Making Relationships Matter

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Social networking site LinkedIn is one of the few firms benefiting from the recession. The most obvious metric? Membership, which, at 34 million, is up from 8 million just two years ago. And as unemployment looms, LinkedIn users are apparently ramping up their networking efforts—the number of member recommendations on the site reportedly surged 14 percent between September and January. Amid the flurry of activity, it becomes vital for the site to uphold its reputation as the social networking destination of choice for businesspeople. In addition to opportunities for recruitment and human resources, investors and partners are beginning to take notice as well—and beginning to connect to the CRM scene.

In late October, SAP revealed it was part of a group that had made a $22.7 million investment in LinkedIn, but only had general comments on its plan for the stake: “LinkedIn is one of the leading Internet companies in the world that targets business users,” said an SAP spokesperson. “When Web 2.0 technologies are smartly applied to the enterprise, they can produce significant efficiencies for small, medium, and large companies, and we believe in LinkedIn’s pioneering approach.”

SAP’s not alone in seeing operational value. BusinessWeek, for example, is one of several media outlets tied into LinkedIn content. Thanks to one of what LinkedIn calls its “Intelligence Applications,” when a visitor to the magazine’s Web site hovers over a company name within a story, a list of her LinkedIn contacts at that company come into view. In addition to Intelligence Applications, LinkedIn now offers 10 third-party applications on its site since opening up its application programming interface (API) in October.

Brad Shimmin, research analyst with Current Analysis, says that opening up the API will help LinkedIn in its retention efforts, thanks to an expanding breadth of usage—and the third-party applications are representative of it. “When I look at the list of these applications that are the most popular on LinkedIn, I see the merger of two worlds: the short-term-collaborative and long-running-collaborative applications,” he says. “I see the LinkedIn users wanting to use LinkedIn as a hybrid cross of those two worlds. The problem is it’s really not built for the enterprise.” Shimmin, whose research focuses on Web conferencing and collaboration platforms, emphasizes the growing demand for collaborative tools among businesses—and suggests that LinkedIn could stake a serious claim to ownership of the space.

“They’re a lot like Salesforce.com where they built software that people really like to use, which allows them to do something, which [in LinkedIn’s case] is to connect with people they know.” Also like Salesforce.com, LinkedIn doesn’t try to create every application that uses its content. That’s where a partner ecosystem comes in, Shimmin says—and a robust ecosystem will help with enterprise adoption.

Shimmin says that, in addition to gaining credibility through its ecosystem, LinkedIn still needs to work on retention. “I’ve heard it said, and I agree, [that] LinkedIn is ‘social networking without the social part’ because most people use it to maintain a reference point of associates that lend credibility to their own value.” It’s a constant battle of where to draw the line between business and personal information. It’s part of why many enterprises are wary of Facebook. Salesforce.com’s decision to connect its platform with Facebook’s, for example, renewed concerns over social networking’s role in business.

Shimmin points out the blurring of personal and business content on sites such as Facebook and microblogging site Twitter hasn’t really happened on LinkedIn. “That was by design,” he says. “[LinkedIn has] said, ‘We want to make sure we won’t let the riff raff in and nothing bad is going to happen you and you can rely on these business networks that you create. Facebook’s never had that pretension.”

Even controlled growth eventually draws unwanted attention: Hackers and spammers that once only plagued Facebook and MySpace have expanded their targets to include LinkedIn and Twitter.

Are those sites officially in the social networking big leagues now—or does it merely mean that no Web site is immune? “It doesn’t matter whether you’re LinkedIn or Facebook, it’s still a danger,” Shimmin says. “Even if you’ve engineered yourself like LinkedIn to put controls around these things, it doesn’t guarantee that you’re going to secure the information.” That’s the kind of talk that makes information-security professionals bristle.

Still, research from analyst firm CMS Watch indicates that users find more business value in LinkedIn than in other networking sites. Facebook may be the biggest—its membership of 150 million is expected to double in 2009—but it may never offer the best business value: “Facebook certainly has a better ‘fun factor,’ ” CMS Watch founder Tony Byrne said in a statement, “but I’m not as sanguine about the platform’s business potential as I was a year ago, whereas LinkedIn seems to be pursuing a measured plan to provide more value to the enterprise.”

So what does LinkedIn need to do to prove that value—and also its viability? Two things, Shimmin says: Become more social, and put information into the hands of enterprises themselves for increased security—whether that means offering “white-label” LinkedIn solutions, or just tightening its own security measures.

“What’s really going to make the biggest difference is changing the mindset of the user base itself,” Shimmins says, “that LinkedIn is not just a resume-building site.”

Every month, CRM magazine covers the customer relationship management industry and beyond. To subscribe, please visit http://www.destinationcrm.com/subscribe/.

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