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Can Jeff Weiner Realize LinkedIn’s Full Potential?

(Corrects Daniel Roth’s title at Fortune)

The morning of May 19, Jeff Weiner became the face of technology’s new era of bubbly optimism. After ringing the bell on the floor of the New York Stock Exchange (NYX), the chief executive officer of LinkedIn (LNKD) watched as shares of his company soared above $120, nearly triple the price set by bankers the night before. That valued LinkedIn at more than $9 billion, and Weiner quickly became a target for critics doubting the company was worth its sky-high valuation. This “is like a movie I’ve seen before,” said Citigroup (C) Chairman Richard D. Parsons, who once led AOL Time Warner, in a CNBC interview.

It’s tough to find a tech CEO with more to prove than Weiner. He took the top job at LinkedIn in 2009, after seven years at Yahoo! (YHOO) struggling—and ultimately failing—to keep the Web portal competitive with Google (GOOG) in search. In the past two years he’s quadrupled Linked-In’s headcount to 1,500 employees, turned the world’s largest database of online résumés into a profitable service for job recruiters, and amassed a personal wealth of more than $160 million.

Now Weiner, 41, has the weight of Wall Street’s expectations on his shoulders. The stock price has cooled since the initial public offering, but it still values LinkedIn at $8.4 billion, a whopping 547 times the company’s 2010 earnings. If it keeps attracting new members and extracting more value from their professional profiles, Linked-In under Weiner could become the first publicly traded success story of the social networking era. If it doesn’t, the company risks becoming the latest poster child for the irrational exuberance of the tech sector.

When Weiner joined in 2009, LinkedIn was a fast-growing startup where scattershot engineering projects were pulling the site in different directions. Reid Hoffman, the LinkedIn co-founder who ran the company before hiring Weiner to replace him, says he’d built “a collection of very strong people, but not necessarily an effective team.” Weiner scuttled some of the less promising projects, including a business-to-business expert matchmaking service. He made LinkedIn’s “hiring solutions” business—which provides services for HR departments and executive search firms—the company’s top priority. “Jeff brought a philosophy of do fewer things and do them better,” says Mike Gamson, senior vice-president for global sales, who has been at LinkedIn since 2007.

Recruiting firms pay LinkedIn an average of $8,000 a year for each employee who uses its advanced tools to search through profiles on the site. Special features such as a “referral engine” let HR managers show their own employees the names of people in their networks and ask if any of them would be a good fit for a specific opening. Overall, hiring solutions are a hit. “The information is up to date, it’s accurate, and you’re able to decipher from that information whether or not that’s a prospect you want to go after,” says Daniel C. Grassi, a partner at executive search firm Boyden. Last year hiring solutions eclipsed advertising and subscriptions to become LinkedIn’s largest and fastest-growing division, generating $101.9 million in sales and accounting for 42 percent of revenue, up from 22 percent in 2008.

Earlier in his career, Weiner saw firsthand the folly of trying to do too much. After graduating from the University of Pennsylvania’s Wharton School, he found a mentor in Terry Semel, then a high-level executive at Warner Bros. (TWX) When Semel became CEO of Yahoo in 2001, Weiner followed. There he helped oversee the company’s acquisition of Inktomi and Overture Services, search technologies that put Yahoo in competition with Google and put the young executive at the center of a polarizing internal debate: Was Yahoo a technology company or a content company? Weiner says he grew frustrated when resources that could have gone into better Web technology—he pushed to acquire YouTube but was overruled—were spread too thinly across too many businesses, from e-mail to news. Yahoo lacked “a clearly defined mission and core set of priorities,” says Weiner. Tired of the uphill battle, he left the company, along with many others. A Yahoo spokeswoman declined to comment.

At LinkedIn, Weiner gets to call the shots. Post-IPO, one of his missions is to make the site a more regular destination for its 100 million members. In May, LinkedIn’s average U.S. user spent only 15.4 minutes on the site, a small fraction of the 374.9 minutes users spent on Facebook, according to researcher ComScore (SCOR). Yet for the hiring solutions business to remain effective, LinkedIn needs its users to keep their profiles updated even when they’re not job hunting, and it is developing new offerings to get people to interact with the site more. In March it launched LinkedIn Today, a personalized, computer-generated news feed, and in June it hired and Fortune Digital Managing Editor Daniel Roth to oversee editorial content. Another new feature, InMaps, lets members explore a visual web of how they’re connected to each other. Debra Aho Williamson, principal analyst at EMarketer, says LinkedIn “is never going to have the usage rates of Facebook.”

A few companies are even using Facebook’s immense network to take on LinkedIn directly. San Francisco’s BranchOut gives Facebook users a way to discover job opportunities through their friends on the social networking site; it nabbed $18 million in funding in May. On June 27, job board Monster (MWW) announced BeKnown, its own Facebook app for professional contacts. These programs help job searchers rub elbows with Facebook’s user base, which, at over 500 million, is many times the size of LinkedIn’s. Employers, likewise, have their job openings exposed to a larger pool of candidates.

Another potential problem for Weiner is employee turnover. LinkedIn’s post-IPO millionaires can begin cashing out in November (as per the insider lockup imposed by the Securities and Exchange Commission). And as hot pre-IPO companies such as Facebook and Twitter snatch up engineering talent, LinkedIn’s already frothy stock price might make it difficult to recruit technologists. “That could put a little sand in the gears if your equity doesn’t have the same currency in attracting talent,” says Ken Sena, an Internet analyst at Evercore Partners (EVR).

On the day of the IPO, LinkedIn staffers were given black T-shirts with the company’s new stock ticker, LNKD, written across the front. On the back the T-shirts read, NEXT PLAY. It’s a mantra inspired by Duke University basketball coach Mike Krzyzewski, who shouts the phrase every time the ball switches hands and his team heads down the court. The idea is “to make sure people don’t spend too much time celebrating a great outcome or lamenting a poor outcome,” says Weiner. “That they turn their attention to the next play.”

The bottom line: Wall Street has high expectations for LinkedIn. To live up to them, Weiner must improve member loyalty and fend off competitors.

MacMillan is a reporter for Bloomberg News and Bloomberg Businessweek in San Francisco.

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