Cross Side Network Effects
Job Seekers: As the number of Job Providers (Recruiting Companies) increases, the number of job seekers wanting to be on the LinkedIn platform sees a rise. This is because, by their very job seeking nature, job seekers want to be at a place where the number and quality of job listings is maximum.
Recruiters: Similarly, increasing number of job seekers on the platform incentivizes the recruiting companies to come on board the platform. Presence of a large talent pool minimizes hiring costs for the recruiters as the marginal cost of discovering/matching/hiring a new employee is reduced as LinkedIn provides them with a ready list of high quality job seekers on one single platform for free.
In addition, larger the pool of candidates, higher the chance for a recruiter to find a perfect match for their company.
Marketers and Advertisers: There is a strong cross-side network effect between professionals (Recruiters and Job Seekers) on LinkedIn and advertisers as more the number of professionals, more the reach for advertisers. As the audience they want to target with their ad campaigns increases, more and more advertisers would be wanting to be on the platform.
However, increasing number of advertisements due to increasing number of advertisers can be a nuisance and irritate the LinkedIn user. Therefore, from the professional’s perspective, there’s a small negative cross-side network effect.
Same Side Network Effects
What motivates a firm to join a platform from which its competitor is hiring? To begin with, firms and recruiting agencies are fundamentally motivated to hire the best talent. Since the talent pool is limited and a job seeker remains active for a very short period when he is aggressively looking for a job, a firm necessarily must make an attempt to reach the candidate before he/she goes off the market (has been hired by the competitor). Therefore, companies have no option but be present everywhere their competitors are hiring from. Otherwise, they risk losing out on great candidates for their companies.
Likewise, as job openings are limited and have an “expiry date” attached to them, a candidate must be available and noticeable to the hiring company. Therefore, a job seeker in fear of missing out great opportunities that his/her friend is currently enjoying, he/she will sign up on LinkedIn.
From the above discussion, it can be concluded that LinkedIn has strong cross-side and same-side network effects.
Leveraging the power of the linkedin social network
Job Seekers
LinkedIn provides a democratic platform for each professional to build his/her brand. A basic requirement for any hiring process is the resume. A person’s LinkedIn page can be filled with details about everything a recruiting wants to know: educational background, awards and achievements, past work experience and skills. The profile page when first created is essentially a static summary of a person’s past career progress.
LinkedIn, however is way more powerful than a web-display of your “Resume”. Building your brand equity on LinkedIn is an active process involving several steps as detailed below.
Network Connections: By actively growing your online professional network, a professional can signal to potential recruiters about his/her career intent. Building connections is a slow process and requires two people to play the same game, that is unless Person A considers Person B to be a valuable connection, Person A will refuse to connect with Person B. This is because, a person’s connections are displayed on his/her page and is proof of his/her standing. Therefore, by self-selection, quality connections are ensured – people often ignore connection requests from strangers.
Network Connections offers an easy source for verifying a job-seekers integrity. A recruiter can contact a mutual connection to verify the claims of the job-seeker.
Activity: LinkedIn offers professionals an opportunity to publish original-content and share/like news articles. By writing articles on their work-domains, job seekers can establish their credibility and authority in their core areas. Higher online visibility of professionals who regularly publish quality content increases their “brand-value” and has an increased probability of being noticed by a recruiter.
Mentoring: A new feature on LinkedIn has a provision to mentor candidates looking for guidance on career progress. This mirrors a work relationship that has existed from the beginning of time – that of a guru and his shishya. Mentoring activity is again a source of building one’s brand equity.
Endorsements and Testimonials: By endorsing skills of your colleagues, the strength of LinkedIn connection for both parties (the person endorsing, and the person being endorsed for that skill) increases. Likewise, writing testimonials increases the credibility of the professional and solves the lemon’s problem by weeding out “fake-profiles”.
Certificates and Skills: Certificate Courses completed on Lynda (the learning platform on LinkedIn) can be directly published on the profile page with a direct link to the certificate.
LinkedIn offers numerous opportunities for a job seeker to leverage the significant power of a professional social network as stated above. By strengthening professional ties through constant activity – building network, publishing content, mentoring juniors, endorsing colleagues’ skills and continually learning and developing one’s knowledge, your LinkedIn profile becomes a window showcasing your brand-value and net worth to the recruiter. Culmination to this online social network brand value game is by achieving the status of an “influencer” – a thinker, a thought leader who LinkedIn considers to be the leader in their fields. To be an influencer on LinkedIn, one must be invited.
Recruiters
The cost of hiring a wrong candidate, that is committing a Type 2 error is enormous for a company. Recruiters therefore seek as much information as possible for potential recruits, a process which is limited by a company’s hiring budget and resources. By leveraging the power of social network connections, LinkedIn solves this problem in a cost-effective manner. Following steps detail the process:
- Self-Validation – candidates willingly offer information about their background. While they can withhold information that they don’t want the recruiter to know, the voluntary information can be a first filter for the recruiters. They can conduct a secondary background check if they are serious about hiring the candidate.
- Network-Validation – A candidate’s profile is visible to everybody on his/her network completely and in parts to the public. Therefore, it is difficult to lie, let’s say about working for a company as others working in that company can call fraud if they find a fake profile. As most users refrain from accepting connections from strangers on LinkedIn, building “fake” network connections is difficult.
- Third-Party Validation- Partnerships with third-party organizations enables LinkedIn to publish certificates about skills directly on the candidates’ profile.
Other benefits of a social network for a recruiter/companies are:
- Market: Companies can promote their brand to LinkedIn members through organic (free company page) and paid advertisements. Building brand equity on the network can help attract talent.
- A company can leverage the network of Company’s employees to reach a wider audience for its brand promotions, job listings etc.
- Sell: Companies can generate sales leads to B2B and B2C customers through LinkedIn sales intelligence solution. They can target DMUs of B2B companies by leveraging insights into their preference, buying behavior etc.