Last week, the world’s largest professional networking company, LinkedIn (LNKD, Financial), launched what it calls LinkedIn Students app. This app is a bid to address the challenges faced by imminent college graduates.
According to LinkedIn, the app is "tailored specifically for soon-to-be college graduates" to help them address key post-graduate questions, including filtering the types of jobs that students should search for, as well as listing the ones that are good for them given their various career choices.
LinkedIn’s core business revolves around talent acquisition. A majority of its income comes from companies recruiting via its innovative platform with very little attributable to job seekers.
As such, by introducing the LinkedIn Students app, this should not be confused with an attempt to begin generating more income from job seekers but rather as a move toward building long-term relationships with its users, who in turn can boost revenue generated from recruiting companies.
LinkedIn is currently going through one of its worst sessions as a stock after falling sharply following its fourth-quarter results early this year. The company’s growth prospects are finally coming under scrutiny, and this appears to have influenced investors’ perspectives on its current valuation.
While LinkedIn has been working on a student feature/app for some time now, it would appear the timely launch may have been done in a bid to provide investors with some perspective on what the company sees as a potential game changer in the future.
LinkedIn first introduced University Pages in 2013, and it seemed inevitable that something tailored for recent/soon-to-be graduates was next in line. The idea behind building relationships with students at an early age is not about what they would bring to the table when they sign up but rather the type of customer loyalty that the company could build in the long run.
This is the same approach taken by Visa (V, Financial) and MasterCard (MA, Financial) with students’ college cards. According to LinkedIn, “using insights from [the company’s] database of over 400 million professionals, the brand-new app helps [students] to discover jobs that are a best fit for graduates with your major, companies that tend to hire from your school and the career paths of recent alumni with similar degrees.”
This app essentially narrows down students’ search for their best job prospects by automatically cutting down the process. Of course, students can do all the searching and profiling themselves, but with this app, all that could be done by simply swiping and tapping with a finger on a smartphone.
User satisfaction is on top of LinkedIn’s priority list with regard to this app because, as I mentioned earlier, the goal is to build long-lasting relationships with these graduates. When they are impressed with the service offered through the app, then they will most likely remain loyal to the company’s network long after establishing themselves in the corporate world.
This also means LinkedIn would be in a better position to face the competition posed by rival companies and emerging alternative recruitment portals like freelance websites. As such, LinkedIn Students app is well in line with the company’s business model of improving relationships between job seekers, recruiters and its own revenue channels.
Enhancing job targeting and filtering features could mean that there will be higher hiring rates, which in turn will result in increased talent acquisition revenue for LinkedIn. In the future, the number of students who join the network via the LinkedIn Students app could well be an original revenue source if they choose to subscribe to one of LinkedIn’s premium memberships.
Conclusion
LinkedIn has introduced several products over the last few years to support its talent acquisition business. The acquisition of Lynda.com is viewed as another long-term play while its content advertising service has already started gaining traction.
The recently launched Students App will replace University Pages on May 16, with the company now focusing on helping students find the best career opportunities. The company says it will do away with the Education Homepage (University Pages) by "depreciating" the education hub page, decision board, the field of study explorer, University finder and rankings.
From a valuation perspective, the company’s stock price plunge may appear to have rendered it cheaper than before, but the decline in net income to negative territory means that it is riskier to own the stock.
As such, the best card to play here is the one that the company is holding close to its chest, the long-term domination of the professional networking marketplace and talent acquisition. For those buying the stock now, meaningful returns could be a couple of years away and not quarters as was the case a few months ago.
