Network Effects: Why You Want to be LinkedIn

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Network effects is when the value of a product or service increases as its number of users increases. Network effects can have a huge impact on what products we buy and what services we use. As human beings, we all like fitting in and want to use the same products that everyone else uses. As the reading pointed out, network effects work well for sites such as Facebook, Twitter, and Ebay. When so many people are users of a certain product/service, more and more people want to get involved so they can benefit from the large network and not feel left out.

Recently, LinkedIn, the world’s largest professional network, has been gaining more users because of network effects. LinkedIn is an example of two-sided network effects. It has been able to entice both potential employees and companies/employers to join because of their new services. It created the “LinkedIn Recruiter” designed for companies that pay to use LinkedIn as a hiring tool. These companies can see all of the user’s profile information without the user knowing that they are looking. Recruiters can access the entire network, with over 200 million members in order to easily search for qualified people who have the skills that match what they are looking for. As more recruiters are finding success, it inspires other recruiters to join. In return, more potential employees join because they can benefit from the larger network of employers. According to Alexandra Chang, the author of the LinkedIn Recruiter/ article, “Happy recruiters mean more and more recruiters using LinkedIn, which in true network effects fashion translates to LinkedIn becoming the future of hiring. By design it’s going to be very hard for anyone else to catch up.”

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Ed Nathanson, director of talent acquisition at software company Rapid7 uses LinkedIn for all of its recruiting purposes and finds the vast majority of employees on the site. “And if you aren’t on LinkedIn? He’ll probably never find you. And even if he did, he probably wouldn’t hire you,” says Chang. LinkedIn provides a good example of the strength of network effects. When more recruiters are joining LinkedIn, this encourages job-seekers  to join so they can improve their chances of being  hired and aren’t missing out on opportunities that their peers have.

There are obvious positive outcomes to network effects. People can easily exchange goods, services, and communication, and users can benefit from large networks when they buy obscure products on Ebay or get hired via LinkedIn. But before jumping into services, it is important to understand the negative consequences from network effects, as seen by an article about reverse network effects. When there are so many people using a network, it can be hard for the network to monitor the activities and manage its users. On sites like Match.com and LinkedIn, they want quality users and want to make sure members are using the site for the right reasons, but a high number of members makes it hard to track user activity to see if it is acceptable and relevant.  There are also security issues. Sometimes people want to be involved in technology so badly that they do not think about privacy issues. People will put up personal information on Facebook or LinkedIn since everyone else uses the sites, but users might not be completely sure how they protect their information and who can access their personal information.

There is a lot to think about when deciding what products and services to use. It is part of human nature to want to be involved with what everyone is doing and have the newest product or social media tool that everyone else has, but we have to be sure it is in our best interest. Overall, the power of network effects is strong, and after reading the article about the hiring power of LinkedIn, it made me want to become a member. Did it make you consider getting an account on LinkedIn?

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10 thoughts on “Network Effects: Why You Want to be LinkedIn

  1. I enjoyed reading this. It was well written. I have started to notice the network effects of Linkedin. First, everyone tells you, you need it. Secondly, it is a private way for potential employers to search and seek out employees. I have been contacted a couple times for jobs.

  2. Really interesting post about both the positive and negative aspects of network effects. To answer your question, this definitely made me consider becoming a member of LinkedIn because there seems to be a shifting trend towards using LinkedIn to recruit. I think I am succumbing to the network effects by wanting to join because I want to be where the employers are. If companies I am interested in working for are using LinkedIn to recruit, I feel that not joining would only be putting myself at a disadvantage. I think the use of technology for recruiting is just another example of how society continues to shift towards a technologically dependent age.

  3. As a senior, it is almost rare for any of my classmates to not be a member of LInkedIn. It definitely a necessity in order for someone to be competitive in the post-graduate job market. At the Boston College Career Fair this fall they even had a photo booth set up so that one could take a picture and look “professional” on their LinkedIn account. I think the LinkedIn network is growing rapidly, but I don’t think it is being relied upon as much as we think. It is definitely another avenue to come in contact with potential employers but not the end all be all. For example, I emailed potential employers and requested them on LinkedIn. Both accepted my LinkedIn request, yet didn’t respond to my emails.

