LinkedIn looks to premium services for profit

The site, which focuses on connecting business professionals, plans to upgrade its interface as well as offer a set of paid services next year. Possible premium options include a better tool for finding job candidates and a more efficient way to find people who can comment on a potential hire or business partner, according to the company.

For example, LinkedIn may enhance its search function to make it easier to find site members with a certain minimum number of years of experience. Recruiters should appreciate that feature, said LinkedIn co-founder Konstantin Guericke. "They're the people who are looking for the needle in the haystack," he said.

LinkedIn and brethren social-networking sites are changing the way job hunts happen by helping businesspeople give or get word-of-mouth recommendations. In a sense, LinkedIn and others offer an alternative to massive online job boards like Monster.com.

Job seekers at LinkedIn can find both openings and insiders who may be able to help them land a position. And recruiters can discover promising job candidates along with people who might be able to provide an assessment of the candidate. "I think all business should happen through trusted referral," LinkedIn Chief Executive Reid Hoffman said.

LinkedIn's built-in trust played a key role in the way Kathleen Hayes got a job earlier this year at software company BlueRoads.

Hayes, BlueRoads' vice president of marketing, accepted an invitation from the company that arrived through a friend of a friend. "The message came to me through someone I trusted," Hayes said. "If (BlueRoads) had called me out of the blue, I'm not sure I would have entertained their request."

Other companies offering online communities or tools for keeping track of personal contacts include Ryze, Open Business Club (OpenBC) and The Ecademy.

LinkedIn differs from the pack by being a no-frills site, said Dan Keldsen, chief technology officer at research firm Delphi Group. Keldsen notes that LinkedIn doesn't provide discussion forums like European site OpenBC. OpenBC also gives users an event manager tool. Still, LinkedIn is effective, Keldsen said. "It's incredibly powerful to have this collection of contacts together on the Web for access from anywhere," he said.

Others are apparently finding LinkedIn useful as well. The growing site has 1.4 million users and claims that a new professional joins every 5 seconds during business hours. LinkedIn allows you to post a profile of yourself and establish connections to other members. Through a network of contacts, LinkedIn aims to let people request introductions to job candidates, industry experts and business partners.

The site also has a specific job-searching function through a partnership with an online job board run by the DirectEmployers Association. When conducting a job search at LinkedIn, seekers get a list of DirectEmployers job openings and information about LinkedIn members who could help them land the job.

This year, the company launched a toolbar for Microsoft's Internet Explorer and Outlook that allows users to connect to the LinkedIn network. "The key is not to crash Outlook," LinkedIn's Hoffman said. In the five months since the toolbar has been out, the company says it hasn't had problems.

The money question
For now, LinkedIn is a free service. The venture capital-backed site began taking in money in September through sponsored-link ads of the sort seen on Google. But LinkedIn intends to make more than 50 percent of its revenue from upcoming paid services and expects to become profitable in the second half of next year.

Most LinkedIn users are not very active on the site. They may use the site to keep their contact information current and browse the network occasionally. Still, these passive users are valuable to the site because they expand the reach of the network, Hoffman said.

Roughly 10 percent of LinkedIn members are what the company calls "power users." They come nearly every business day and include financial analysts searching for exclusive information about companies and professional recruiters seeking job candidates. LinkedIn plans to pitch premium services to these frequent visitors.

One of those services might concern reference searches, co-founder Guericke said. Recently, LinkedIn began a beta test for reference searches that enable users to find people on the network who have worked with a job candidate or potential business partner. The idea is to get a so-called "back door" reference on a possible hire or learn more about a partner under consideration. For example, a manager might want to know whether a counterpart is likely to live up to a contract, Guericke said.

A free version of the reference search function will likely continue, while a paid version would have enhancements, he said. Guericke wouldn't comment on price.

Tim Farrelly, president of executive search firm Coit Staffing, said LinkedIn has already enabled him to complete a search in a quarter of the time he may have needed without the site. Farrelly is ready to pay for advanced searches and said he'd like the ability to specify a skill set during a search. If the resulting individuals are not close connections, Farrelly would also like to see a method or path for connecting to them. "Those sorts of search features would be fantastic," he said.

Despite Farrelly's enthusiasm for the site, professional recruiters may be wary of the way LinkedIn could make them obsolete, Delphi's Keldsen said. After all, the site gives internal hiring managers tools for doing searches on their own. "Headhunters will tend to see LinkedIn as a threat," Keldsen said.

In a couple of ways, though, LinkedIn is trying to become friendlier to users. For one thing, it plans to increase the range of possible relationships among members. This would allow people to avoid giving a rude-sounding rejection to some of their callers. Currently, Hoffman said, "you need to be careful about the invitations you accept. The only solution today is, don't accept" invitations from people whom you aren't willing to introduce to your contacts.

LinkedIn also aims to look better. The first changes to its interface will be completed in the near future, and a bigger fix will come in nine months.

"Our search interface is not the most user-friendly," Hoffman said.