LinkedInConnect: The Missing Link · 2 LinkedIn’s fundamental value proposition is connecting...

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LinkedInConnect: The Missing LinkDeGroote Consulting, Tech Strategy Division

Sarah SchweinbergerBriana KnowltonMichael WidlickiShelby Gorelle

Opportunity Statement

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LinkedIn’s fundamental value proposition is connecting people to opportunity.

How can LinkedIn promote, integrate and monetize Lynda.com’s catalogue of resources into its existing product offering, ultimately creating sustainable value for its

shareholders?

Recommended Solution

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We recommend that LinkedIn provides a clearly defined pathway for LinkedIn members to attain the skills they need, and land the job placements they want, by implementing “LinkedIn

Connect” using the MATCH Methodology.

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Key Considerations

Key Considerations

5Key Issues Analysis Alternatives Solution Execution Contingency

Importance

Urge

ncy

HighLow

High

Low

Return for Shareholders

• After the Lynda.com acquisition, there was a 5.3% drop in LinkedIn share price

• Shareholders were concerned• Shareholders must be reassured

that LinkedIn will recognize value from Lynda.com

Shareholder returns

Key Considerations


Importance

Urge

ncy

HighLow

High

Low

Synergy Alignment

• LinkedIn’s acquisition of Lynda.com took analysts and shareholders by surprise

• To reassure both groups, LinkedIn must determine how to integrate Lynda.com into its current suite of product offerings

Shareholder returns

Synergy Alignment

Key Considerations


Importance

Urge

ncy

HighLow

High

Low

Grading/Certification Credibility

• Current LinkedIn courses do not offer credible grading once completed

• They also do not offer credible certifications

Shareholder returns

Synergy Alignment

Grading & Cert.

Key Considerations


Importance

Urge

ncy

HighLow

High

Low

Maintaining Active LinkedIn Members

• LinkedIn must maintain its database of active, high quality talent that recruiters can utilize when filling roles

• Members must realize a return for their membership that is concretely defined

Shareholder returns

Synergy Alignment

Grading & Cert.

Active Members

Key Considerations


Importance

Urge

ncy

HighLow

High

Low

Low Barriers to Entry/Competition

• Social platforms tend to have low stickiness

• There are many platforms (physical and social) that offer competing services to LinkedIn

• To stay relevant, LinkedIn must continually update its product offering

Shareholder returns

Synergy Alignment

Grading & Cert.

Active Members

Competition

Key Considerations


Importance

Urge

ncy

HighLow

High

Low

Key Takeaway: LinkedIn’s shareholders are concerned with the acquisition of Lynda.com; the value of this service must be concretely defined and demonstrated.

Shareholder returns

Synergy Alignment

Grading & Cert.

Active Members

Competition

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Analysis

Situational Analysis – SWOT


SStrengths• Large existing user base that LinkedIn can tap into• Lynda.com course-content production facilities and

competencies• Ownership of Lynda.com allows LinkedIn access to $30B

professional certification market• LinkedIn can control the addition of new courses, aligning

this to its preferences

WOT

Situational Analysis - SWOT


SWeaknesses• LinkedIn does not have existing competencies in the

professional certification industry• Lynda.com does not currently offer knowledge testing

services• Lynda.com does not offer a credited certification system

WOT



S Opportunities• “The future is outside of the traditional campus” – experts

agree that e-learning presents a significant future opportunity

• Offering recruitment clients the opportunity to better parse and select candidates to fill desired positions

• Opportunity to increase length of jobseeker stay on LinkedIn via courses; leads to more marketing opportunities

• Improve user engagement by offering courses

WOT



SThreats• Online learning market is competitive (ex. YouTube tutorials)

with relatively low barriers to entry• In its current form, Lynda.com is not a substitute for a formal

education in the eyes of recruiters• LinkedIn is very susceptible to changing economic client, for

both jobseeker and recruiter clients

WOT



SKey Takeaway: Though many opportunities exist, currently

Lynda.com does not offer credible testing and certification; this is the service’s greatest weakness.

WOT

LinkedIn – The “Economic Graph”


Pool of Candidates

Training and Development

Job Placement

LinkedIn’s current competencies can be visualized as a chain.



