The two most popular online professional networking sites, LinkedIn and Xing, have been growing at breakneck speed and boast 29m and 6.5m members respectively. And in contrast to mass-market social networks such as Facebook and MySpace, both firms have worked out how to make money. LinkedIn and Xing are similar in many ways. Both cater to youngish professionals with above-average income, and allow people to connect, keep track of each other's activities and create groups of common interest. Both are also profitable since they help members find jobs or build their businesses, many users are willing to pay. Yet the two firms come from very different worlds. LinkedIn, was founded in 2002 by Reid Hoffman to manage his own business network. Funded by venture capitalists, it recently secured $53m of funding in a deal that gave it a valuation of over $1 billion. Xing comes from Germany, where it was founded in 2003 by Lars Hinrichs. It has relied on subscription fees since its launch, and it went public in 2006.
LinkedIn is chiefly about advancing its members' careers, even if many other things set a look in. A big chunk of its estimated annual revenues o $100m in 2008 is said to come from headhunters and companies, which pay to search LinkedIn database and contact its members. For Xing, although recruiting plays an important role, the site is more about networking. Members often meet offline. They also generate 80% of the firm revenue, which amounted to 16m euros ($24m) in the first half of this year. Half a million users pay a monthly fee of 6 euro ($9) to use the site. Xing's profit margin was 37% in the most recent quarter.
According to Forrester research, Facebook could be a potential competitor if it grows up and become a place to do serious business. American newspapers such as New York Times and Wall Street Journal are adding networking features to their websites. These are mainly meant for readers to stick around but could grow into professional social networks. Professional associations could also enter this sphere.
Source: "Facebook for suits." The Economist, September 27th 2008, pp. 76-77.