Next up in my series of interviews recorded at the World Economic Forum in Davos, Switzerland last week is Reid Hoffman, the founder and CEO of LinkedIn. I spoke to Reid for more than twenty minutes in the lobby of our hotel about a wide range of subjects, including LinkedIn’s product plans, fundraising activities and revenue.
LinkedIn has raised over $100 million in financing – roughly $75 million of that was in 2008 alone. The company has been profitable for the last two years, Reid says, and has $80 million in the bank.
I spoke with Reid at length about whether he’d consider a merger with Facebook (he’s buddies with most of the Facebook execs that attended Davos and was spending a lot of time with them). His flat out answer is “no,” there aren’t any discussions going on with them. And he insists that personal and professional networks shouldn’t be linked. At the very least they need to stay separate brands, he says.
Meanwhile, LinkedIn continues to grow like a weed, adding a million new registered users every seventeen days. With that $80 million in the bank and 2 years of profitability, he’s not being unreasonable when he says, near the end of the interview, “We’ve been profitable for the last two years, so when we want to IPO we can do that.”
The full transcript is below.
Michael Arrington: I’m here with Reid Hoffman, the founder and CEO of LinkedIn. Thanks for taking some time with me, I’ve been hounding you all week and we’re at the last day of Davos. Before we jump into Davos, I have a couple of questions that I’ve been asking people that I’ve interviewed. So you’re staying here at the Club Hotel, we’re actually doing the interview here at the hotel. This is where they put all the Internet luminaries. Arianna Huffington is staying here. Sheryl Sandberg from Facebook. You’re staying here.
Reid Hoffman: and Chris DeWolfe
MA: Chris DeWofle is here. I was asking Chris yesterday about this wonderful two star hotel that charges five star prices and the first question is, do you have a Murphy bed in your room?
RH: I actually had one last year but this year I have a regular bed but it’s no better.
MA: So last year I had a Murphy bed and my room was mostly underground. But yours is ok?
RH: I’m on the 8th floor and have a good view of the mountains, it’s actually pretty good this year?
MA: What about the water controls for the sink and the shower, have you found they are kind of difficult?
RH: Well you know like any technology you have to master it.
MA: Yeah but there’s a lot going on.
RH: The funny thing is the lack of connectivity. This is the Internet ghetto and there’s limited wifi in the lobby and that’s it.
MA: You pay for it, 8 Franks for two hours, doesn’t work well, nothing in the room, we’re all racking up $1,000 bills on cell phones, whatever. How many trips to the World Economic Forum is this for you?
RH: This is my second.
MA: Ok so last year was your first year. When you came last year was it part of the Tech Pioneers?
RH: I don’t think so.
MA: You didn’t pay the massive $100k fee to get in did you?
RH: No.
MA: Think you’ll come back?
RH: Probably. The people here are incredibly high quality. Of course I’m not referring to you really but you know [laughs]
MA: I’m definitely editing that out [laughs]
RH: No but the people are great, I actually really like the breadth. The three conferences I really like is this one, Sun Valley Allen & Co. and TED.
MA: What was your favorite session so far?
RH: My favorite session was a NYSE exchange dinner.
MA: Did you lead any sessions?
RH: Privacy. And What is Social Computing Mean For The Enterprise with you.
MA: That was fun. Last Davos question: Last year, you took the Google plane back. Are you taking it back tomorrow?
RH: I haven’t been invited.
MA: How’s LinkedIn doing?
RH: Very well. We had a record Q4 in terms of revenue, growth. We’re profitable and have 350 people.
MA: Ok. Are you just barely profitable?
RH: A little profitable.
MA: You’ve raised over $100 million. How much of that is in the bank?
RH: Over 80%
MA: But didn’t you raise twenty something last year?
RH: We raised $73 million last year, and all of that is in the bank?
MA: what are you going to do with all that?
RH: We raised an extended round last year. The first was the money people to set the price, that was Bain. They gave us the right to extend it to include some key business development players, SAP, McGraw-Hill, Goldman Sachs.