Pool of Candidates


Job Placement

• 467M LinkedIn members globally• 39M students/recent college grads• In over 200 countries• 60% of members are passive job

seekers• 25% are active



Pool of Candidates


Job Placement

• Lynda.com has over 6000 courses• Topics ranging from coding to

marketing to general business• Adding 400 new courses/yr (unlike

universities and colleges)• High quality training videos and

content developed by industry experts



Pool of Candidates


Job Placement

• LinkedIn strives to offer it’s members the job placements they want and provide recruiters access to top talent

• 35% of 38,000 employers report difficulties filling jobs

• Recruiters question the talent base and look to other options when they are unable to fill their desired roles




What’s missing in the chain is the LINKS.

Pool of Candidates


Job Placement




What’s missing in the chain is the LINKS.

Pool of Candidates


Job Placement

No one knows where each other is, until they choose to “Connect” on LinkedIn, or to apply/post a job.



Pool of Candidates


Job Placement

Key Takeaway: These missing “links” present a vital opportunity for LinkedIn to continue delivering value to its customers, and subsequently, its shareholders.

Customer Profiles


Sam: The Job Seeker: Wendy: The Recruiter

• Age: 27 years old• Gender: Male• Recently graduated top of his

class with a BBA (marketing)• Looking for a marketing role in

the technology industry• Searches LinkedIn

advertisements daily, but understands that his chosen industry is very competitive

Customer Profiles



Sam’s major question: How can I make my resume more competitive?





Customer Profiles




• Age: 33 years old• Gender: Female• Recruitment Coordinator at a

major technology company in the United States

• Looking to fill rolls within her marketing department

• Knows that once she posts these positions on LinkedIn she will have thousands of resumes to look though





Customer Profiles








• Age: 33 years old• Gender: Female• Recruitment Coordinator at a

major technology company in the United States

• Looking to fill rolls within her marketing department

• Knows that once she posts these positions on LinkedIn she will have thousands of resumes to look though

Wendy’s major question: How can I ensure that I’m spending time reading the right resumes?

Customer Profiles



As the executives at Linkedin, what should your question be?

Customer Profiles



As the executives at LinkedIn, what should your question be?

Sam and Wendy have complementary needs to fill. How do we connect Sam and Wendy?

Perceived Value Lost


How much Value do we have to create?

LinkedIn stock declined by 5.30%Lynda.com Cost $1,500,000,000LinkedIn Market Capitalization $2,600,000,000

Percieved Market Over Payment $137,800,000

Key Takeaway: At the announcement of the acquisition, the stock price fell by 5.3%. In order to retain shareholders and create value this perceived loss must be recouped.

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Alternatives

Alternatives


LinkYourLife – Develop database of lifestyle and health videos

• There is a large pool of existing content producers that can be drawn in

• Market is trending heavily towards health

• Video length allows for greater Ad revenue traction

• Diversify product offering

• Not directly leverage video content competencies

• Off-Brand product• Content has very

developed existing substitutes (YouTube, Twitch, and Tumblr)

Key Takeaway: Solution allows for diversification of product offering and leverage existing consumer base. Unfortunately product type is outside of current scope.

Alternatives


LinkedIn Meetup – partner with “meetup.com” to run in person seminars and interviews

• Increase in-person networking

• Emphasize importance of social relationships for recruitment and professional development

• Increase job acquisition conversion rates

• May experience resistance from meetup.com and other existing solutions

• Requires risky buy-in from the existing consumer base

• Heavily dependent on success of job conversion rates

Key Takeaway: Directly leverages trend towards community and networking, unfortunately takes the final product “offline” which is not a current strength

Alternatives


Linked in Connect – Create clear path to connecting Recruiters with Applicants

• Create new revenue stream that parallels existing offerings

• Directly addresses the need of recruiters (largest revenue generator)

• Links LinkedIn and Lynda.com directly

• Requires buy-in from recruiters (up front cost)

• Applicants must be willing to complete courses

• Shareholders must see that value is being created by the new bolstered product

Key Takeaway: The link between LinkedIn and Lynda.com is bolstered and synergies are salient to shareholders. The plan is contingent on buy-in from both ends of members.

Decision Matrix


Key Considerations Weights Link Your Life LinkedIn Meet-up LinkedIn Connect

Shareholder returns 0.3 3 3 5Synergy Alignment 0.25 3 3 5

Grading and Certification 0.2 5 5 5

Active Members 0.15 3 3 3Competition 0.1 1 3 5

TOTAL 1.0 3.2 3.4 4.71 – does not address5 – fully addresses

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Implementation Plan

Implementation Overview


The goal of “LinkedIn Connect” is to create “links” between LinkedIn’s current competencies.



