explain personally why he could not make the student a connection: they had never worked together and were not even in the same industry. However, soon Gary realized that he did do business with the student. In fact, he had for several years. The student’s family sold produce at the local farmer’s market that Gary frequented. So Stock relaxed his rules, and it appears, LinkedIn has as well.

A network that first insisted that we network only with those we know has morphed into a place to network with those we want to know us.

That transformation has turned the LinkedIn data stream into a torrent of less-meaningful data. Eventually, Stock predicts, LinkedIn may need to divide itself into separate businesses or risk becoming a “melange of gray goo that nobody recognizes anymore.”

For non-nerds, “grey goo” is a phrase first coined by nanotechnologist Eric Drexler in the 1986 book Engines of Creation. Grey goo is the the result of an apocalyptic scenario in which rogue self-replicating robots consume all matter on earth while building more themselves. If it isn’t careful, LinkedIn may find itself turning into a large mass of replicating nanomachines (members) lacking large-scale structure (promiscuous networking). Yes, grey goo.

This article is provided for informational purposes only and is not intended to offer specific legal advice. You should consult your legal counsel regarding any threatened or pending litigation.

  • Keith Halperin

    @Irina, @ Krista: In this case, I tend toward the Krista faction- I like my communication as direct as it can be. Also, ISTM that a well-researched, focused, carefully-targeted approach toward reaching out to candidates via: either email or inMail works best. That being said, wouldn’t the most direct approach be better, or does a carefully crafted inMail tend to produce better, quicker results than an equally well-crafted email or phone call? Also, since you can’t contact the people directly anyway, wouldn’t the money spent on a highly-upgraded LI Recruiter account be better spent on effective tools/sourcing to search LI externally through other means?

    Thanks,

    Keith

  • http://www.braingainrecruiting.com/ Irina Shamaeva

    Hi @Keith – @Krista’s point, as I understand it, is that she wants to stay away from LI – or any other “3rd party” messaging systems – in order to control communication.

    I would recommend against spending money on LinkedIn Recruiter (unless you have unlimited supply of it) for many reasons.

    Cheers :)

  • Keith Halperin

    @ Irina; Thanks again.
    Your comments are always thoughtful and valuable.

    @Anyone: who can recommend LI Recruiter or any non-free version of LI?
    1) What do you have?
    2) What do you use it for (recruiting, immediate sourcing, pipeline sourcing, job posting, etc.)?
    2) How do you get it to justify its cost, i.e., make it work well (as we discussed re: InMails)?
    3) What alternatives to it have you considered (tools, other SNAs, etc.)?

    Cheers,

    Keith

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  • http://www.linkedin.com/in/stephenturnock Stephen Turnock

    Linkedin: indeed the Grey Goo. But so too is life and many other things! It’s really what you want it to be, what effort you put into it first before getting something more rewarding out.. It has proof of concept but the viability is in how users will adapt and work their own concept. LinkedIn is the Least Social but being a Network it is still indeed ‘Social’ as that is what a network essentially is.

    Recruiting is always going to be the fuel for linkedin but LinkedIn will need to find a balance between the conversations happening and the sometimes intrusive interrupts from Recruiters or otherwise. But regarding such interrupts, I think interrupts will become less and less as Recruiters will stop using linkedIn to just find people but instead become masters of engaging with people in advance before the potentials are looking – as all LinkedIn users are potential candidates.

    Of course most LinkedIn users are not looking for a change in job and in normal out of recession conditions, this is maybe 90% of users. Perhaps today it is more like 50% that would actually consider a move? The recession has been a retention policy for many perhaps!.. Over time, as the LinkedIn users ‘concept in usage’ change and evolve, those users most active in conversation and content of value will be most likely to be both listening and open to be found – correctly inbound-marketing and attracting the right jobs, direct employers and engaged Recruiters.

    For some Recruiters (or purveyors of anything), getting max connections is currently an Olympic sport, but in time the value will be in your niche, quality and relevance over quantity! Its great Goo, with a little Quark Strangeness and Charm. #13,266,958

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