MA: You didn’t need the money, so what are you going to do with it?
RH: we raised it because we were thinking of doing some acquisitions. If you do private acquisitions, cash is very helpful, if we find the right deal we’ll of course do that. As it turns out given the market turbulence it’s nice to have a thick bank account.
MA: You were valued at over $1 billion in your last round?
RH: Yes.
MA: How many users come to the site? Registered users?
RH: Over 34 million registered, 9 million in Europe, growing by over 1 million every 17 days. Twelve million people visit every month.
MA: How is the economy affecting your business?
RH: Everyone knew we’d get an uptick from job seekers, free agents, consultants. A pleasant surprise is the recruiting space, all of our customers are keeping or increasing their spend. Recruiting business is growing. We have three principle lines of revenue, advertising, subscriptions from users, recruiting tools.
MA: How can people use LinkedIn in a tough economy to get a job?
RH: Be present, fill out your profile, which will help people find you. It’s essentially SEO. Second, be active in using it. First, searching, if you are looking for contracting gigs, reach out to companies you want to work with, tell them you are available. Second, use the answers service. Ask questions that generate discussions. Or answer to demonstrate expertise.
MA: In December you took the CEO role back from Dan Nye. Your reasons for that are well published, but now that you are CEO again, what are you short term goals for the company?
RH: We have a number of tools but most people don’t know how to use them. Lots of ways of finding the right information. Focusing on product marketing or merchanidising them.
MA: So first priority is marketing, evangelizing. Second priority…
RH takes a phone call from Simon Levine at Accel.
MA: building on existing functionality is other priority. Any new big products coming?
RH: Last year we beta launched company groups. Create private discussion thread. Can filter in news, create news feed for a company any time their name shows up.
MA: foreign language support?
RH: We have Spanish and French. Can establish profiles in local languages. We’re very focused on Europe, makes obvious progression on new languages.
MA: Asia? Not as much?
RH: We’re looking closely at Asia and interested in it. Harder to get right. Have 9 million people in Europe now, so building on it makes sense. We have discussions in Asia, India is growing like wildfire.
MA: I’ve seen you hanging out here at Davos talking to Facebook execs. Merger coming?
RH: Facebook execs are my friends. Matt Cohler was sourced into Facebook from LinkedIn. I knew Sean Parker from Plaxo before he went to Facebook.
MA: Yeah but you aren’t answering the question
RH: There are no discussions on that topic.
MA: Ok so you’re denying those rumors?
RH: What rumors?
MA: I’m not sure [laughs] But from my point of view a merger would make a lot of sense and here’s why. Facebook is a social utility, you are a professional network. It seems to me that an obvious area of growth would be for them to be overlapping with you quite a bit, get more detailed information about resumes into Facebook and get into recruiting and things linke that. A merger would make a lot of sense.
RH: I can’t speak for Facebook, but their goals seem to be…they self describe as a social utility, what they mean is sharing a variety of social experience that matter to you. Pictures, which movies do you like, music, that’s the stuff that they’re focused on, its very different from what we do. The brands must be separate. MySpace is like a bar, Facebook is like the BBQ you have in your back yard with friends and family, play games, share pictures. Facebook is much better for sharing than MySpace. LinkedIn is the office, how you stay up to date, solve professional problems.
MA: Ok, but Facebook has eaten MySpace’s lunch. In all the international markets FB is absolutely dominating, and they’ll catch up to MySpace in the next year. Once FB consumes the bar, what stops them from consuming the office as well?
RH: The profile you establish is different. On FB, you want to look like a fun person, you go to parties, you drink, dating, not dating… None of that stuff is relevant professionally. Also what kinds of applications? There is no enterprise photo sharing, not what people do at work. Just like life, home life and friends, but need two distinct environments.
MA: IPO?
RH: We’ve been profitable for the last two years, so when we want to IPO we can do that.
MA: Thanks very much.
RH: Pleasure.
Great videos Michael. Maybe the WEF should be more open in terms of providing content like this via Youtube or wherever possible.
