Germany-based business networking service Xing today announced its CEO Lars Hinrichs will step down and be replaced by Ebay Germany head Stefan Gross-Selbeck effective January 15, 2009.
Hinrichs founded the company in 2003 and led it to an IPO three years later at the Frankfurt Stock Exchange where the market cap is currently hovering at around $182 million. (Which is a fraction of LinkedIn’s reported $1 billion private valuation). He will join Xing’s supervisory board as a consultant.
We asked about the reasons for his withdrawal, mainly bringing up Xing’s recent performance and the increasing encroachment of LinkedIn in Europe (especially in non-German speaking countries). Hinrichs responds:
Xing is performing better than expected and has built up a huge track record with the investor community. I think 40% EBIDTA margin [and] close to three digit growth speaks for itself. I am a serial entrepreneur (Xing is my third company) and and it’s different running a 180+ people company poised for growth and that goes after acquisitions.
Linkedin is rich on members but does not have the opportunities to engage & monetize them as we do. We are well prepared and they don’t get real traction around here. You have to understand Europe to win Europe – that’s what we are doing.
In fact, Xing’s numbers aren’t that bad at all. The site currently has 6.5 million members, about 510,000 of which are paying about $90 per year for a premium account to get full networking functionality. (LinkedIn claims 30 million registered users). XING has been cash flow positive 3 months after the start and boasted seven record-breaking quarters after the IPO, achieving more revenues and earnings in each quarter. Revenues from January to September this year amounted to $32 million, 28% more than in 2007 as a whole.
But apparently, this performance wasn’t enough. Xing isn’t pointing out exact reasons, but one factor might be the sluggish traffic on the site. In comparison to LinkedIn, Xing’s traffic on a worldwide basis has stalled in recent months (see the Google Trends chart above).
The share price might be one other major reason: Xing shares never really took off and now stand at about 25.50 Euros, 4.50 Euros less than the offering price two years ago.
Xing is quite strong in parts of Europe, where the company set up offices in Hamburg, Barcelona and Istanbul, but the site never gained a foothold anywhere else: Being almost unknown in the USA and Asia is a significant drawback as far as business networking in a highly globalized economy is concerned. Xing’s core markets are Germany, Austria and Turkey, while LinkedIn is winning in Great Britain, Belgium, Holland, France and Denmark, for example. Now Xing says one of the main duties of the new CEO is to pursue a more aggressive international expansion strategy and that it has a war chest of $50 million to achieve that goal.
Hinrichs, who is widely regarded as one of the few icons in Germany’s web industry, denied rumors about his withdrawal until Friday last week via his Twitter account. In his personal blog he says he now has more time to develop and implement new business ideas.
In Poland which is quite big (38M population), Xing is virtually unknown, and Linkedin is quite popular, particularly among higher management and professionals. Given competition of local counterparts, I cannot see any possiblity of Xing taking ground here.
Just a quick note: Premium account is around $90 per year, not per month…
I think that there are 510,000 premium members but my estimate is that jut 50-75% of them pay the fee. Some of them are receiving premium membership for free for inviting other people to Xing.
I think you’re being a little harsh on XING. First off, how many other companies can show a current share price down less than 10% on where it was 2 years ago?
Secondly, these guys are doing a phenomenal job of getting people to pay for the service, with 8% total subscribers numbers paying for premium. Mark Zuckerberg must dream of stuff like that and I bet LinkedIn is nowhere near it.
LinkedIn has nothing like the business focused social networking market to itself and I agree fully with Herr Hinrichs that LinkedIn is behind in making money from the 30 million profiles, possibly because users don’t see the value once the novelty of catching up with your ex-colleagues has warn off…
Ian Hendry
CEO, WeCanDo.BIZ
http://www.wecando.biz
I agree with you. They have been a lot behind in monetizing their 30 million users. They have started pushing Advertising into your LinkedIn inbox now. Soon it will become like your email inbox, littered with spam. Don’t like it at all.
http://www.jobsbyref.com
I agree Ian. As a Xing Premium member, LI premium member, I can make a clear difference between the 2.
