LinkedIn executives won smiles from Wall Street last October by disclosing plans to establish new and generally higher pricing for the site's premium subscriptions, which in the past have ranged anywhere from $10 to more than $100, per month. Now it's time to see if users will absorb those changes cheerfully, or turn furious.
Most of LinkedIn's 332 million users engage only with the social network's free features, which include the ability to post a career profile, connect with colleagues and do some limited searching for other people. Some power users, however, pay extra for better visibility, email and search tools that can help them find jobs, identify hiring prospects or generate business leads. In 2014's third quarter, such premium subscriptions generated $114 million for the company, or 20% of LinkedIn's total revenue.
Details of LinkedIn's new pricing initiatives have been seeping into the marketplace since November, but they all are being formally announced today. As many as a dozen older plans are being consolidated into four new ones, as follows:
- Job seekers now are being steered toward a $29.99/month premium package designed for them. Cheaper alternatives such as the $10/month Spotlight package aren't available anymore for newcomers, although LinkedIn says existing Spotlight customers can keep renewing at old rates.
- An all-purpose Business Plus plan is now priced at $59.99/month.
- The premium service for sales people is $79.99/month.
- A premium plan for hiring specialists, known as Recruiter Lite, is $119.99/month. (LinkedIn also offers a full-strength package for recruiters, sold separately by its Talent Solutions division.) On all plans, customers buying annual subscriptions qualify for slight discounts.
LinkedIn product manager Gyanda Sachdeva maintains that even if customers will be paying more, they're also getting more. She has a point. LinkedIn has cleaned up its search function for both free and premium customers, so that queries now yield full first and last names. Gone is a weird -- and annoying -- LinkedIn quirk of showing only first names and surname initials in many cases.
LinkedIn's own growth, too, makes the site more valuable to all its users. Many of LinkedIn's earlier subscription prices were established as far back as 2007, when the site had less than one-tenth its current membership. LinkedIn also has vastly increased its number of job listings in the past year. On a price per data node, LinkedIn's premium subscriptions now are far cheaper than they were a few years ago, even if monthly rates have risen.
In hopes of gently winning users' interest in these pay services, LinkedIn is offering one-month free trials of its premium services. Users then will be automatically migrated into the paid version of whatever they are sampling, unless they choose to cancel. In an October 2014 conference call with investors, LinkedIn chief financial officer Steve Sordello said that "while the free trial element will create a short-term revenue headwind, we are excited to deliver an overall higher-quality premium experience for our members that will positively impact the business over the long-term."
As recently as 2009, premium subscriptions were LinkedIn's biggest business line, accounting for 38% of revenue. But the company's economic engine more recently has been its top-of-the-line Recruiter offering, sold to big companies at prices that can top $8,000/year per seat. From a financial perspective, subscriptions have begun looking like a slower-growth, somewhat neglected part of LinkedIn's overall financial performance.
Even at its new, higher rates, LinkedIn's premium subscription offerings are relative bargains, compared to traditional business data sold by the likes of Dun & Bradstreet or consumer-credit agencies. But it's a different story if LinkedIn is benchmarked against social-media sites such as Twitter or Facebook, where advertising pays the bills and users are hardly ever charged for anything.
Expect LinkedIn to spend a lot of energy the next few months trying to frame its premium subscription pricing as great value for business users, rather than as an unwelcome cost for consumers. Still, LinkedIn isn't hiding its desire to get paid by people who use its site a lot to help their business objectives. This year, LinkedIn will begin showing active users how close they are to reaching free-usage caps that apply to their keyword searches.
As LinkedIn officials explained, there's a reason why some people keep searching for "Java engineers in San Jose," followed by "Java engineers in Palo Alto," and so on. Such usage habits are hallmarks of professional recruiters -- and LinkedIn has a long and successful history of steering these users into paid products. LinkedIn isn't saying exactly how many such searches in a month will trigger warning messages. But once users get above 70% of their monthly caps, they will be encouraged to switch to a free trial of premium services instead.
If LinkedIn is lucky, the conversion rate will greatly exceed the complaint rate. We'll see.