I once wrote a controversial article http://smartbab...ging-world.html where I argued that the job of an entrepreneur is not to change the world or to have fanatical passion, but to great great companies that make money.
Companies like Linkedin seem to me to be a great example of successful entrepreneurship. This is a web 2.0 company with a clear business model, strong user proposition, and most importantly, makes money.
Well done, LinkedIn!
Anjali Sen
http://smartbab...xy.blogspot.com
Why can’t you do both?
Great article, Mike. Don’t let all these haters get you down, and as for the people who spat on you and made you go into hiding – they will get what’s coming to them.
Keep writing great articles… Cheers!
Arrigton needs to practice this hiding thing. Start by not publishing the name of the hotel where he is staying.
I think the forum ended on the 1st. So does a google search:
http://www.wefo...g2009/index.htm
It would have been interesting to hear what he thinks about the rise of niche networking. Do niche networks built on Ning, CrowdVine, etc. eat away at their business or do they run compeletly in parallel. Same question for job boards. The job board hosted on 37signals or here represents it’s own professional network, only it’s based on interest/personality rather than my own rolodex.
Reid “got” the social space before anyone else. They guy is just flat out smart.
Yeah, the Paypal alumni stories are amazing. That company has basically been the most successful internet incubator ever.
The recruiting space is big money too!
cooljobsonline
http://tinyurl.com/7uj5ay
worth the wait. we all want to know what is going on with the self professed leading business social network.
Another great little article by Mr. Arrington. I always enjoy seeing this kind of casual talk with different CEOs etc.. They always have great insight and it shows where the markets at going.
These videos from Davos have been immensely informative, thanks a lot and I look forward to more.
Sorry…Reid is delusional if he thinks Personal/Professional networks shouldnt or wont converge.
The fact that Linkedin has been able to get by with such a crappy service for so long speaks to the opportunity in this market for someone to displace them.
I really shouldn’t reply to trolls.. but maybe I am being one too.
So your saying the electro music loving party animal, whose friends are all crazy ravers, but turns into respectable hard working professional at 8 AM on monday morning would want to show Clients/bosses pictures from his crazy Sat night.. etc. Or vice versa, if you met this crazy raver girl whose wicked fun, arty and cool, but doesn’t really get the corporate world.. would you want to show her your business skillset, your account executive position at you 9-5 work sheep life?
No, because the world is judgmental. Work =/ Real life.
Sam..you are way off base here, especially with your lack of knowledge in the professional and social network demographic.
It is inaccurate for you to imply that all users of social networking site, i.e. Facebook, go through “crazy Sat night”, meet “crazy raver girl who is wicked fun arty and cool and doesn’t really get corporate world”. Here is why.
Facebook crowd is not just immature college students.
1. Facebook demographic 18 – 25 years old = 19 million.
2. Combine Facebook demographic 26 – 65 years old = slightly more than 20 million
Interesting isn’t it? And guess what, the 35-65 are the fastest growing demographic on Facebook. There “may be” more business users on Facebook than the “crazy raver girl/guy type” on Facebook.
What I find interesting is that, hardcore LinkedIn users get really defensive when talking about Facebook and LinkedIn. Get over it. LinkedIn can keep their 41 years old demographic until they retire.
Demographic data taken from InsideFacebook – http://www.insi...-women-over-55/
I’m with Sam on this actually. Although he exagrerates to make his point, who really WOULD want to mix friends who post on Facebook with absolute abandon and litttle regard with your professional contacts? There are privacy settings but you can never relax knowing that rude comments made on your pictures by drinking buddies can’t be seen by customers. And you also seeem to end up walking a line with your own uploaded content where you are appearing professional enough to appease your business contacts, but trying not to look like you sake yourself too seriously to your friends and family. If I am honest, it just doesn’t work.
Of course, it’s less of a problem if your “professional network” is buddies at former employers, as most of LinkedIn is, but with a network that includes current or prospective customers merging the two just feels too risky.
I’m not sure demographic data means anything in this discussion. It’s all about context.
Ian Hendry
CEO, WeCanDo.BIZ
http://www.wecando.biz
I, for one, don’t want personal/work networks to merge.
