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Social-networking sites are not just for teenagers. They have business uses too.
Economist Staff, The Economist
May 2, 2007
The most avid users of social-networking websites may be exhibitionist teenagers, but when it comes to more grown-up use by business people, such sites have a surprisingly long pedigree. LinkedIn, an online network for professionals that signed up its ten-millionth user this week, was launched in 2003, a few months before MySpace, the biggest of the social sites. Consumer adoption of social networking has grabbed most attention since then. But interest in the business uses of the technology is rising.
Many companies are attracted by the marketing opportunities offered by community sites. But the results can be painful. Pizza Hut has a profile on MySpace devoted to a pizza-delivery driver called Ted, who helpfully lets friends in on the chain's latest promotional offers ("Dude, I just heard some scoop from the Hut," ran one recent post). Wal-Mart started up and rapidly closed down a much-derided teenage site called The Hub last year. Reuters hopes to do better with its forthcoming site for those in the financial-services industry.
Social networking has proved to be of greatest value to companies in recruitment. Unlike a simple jobs board, social networks enable members to pass suitable vacancies on to people they know, and to refer potential candidates back to the recruiter. So employers reach not only active jobseekers but also a much larger pool of passive candidates through referrals. LinkedIn has over 350 corporate customers which pay up to $250,000 each to advertise jobs to its expanding network. Having lots of people in a network increases its value in a "super-linear" fashion, says Reid Hoffman, LinkedIn's founder. He says corporate use of his service is now spreading beyond recruiters: hedge funds use it to identify and contact experts, for example.
Jobster, a Seattle-based social-networking site, is entirely devoted to recruitment. Jobseekers can post their own profiles and tag their skills; these tags are then used to match candidates against jobs posted by employers. Unlike on LinkedIn, companies can set up private networks to ensure that the right kinds of people are alerted to openings and that the data they post remain under their control. Information needs to stay behind when a user leaves the company, argues Jason Goldberg, Jobster's founder.
Where LinkedIn emphasises scale and Jobster emphasises specialisation, Visible Path, a start-up based in New York, focuses on the strength of individual relationships. The firm analyses e-mail traffic, calendars and diary entries to identify the strongest relationships that exist inside and outside a company. An obvious application is to generate leads: a salesman can use the service to identify who within his network has the closest links to a prospect, and request an introduction.
Such techniques are also gathering momentum in "knowledge management". IBM recently unveiled a social-software platform called Lotus Connections, due out in the next few weeks, that lets company employees post detailed profiles of themselves, team up on projects and share bookmarks. One manufacturer testing the software is using it to put inexperienced members of its customer-services team in touch with the right engineers. It can also be used to identify in-house experts. Software firms will probably start bundling social features of this kind into all sorts of business software.
To work well in the business world, social networking has to clear some big hurdles. Incentives to participate in a network have to be symmetrical, for one thing. The interests of MySpace members — and of jobseekers and employers — may be aligned, but it is not clear why commission-hungry salespeople would want to share their best leads with colleagues. Limiting the size of the network can reduce its value for companies, yet confidentiality is another obvious concern for companies that invite outsiders into their online communities. "Social networking sounds great in theory, but the business benefits are still unproven," says Paul Jackson of Forrester, a consultancy. But if who you know really does matter more than what you know, it has obvious potential.