The goal of “LinkedIn Connect” is to create “links” between LinkedIn’s current competencies.

• Provides LinkedIn members the opportunity to get the skills they need to stand out to employers

• Provides recruiters a more efficient way of finding the qualified candidates that they’re looking for

• Certified, trained• HR systems compatible (ex. Taleo, SilkRoad)



Sam the Job Seeker

• Signs in to his LinkedIn account• Selects job opportunities that he would

be interested in• System generates a list of courses and

learning paths to get Sam “LinkedIn verified”

• Sam takes the required courses, and needs to pass the “Knowledge Test” at the end of the course

• Once Sam passes the test, he is considered “verified”

• The skill is posted on his profile• His profile is sent directly to the

employer

Wendy the Recruiter



Sam the Job Seeker Wendy the Recruiter

• Logs onto her Recruiter account• Specifies the application she wants for

her latest job posting• Specifies the “Verified Skills” she wants• As users become verified their profiles

are sent to Wendy once all of the criteria has been matched

• Wendy has the option to specify when she no longer wants to be notified



Sam the Job Seeker Wendy the Recruiter

Result? Wendy and Sam are connected!

How to Implement?


MMake the Plan A

Agile Development T

Test theSystem C

Commence withSystem Launch H

Help PromoteConnecting Sam with Wendy.

How to Implement?


MMake the Plan

• Conduct focus groups with current job seekers and recruiters• Look for Sams and Wendys• Leverage existing partnerships with recruiters• Determine skill gaps in the job market place

How to Implement?


MMake the Plan


• Create “Solution Architecture”• Assumption: systems architects are currently on staff at LinkedIn• Create a project plan

• Assign a project manager

How to Implement?


MMake the Plan


• Create “Solution Architecture”• Assumption: systems architects are currently on staff at LinkedIn• Create a project plan

• Assign a project manager• Develop “verified skills” certification

• Reach out to authors of tests to create a “test”, that course takers will be required to complete

• 80% threshold

How to Implement?


AAgile Development

What is Agile? Replaces traditional “waterfall” development methodology. Uses sprints, scrums and congruent development to create software more efficiently.

How to Implement?


AAgile Development

What is Agile? Replaces traditional “waterfall” development methodology. Uses sprints, scrums and congruent development to create software more efficiently.

• Assumption: 3 sprints (3 weeks to 3 months each) to complete the project

• Hire 1 scrum team for each:• Certified scrum master (paid to certify, ~$1000)• Developers (2)• Digital designers (1)• Analyst (1)• Software Testers (1)

• Each Sprint has 3 phases: Design, Build, Test• *testing done here is for system functionality

How to Implement?


TTest theSystem

• Test “in the sandbox” for look and feel

How to Implement?


TTest theSystem


What is the “sandbox”? It’s an artificial environment that is as close to reality as possible, that allows for an ‘almost live’ test space for technology.

How to Implement?


TTest theSystem


What is the “sandbox”? It’s an artificial environment that is as close to reality as possible, that allows for an ‘almost live’ test space for technology.

• Testing will be completed by the analysts from the Scrum Team• They will report back to Scrum Master• The next Sprint will make improvements as necessary

• User Acceptance Testing• People like the end user will test the software, to see if they like

how it works• Gives feedback – anything they don’t like will be improved

How to Implement?


CCommence withSystem Launch

• Launch of new software component, LinkedIn Connect

How to Implement?




• Active users: 25%• Specify which companies they are interested in

working for• Will be able to determine exactly which verified skills

recruiters are looking for in a candidate

How to Implement?




• Active users: 25%• Specify which companies they are interested in

working for• Will be able to determine exactly which verified skills

recruiters are looking for in a candidate• Passive Users: 60%

• Specify that they want their profile to be sent only to certain companies, certain job types or positions with a certain salary

• Or, they can check a box stating:• “I don’t want anyone to know that I’m taking

courses, specifically my current manager.”

How to Implement?


• B2B Marketing• Important to target recruiters first: it will motivate job

seekers to take courses as well!• LinkedIn has existing one on one relationships with its

business clients• Businesses with Silver + tiers have a relationship

manager• RMs responsible for encouraging system usage

• Offer 1-2 month free trials of system• To expand client base, attend technology

tradeshows, job fairs, and request presence at annual Microsoft Clients Conference

HHelp Promote

How to Implement?


