Best of The Web
Corporate
Inter-Face-Time
Nikhil Hutheesing, 03.22.04
You no longer have to suffer endless cocktail parties or business
dinners to expand your professional network. A new wave of Web sites
could boost your business with a few clicks of the mouse.
Ever heard of four degrees of separation? Axel
Schultze, the chief executive of San Mateo, Calif.-based BlueRoads
never had until August of last year when he signed up with LinkedIn, a
new breed of networking sites. Schultze, 50, an entrepreneur who has
founded several companies over the past 20 years, initially wasn't sure
there would be much value to the service. Now he thinks there is.
Recently his company, BlueRoads, a B2B partner
management firm that connects vendors, such as Sun Microsystems, with
their indirect channel partners, needed to hire a vice president of
marketing. Schultze put the word out to his 230 contacts via a LinkedIn
e-mail. Some of them sent out e-mails to their own contacts. The flurry
of e-mail correspondence eventually connected Schultze's contacts with
the contacts of Kathleen Hayes, a vice president at Epicentric, a
content-management company.
Hayes wasn't looking for a new position, but
once the connection was made through their trusted contacts, Hayes and
Schultze decided to meet. "During the meeting, Kathleen became excited
about our business and I became excited about her," says Schultze. In
March, Kathleen took the job. It was a win-win for BlueRoads. Not only
did the company hire someone who wasn't even looking for a job and
would not have considered working for an early-stage startup, but it
also saved about $30,000 in recruiting fees.
LinkedIn's Web networking service is based on
the theory of six degrees of separation, which says that you are just
half a dozen introductions away from anyone you want to meet. The site
puts the concept to practical use, letting you take advantage of a
chain of connections by allowing users to create searchable, private
networks of contacts. The premise is that the most critical step
towards finding a job, finding an employee or finding a business
partner is getting a high quality referral—an introduction from someone
who knows you and thinks highly enough of you to stake their reputation
and pass your name along.
Schultze has now joined 385,000 users who have
signed up on this business-networking site. He now has a personal
network of 230 direct connections, some of whom he uploaded from his
Eudora e-mail client, and an accessible network of 200,000 contacts
within four degrees of him.
For the most part LinkedIn has spread virally.
Most people join LinkedIn after they receive an e-mail from a personal
contact requesting that they join their network. By joining, you can
receive referrals from all of their contacts about topics you make
yourself available for. Examples include potential jobs, new hires,
business partners, sales prospects, strategic consulting and funding.
Equally, the person who recruited you stands to widen their circle of
contacts for similar purposes.
If you would like to arrange a meeting with
someone in your network—which is defined by all contacts within four
degrees of separation from you—you would use LinkedIn's Web site to
initiate contact. An e-mail is then sent through the site to your
direct contact asking for a referral to the person on their contact
list you want to meet. Likewise if the person you want to meet is three
degrees away, your direct contact's contact could have to make the
introduction. LinkedIn could also send a request for an introduction to
someone else who is not your direct contact but who knows you and the
person you are trying to meet. Assuming the chain of personal contacts
follows through and makes the necessary introductions, it is more
likely that the meeting would actually take place than if you had made
a cold call to that person.
"Things like honesty, how a person works in a
team are harder to tell if you don't have a connection to the person,"
says Konstantin Guericke, one of the cofounders of LinkedIn. "You can
check out a person's references better if that person is in your
sphere."
The idea of referrals is key here—LinkedIn
doesn't give out e-mail addresses and other contact information so your
privacy is guarded. (For that reason, well-known entrepreneurs such as
Netscape Founder Marc Andreessen, Yahoo's Jerry Yang and Pierre Omidyar
of EBay all use LinkedIn as well.)
Mountain View, Calif.-based LinkedIn was
launched on the Web in May 2003 by Reid Hoffman, a former executive
vice president at PayPal, who was also a seed investor in Friendster, a
social networking site geared more towards finding friends and dates,
and by Konstantin Guericke and three others. Each of them had worked at
building online communities in the 1990s and realized that when it came
to business, online communities were not efficient meeting places.