I have a linkedin and facebook account in order to keep the two worlds separate.
SAME HERE. ABSOLUTELY CANNOT MIX BOTH
Yet here we are, talking about business-y stuff while logged in through Facebook…
I really liked the analogy for MySpace, Facebook and LinkedIn. And I agree that he probably doesn’t think that there can be any relationship between professional and personal networks. I think that while there probably won’t be any merger, it could make a lot of sense for them to have some sort of overlap.
http://dankalmar.com
http://schoolshift.com
http://twitter.com/dankalmar
“RH: We’ve been profitable for the last two years, so when we want to IPO we can do that.”
LOL, really ?
Go on then!
Or have you worked out some new great reason why that isnt a good idea? Perhaps there is a really good reason that you should’nt? Would SO love to hear that one.
(leave the integrity reason out)
There’s a simple reason not to go public. By not going public, the current owners retain ownership, control, and profits to themselves (while eliminating the pain of regulation (Sox regulations, for one), scrutiny of the public, and overhead of catering to investors.
Private companies are just that – private. Look at Cargill. One of the largest companies in the US, but remains private.
The second reason for not going public is that the current investors may feel that the current value as perceived by the public is less than what they estimate the value to be. This could be due to market conditions or secret knowledge and plans of the board. In other words, why sell something for less than you think it’s worth?
IPO is not the magic pill that’s perfect for everyone!
One problem: You have to believe a single word that he says about the financials and if you believe a start-up CEO about their private financials, I have an early stage start-up that you need to fund ASAP.
Yeah right, judging from their active users numbers, I don’t believe LinkedIn numbers are all that accurate. A lot of users are just creating an account and moving away.
Not to mention, LinkedIn has becomes one of the worst spam websites in the last year or so.
One more thing. The merger will not make sense.
LinkedIn wants 1 billion, which Facebook does not have.
Facebook wants at least 6 billion which LinkedIn does not have.
So there is no way there will be a merger.
As always you want the best overage of anything ask Mike..good work Mike.
Should go public soon. Facebook is going to eat its lunch. The sales people are using facebook more because they can see ‘other aspects’ of their customers like what kind of poodle they have and where they like to go skiing, etc. to help the sales people establish a more personal connection with their customers. To those who say they don’t want to mix personal / work networks, all facebook needs to do is to add a “co-worker” attribute to a ‘friend’ and allow the user to set permissions based on that, and your co-workers will not see anything you don’t want them to see on facebook. Once that feature becomes available, I just don’t see how much more LinkedIn offers that’s not already on facebook.
I disagree. I am with Reid and the others here, I do not see the two merging. That is not to say that there cannot be some overlap, but I know that I would like to keep my social life away from my business life.
I agree with anon8mizer that FB may yet eat LinkedIn’s lunch. Based on a bit of personal experience I seriously question the bench strength of some of LinkedIn’s senior leadership team, and it’s therefore a good thing Reid Hoffman has come back in. Although I also question the wisdom of separating personal from professional networks. Doesn’t seem to me to be the way younger folks work and socialize and interact online.
Finally, nobody should have to put up with the indignities you have Mr. Arrington. I know this may seem absurd, but it’s not personal. Enjoy your time away.
Great video and article Mike. What type of camera are you using for your interviews…Flip Mino maybe? Myspace(Bar), Facebook(backyard bbq) and LinkedIn(the office)…great analogy.
twitter.com/cliffdailey
Did Reid drop the F-Bomb in there?????
I thought I heard it too.
Yeah – it’s not in the transcript, but he slipped.
Great video and I totally agree with the separate view of your networks. I do not say the same things on twitter as I do on Facebook and vice versa. Linkedin is totally different and should be treated as such.
I don’t think that it’s an “all or none”, or a “go or no go” kind of proposition when it comes to mixing business and professional with social networks. I believe that it will happen as soon as it can be done in a safe, careful and controlled manner.
Your comment made me think Thomas. Maybe what we need is NOT to “mix” both but to be able to MINE both to gather as much intelligence on our contacts as we need, which we then keep off-line (or at least away from networks).