• B2C Marketing• Free service (can look into charging premiums later)• LinkedIn advertisements

• Using existing targeted advertisement platform• Targeting active users

• Testimonials from candidates that have successfully utilized LinkedIn Connect

• Email campaign

HHelp Promote

Implementation Timeline


Make the Plan

Agile Development

Sprint 1Sprint 2

Sprint 3

Test

User Acceptance Testing

Help Promote

Commence with Launch

Costs


LabourSprints Labor (x3) 480,000Marketing (x2) 120,000Development (x1) 80,000Testing (x1) 80,000Convert to Mobile 200,000

MarketingFocus Groups 25,000B2B marketing 300,000B2C marketing 250,000

Total 1,535,000

Value Creation


Actual2015 2016 2017 2019 2020

AssumptionsRegistered Users 413,671 526,274 643,215 753,979 846,119Growth Rate (3 year average) 27.22% 22.22% 17.22% 12.22%

UsersTalent Solutions 64% 264,749 336,815 411,657 482,547 541,516Marketing solutions 19% 78,597 99,992 122,211 143,256 160,763Premium subscriptions produc 17% 70,324 89,467 109,346 128,176 143,840

Value Creation


Actual2015 2016 2017 2019 2020 Exit

Revenue AssumptionsTalent Solutions $2,000 529,498,880 673,630,848 823,314,642 965,093,113 1,083,031,816 1,161,231,567Marketing Solutions $0.20 15,719 19,998 24,442 28,651 32,153 34,474Premium Subscriptions products $0.00 0 0 0 0 0 0Total 529,514,599 673,650,847 823,339,084 965,121,764 1,083,063,969 1,161,266,042

FCF to Equity Holders 25.79% 136,576,009 173,752,611 212,361,220 248,930,774 279,351,230 2,995,216,412(Exit Multiple of 10)

Percentage Penetration of Product9.0% 12,291,841 15,637,735 19,112,510 22,403,770 25,141,611 269,569,4778.0% 10,926,081 13,900,209 16,988,898 19,914,462 22,348,098 239,617,3137.0% 9,560,321 12,162,683 14,865,285 17,425,154 19,554,586 209,665,149

Value Creation


Equity Value Generated9.0% $210,729,3058.0% $187,314,9387.0% $163,900,571

Discount Rate 14%

Benchmark: $137,800,000

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Risks & Contingencies

Risks & Contingencies


Situation Trigger Likelihood Resolution

Recruiters are overwhelmed with number of candidates matching their criteria

Complaints to RMs Low

Work 1 on 1 with recruiters to help narrow down their preferences; upload specific instructions for recruiters to scale LinkedIn Connect.

Low course completionrates

LinkedIn members are starting courses but not

completing themLow to Medium

Use surveys to gain feedback as to “why”; help users carve out an education path by investing in a PathFinder technology.

Challenge to maintain top talent pool due to high competition

Stagnant or decreasing active member base or

complaints from recruitersLow

Use marketing to drive home membership to job pathway; advertise link between courses and employment


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Appendix

Key Performance Indicators

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• % of courses completed• % increase of members• # of job interviews offered and connections made• # of job descriptions with “verified skills” added on• # of courses added to Lynda.com database per year• % increase in recruiter clients

• Parse by tier (Gold, Silver, Bronze)• # of ad impressions, clicks and conversions• Revenue generated by new activities• % change in Share price

Proposed Solution Architecture

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Recruiter Profile (Wendy) Qualified Candidates Test Results Bank

Course Module and Tests

User Interface (LinkedIn.com)

Employer Specs.

Job Ads

Financial Statements

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(in thousands) 2011 2012 2013 2014 2015

Net Revenue 522,189 972,309 1,528,545 2,218,767 2,990,911Total costs and expenses 496,344 915,447 1,480,733 2,182,632 3,141,853Income from Operations 25,845 56,862 47,812 36,135 -150,942Other income (expense) -2,903 252 1,416 -4,930 -63,788Net Income (loss) 11,912 21,610 26,769 -15,320 -164,761

25% 27% 26%EBITDA 98,713 223,030 376,243 592,214 779,804Number of registered members 144,974 201,912 276,842 346,731 413,671

0.371102262 0.252450856 0.193060326

Per Registered MemberNet Revenue $3.60 $4.82 $5.52 $6.40 $7.23Net Income (loss) $0.08 $0.11 $0.10 -$0.04 -$0.40EBITDA $0.68 $1.10 $1.36 $1.71 $1.89

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