"There was an imbalance among those looking for jobs and those looking
to hire, and between those with money to invest and those seeking
funding," says Guericke. "As a result, these kinds of people built
screens around them and used trusted contacts as filters before
communicating with others."
Sensing an opportunity, the entrepreneurs
formed LinkedIn and the site has quickly become the Internet's largest
online business network. LinkedIn currently has 15 million contacts on
its system; according to the company, users search for professionals
over one million times per month. LinkedIn says it facilitates more
than 15,000 referrals per month.
LinkedIn's quick success is part of a bigger
trend sweeping the Web, known as social networking. Today there are a
number of such sites and the majority of them—sites such as Friendster, Tickle and Meet Up—are aimed at the dating
scene.
While there are no clear numbers yet for how
many people are using such sites, there are probably at least 7.5
million people who use these Web-based social networks. That's big
enough that Google has recently created its social networking site, Orkut, and America Online just
launched its site, ICQ
Universe.
Now sites such as Ryze, Spoke
Software, Always On
Network and LinkedIn are
the latest to try to benefit from connecting people, this time to get a
job, meet a business partner, find venture funding or simply to gather
information. Of all of these, LinkedIn is the most strict about keeping
its site solely for professional, business purposes.
So far venture capitalists have poured $70
million into these networking businesses—and they have yet to come up
with a valid business model. Last fall, Friendster got $13 million in
funding from Benchmark Capital and Kleiner Perkins Caufield &
Byers. EBay founder Pierre Omidyar invested several million dollars in
MeetUp in October. DCM-Doll Capital Management led a $12 million
investment in Spoke Software in November and that was on top of nearly
$9 million in VC money it already had. Around the same time LinkedIn
raised $4.7 million in an initial round of venture financing led by
Sequoia Capital, a onetime backer of Yahoo, Google and PayPal.
But many of these sites are still in beta and
have yet to determine how they will make money. Today LinkedIn is
entirely free, but eventually the company may offer a premium service
and charge a flat subscription fee or a referral fee—perhaps $5 for
each referral made. The company is also exploring advertisements
modeled after the text-based keyword ads popularized by Google. Ryze
does charge a fee: $9.95 a month for a gold membership that gives users
advanced search capabilities and allows them to set up groups that are
focused on industries or geographic areas.
Eventually there will be a consolidation among
these social and professional networking Web communities. Charlene Li,
an analyst at Forrester Research, worries that there could be a
different kind of fallout from the rise of these sites. She is
concerned about invasion of privacy."What if a recruiter goes into
LinkedIn and he could compare how well connected I am within my company
versus someone else in my company applying for the same job?" says Li.
"That kind of information wasn't so readily available before and could
hurt my chances of getting a job."
There are other competitive concerns as well.
Law firms, talent agencies or investment bankers might balk at
potentially exposing key employees' contacts and clients to outside
firms. Another worry has to do with linking these networks to software
that allows for mapping all the relationships within a company by
accessing data in a company's customer relationship management or sales
force automation databases. Today, such databases are used to show
interactions between a company and one corporate customer. But in the
future, Li warns that such mapping software could give employers
ongoing access to more personal information, for example an employee at
one company has a boyfriend who works for a company that is a client or
competitor. It is entirely possible that these networks could even
assist regulators in gathering evidence in insider trading cases.
For now, LinkedIn is forging ahead adding
features in an effort to expand its user base as fast as possible. One
recent enhancement is a keyword search function. For instance, if you
run a Web design firm and you need to locate everyone in your network
who has experienced in flash technology, you can search by keyword
"flash" and anyone in your extended network with experience in this
area will be listed. Another nice feature: Thanks to a relationship
with Direct Employers, a job search site, LinkedIn offers perhaps a
smarter way to find a job. With LinkedIn you can see 240,000 open job
listings and see if you have contacts at the company where you would
like to work. On Monster.com you would most likely need to sift through
job postings and then send in a blind resume.
Social and business networking sites have
grabbed the attention of users and the venture community precisely
because they take full advantage of the Web's community aspects,
advanced database management software and a high level of Web usage in
places like the U.S. and Asia. Of course, the real test will ultimately
be whether or not they are compelling enough to users to earn their
keep.
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