Best Regards
Marieme
I can say that in the Netherlands LinkedIn is the standard, Xing doesn’t have any big traction.
I strongly recommend Mr. Lars Hinrichs to have a look to this graph http://tinyurl.com/6apd23 which shows the Linkedin, xing & Neurona (the company bought by xing to enter in the Spanish market) growth in Spain.
I think Lars has done a tremendous job at Xing. Building a company from scratch, making it profitable (plus the IPO) and converting users into paying customers is something that 9,999 out of 10,000 entrepreneurs never achieve. I wish him all the best for the future.
Hello,
Being a member of XING, Facebook and LinkedIn alike I would say, that XING is definitely the most divers network community that is based on a business ethics background.
Traffic doesn’t exceed as on Facebook sometimes, where people post just something on the pinboard.
Of course people earlier commenting are right that it is Germany-based and therefore probably has still difficulty to spread outside and around the world. Concerning the groups I moderate there such as “Lean Thinking” I am pretty sure that over the long-run the added-value of the network has (for me at least) not been outreached by others.
It is still challenging to see how it goes further and perhaps there will be another killer-app (such as Flock 2.0) that is combining all these communities in some way (a lean way:-)) so people can either stay in their familiar ones and still can pull on other ones without too much hazle and time.
Any innovative folks around that would be interested in getting this idea on the ground?
This would be really cool and choice, not destroying value but create even new value out of combining the network communities out there.
Cheers and looking forward to hearing from you
Ralf
(http://www.twitter.com/ralf_l)
I just dont understand the comparison really. LinkedIn is great for managing personal contacts, members to search for other members for job and sales prospecting, and their big value of hitting the online recruitment of talent.
Xing is to Europe what mySBX is to United States – The models are not about page views or hits but about meaningful engagment of businesses and professionals to effort forward results…
I fully agree on the later, it really is about value adding connections:-))
Best
Ralf
By the way — if you go to http://www.mysbx.com and see the learn more you will understand my point to the differences..
I’m on both Xing (paying) and LinkedIN. If you want to do business in Germany (partially Europe) you need to be on Xing. It is the clear #1 of choice with a much broader set of functionalities than LinkedIN. Also, LinkedIN (at least for me) – is so damn slow here & the look & feel not really made for Europe
I assume, indeed it will be difficult for LinkedIN to win the community over here.
Xing is simply an unbelievable success story! What other startup can say to generate 40% EBIT margin and generated over the last years sustainable profit. From the beginning Lars build a Social Network based on added value and charged for it. This needs guts – and he has it. Lars congratulation and lots of success in your future projects.
I agree Peters, Xing is great. Lars has made a great decisions. Sometimes strategies needs to change for a sustainable better result.
Best Regards
Marieme
That’s funny, I just googled the incoming ceo’s name and top of the list was his linkedin profile.
I am a paying XING member and the site is so much better than LinkedIn. I basicaly use LinkedIn and facebook for international and XING for mainly German contacts. Living in London with business in Germany and around the world, I have to jump between these two silos everyday. The XING business tools have been extremely useful to my company in Germany (www.squeaker.net – a career network) in finding employees, getting introductions, finding business partners etc. I wished LinkedIn were anywhere near that superb experience.
Plus: Monetization has been on the top of the list for XING, and they done well. Will LinkedIn ever find a buyer at a valuation of 1bn?
True, XING will face an uphill battle to grow internationally. Nearly impossible. I wished more of my international contacts would use XING, as it is simply better.
Totally agree Stefan!
LinkedIn works for me in the USA, and Xing in Germany.
I will have a look at your site.
Great point.
Best Regards
Mariéme
For France, Viadeo is by far the most interestng site. They overtook LinkedIn ages ago, many more people, more user-friendly, more services… Xing is nowhere in France
I agree Peters, Xing is great.