Contact management/CRM mining social networks would provide some answers when it comes to collecting all relevant information on business contacts and making good with that information.
Ian Hendry
CEO, WeCanDo.BIZ
http://www.wecando.biz
really? because the only ppl using LI to contact me these days are recruiters & people who need jobs
This company is worthless. I bet it will be penny stock soon after IPO.
This is an engaging interview especially for LinkedIn users.
Baidu does not require diversified! This is only my personal views, thank you!
linkedin is very active ,but many times i have login problems..after login page stuck & i just cant login.
So is Davos the trendy place for the startup crowd to hang out now?
Umm, no. They are not profitable and have not been for the past two years. Not sure how Reid is coming up with that conclusion.
As for the IPO, total BS as the private investors need the company to go public in order to sell their stakes and become liquid (ie the venture model).
They were on the verge of a profitable quarter in early 2008 but the economy swung them in the opposite direction.
If the company was profitable, Dan Nye would not have been asked to leave. If the company was profitable, there would not be flight of top management.
Reid really needs to tone it down.
Well the recruiter tools are pretty high margin. Allegedly 15K/year according to this source:
http://www.recr...551:Topic:76555
And with the economic turmoil potentially freeing up lots of talent that recruiters drool over combined with general desperation due to declining number of overall placements, it seems plausible that a fair number of staffing firms are ponying up for these tools.
We aren’t recruiters, so we don’t really see this market(ing) or its effects. I personally don’t think Reid is a liar.
I’m not a recruiter either but I did see their financials. He is lying.
Provide some evidence. I’d love to see it.
Ive heard the same thing. That Linkedin isn’t looking so good from the inside as Reid makes it sound.
I’d also like to have personal contacts separate from professional contacts.
I think LinkedIn has more intrinsic value than every other social network. I find it more credible and useful as a user. LinkedIn’s model are will be more apt to be sought after by advertisers because they can focus on who they are marketing to more effectively. I’d go out on a limb to say your average LinkedIn user probably make more money than your average facebook user.
You can read this and other quality blogs in an easy to read newspaper format at:
http://www.Libe...tynewsprint.com
Check it out.
I disagree with the other commenter. Michael Arrington is a real nice (!) and respectful guy. Watch the video if you don’t believe me.
Well, what I always say is talk is CHEAP! If he could, he would! Duh!
RT
http://www.real-privacy.us.tc
What can I say. Great article Mike. Keep it up. You’re among the best social media writers.
I thought Arrington said he was taking a break from Techcrunch?
(linkback) Believe or Doubt? LinkedIn’s Reid Hoffman: “We Can Go Public Any Time We Want To” [VOTE] – http://www.thri...rfail.com/122f6
I think Hoffman is absolutely correct in what he says about merging with Facebook. It may at some point make commercial sense (who knows) but the separation of business and personal networks is really appealing (to some, I think most). It seems to have happened that way quite organically, so why force it together. I just hope LinkedIn doesn’t lose the plot with application additions. Keep it simple and reasonably vanilla please.
Great interview Mike!
I think the overlap between Facebook and LinkedIn is smaller than Reid is claiming. In theory I think Work vs. Private should be separate, but in practice most everyone I know has a profile on both, and uses Facebook in BOTH a professional and personal manner.
Business Schools are a perfect example of an organization that is both professional and personal in their interactions. My MBA program has 1000 of users and groups on both platforms, and different alumni classes/programs are grappling with where to place their formal support.
I agree with Arrington, it would be great to see some type of integration between the two platforms, if not a full on acquisition/partnership.
Oops, typo… The overlap between Facebook and LinkedIn is “LARGER” than Reid is claiming.
if its profitable and he really isn’t doing anything with the money right now….. why on earth would he want to take it public?
I am just amazed what a quality and visionary guy Reid Hoffman keeps showing up to be, even if the interviewer keeps interrupting him (I know it was just in fun)
Thanks! I posted this interview on: http://www.twit...m/usinglinkedin
Martin