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Wednesday, April 09, 2008 

Fixing LinkedIn system for business referral

By: Alon Cohen & Ronen Mizrahi

Linked-In is one of the earliest business social networks and as such inspired great hopes of simple access to people for the purpose of doing business. The hopes were for direct or friend-assisted access to individuals you want to do business with, which may be in your network up to a certain degree of separation.

Many of those who actually tried using the network as business tool report a complete failure.

Seamus McCauley states in post at Virtual Economics: “Here’s the problem with LinkedIn - it doesn’t do anything. You sign up, you find some colleagues, you link to them and then…nothing.”

So have others, including Jeff Pulver, who completely gave up on Linked-In and moved to Facebook.

Our experience is that even using the paid version of linked-in for direct access does not help a bit. The only people you really gained access to, were the people you already knew beforehand, and all the rest of the millions on the network remained inaccessible.

One can only assume that Linked-in invested vast amounts of development time into the referral mechanisms just to discover that it doesn’t work in the real world. The network’s main value is apparently manifested as a repository of resumes and as an active update mechanism that generates notifications as friends find to new jobs.

The problem, as we identified it, was not the concept of the friendly referrals but rather the lack of incentive for people to propagate introduction requests, specifically in fear that they may not be up to par, and the lack of a method to evaluate the request and determine whether passing it on will undermine their reputation in the eyes of the receiving party or reinforce it. In other words am I doing the receiver a favor or am I wasting their time with junk. Plus what’s in it for me?

The idea is to create a clear incentive path and a tracking mechanism for deals that materialized due to referral actions taken by individuals, with the intention to make business introductions facilitated by a social network significantly more efficient when compared to pre-existing methods.

This is similar to the efficiencies social networks added to other forms of communications between friends such as selective sharing of news, photos and other personal data.

Business referrals among friends has been taking place in the world long before the Internet came along, yet it has not been made more efficient or monetized by social networks yet, like other social activities have.

The Internet and specifically social networks provide the underlying infrastructure to do just that with the potential to track the referral and its path in the network and to keep all parties updated with respect to the referral progress.

As an example if I knew that by referring a start-up to an NBC executive I will receive 1% of a multimillion dollar in case the deal is closed, I will probably do my best to forward the referral request, and even make an effort to find the correct next link to ensure higher success probability of the referral.

Think about helping an entrepreneur get to a VC for a few millions dollars deal, or any other deal that is not so hard to quantify. I am sure you can think of some as you read those lines.
Obviously the network will monetize its database by taking its own 1% commission from those “few” multimillion dollars deals.

The provisional patent described here was filed and it is depicting a method and mechanics associated with incentivizing and monetizing the referral system in business social networks such as Facebook, MySpace, Linked In, Xing, Plaxo or Pulse and can fit other social networks used for Dating and Matching, as such it is not limited to the business domain.
Third-parties currently working on social network projects and APIs (Google, Open Social and so on) may also implement it across several social networks such that the referral path may span and can be tracked across seemingly unconnected networks.

The inventors are happy to negotiate licensing terms with interesting parties that want to own the patent and its priority date.

In a year (April 7th 2009), this patent will officially lose its priority date and will be available, royalty free, to all social networks. Take that as our own contribution to the social networking world, and yes, we need this to work. We are already in discussions with few parties, so if you are the CEO of a social network straggling to differentiate and compete, or a Biz-Dev guy for that matter, with those companies, don’t let this slip between your fingers, be among the first to contact us.

For more information please contact Alon alonc@netvision.net.il or Ronen ronenmiz@gmail.com.

LinkedIn was never designed to be a "social" network, and so comparisons with Facebook or MySpace seem pointless, IMHO.

LinkedIn is more like a search engine that can help you find professional profiles that fit your keyword phrase(s), in a similar way that Google will find web pages.

Granted, if you are not directly connected to one or more of the people (connectors) that have networks of 500+ direct contacts, then the limited value of LinkedIn quickly becomes apparent.

That said, the vast majority of people that use LinkedIn don't understand the significance of creating a comprehensive online profile with descriptive keywords.

Moreover, they waste time attempting to attain referrals via LinkedIn, when it's often more affective to simply use other online tools to find the email address or phone number of the person you want to reach -- and contact them directly.

I believe that the ultimate business-oriented social network has yet to be created.

Really interesting points. Nevertheless, reports are that the Company has now surpassed $100mm in yearly revenues, are profitable, growing and was last valued at $1B.

Just think what they would be worth if they implemented some of your suggestions?

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