  4. I have always somewhat underestimated LinkedIn’s capabilities. I can’t exactly explain why I guess it just boils down to a little bit of prejudice, to be completely honest. To answer your question, yes this made me consider getting a LinkedIn account. My Dad always emphasizes to me the importance of networking. He, amongst others, has proven to me that it gets you where you want to be in life, not to mention you get to meet great people who do great things! Reading your blog, I am learning that networking is making its way to the world wide web. LinkedIn and networking are becoming connected in a way many people probably never expected. While more is required of individuals than just using LinkedIn, it is a great start for potential employees and recruiters. As you pointed out, it is something that both employees and employers can’t exactly do without if they want to be as successful as others using LinkedIn. While I figured I would join LinkedIn at some point, this blog reassured me in getting connected with it. As the comment above me states, almost all seniors at BC have joined, and I will join them.

  5. I really enjoyed your blog post! I think that LinkedIn is such a huge force, especially nowadays, and it was super relevant seeing as all of us will most likely have join the network within the next couple years, if not just the next upcoming year. This definitely made me consider joining LinkedIn, not only in the future, but immediately. It is such a helpful tool that I think it would really behoove all of us to join as soon as possible because, nowadays, connections are everything, especially in the business world. I think LinkedIn is so special, because not only was it one of the original social media sites, but it it does something so well that other sites don’t even think to do. Why would other sites not try to get in on this action and take advantage of the huge market for people looking for jobs, especially in this type of economy? It seems like the obvious choice. Awesome job!!

  6. Great post and great example of a double sided network effect! I have recently created a linkedin account and was left wondering what does it actually do? It is nice to see recruiters are now looking through the website to try and find someone that is capable to work for them. This makes finding a job a bit easier than before! However, currently Linkedin is still predominately used in the United States. What happens when it is as big as Facebook, how will Linkedin monitors its member and maintain quality control? The fact that you enter whatever you want to appear on Linkedin, what exactly are their strategy in making sure the information presented by its members are accurate and not falsified? In addition, as Linkedin becomes bigger and bigger, would other firms (like Facebook) attempt to buy linkedin? only time can tell! Very interesting case we have here!

  7. LinkedIn was the first thing that came up to my mind when Professor Kane talked about Network Effect. Glad to see a actual post of it. For me, Network effect is like a line graph, it starts at low rate, once the amount of people increase, the increasing rate jumps just like a curve line. I really like the telephone illustration you put, it efficiently explains the concept.

  8. After reading your blog I would definitely consider getting a LinkedIn account. I had no idea that network effects has led to LinkedIn making such a large impact on the job search industry. It seems that soon enough LinkedIn will be the main source of job employment information for both those seeking employment and businesses seeking employees. I also thought the negative points you brought up were very interesting. It is important to remember that even professional profiles may share too much information. Overall, though I think joining LinkedIn would be in most people’s best interest.

  9. Great choice to write a blog post about Linkedin. Linkedin is an excellent example of a company gaining strength from the power of network effects. There are certainly many beneficial aspects of Linkedin that have expanded as more and more users/ employers create an account. For example, my roomate over the past few weeks has had interviews with 6 different companies. All of these interviews are a result of Linkedin/ her submitting her resume via Linkedin. This certainly shows the benefits of creating an account. However, I have not necessarily had such a great experience on Linkedin. Personally, I have never been sure the appropriate conduct on Linkedin– i.e. when is it okay to request an employer, what exactly should I put on my profile, etc. However, I do think that as time goes on and people become more familiar with the site, these issues will be elimated. I really enjoyed how you explained the negative effects of Linkedin, particularly its desire to attract quality users and make sure members are using the site for appropriate reasons.

  10. A service that enjoys large network effects is still susceptible to erosion if a competing service can offer significantly higher value. One outcome of technology is the lowering of barriers in replicating social networks across services.

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