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Online networks a magnet for job-seekers

The economic crisis slamming firms across the globe has sparked a spike in usage of professional networks — Xing and LinkedIn are key sites — as people hedge against losing work and laid-off employees seek jobs.
/ Source: Reuters

Janel Landon, who runs a small PR consultancy in Chicago, has long been aware of the potential of online networks: now in her mid-50s and facing a global recession, she's decided to sign up.

"Given the state of the economy, I recently decided to jump on board," Landon told Reuters. "Professional networking is a 'must do' during unstable economic times."

The economic crisis slamming firms across the globe has sparked a spike in usage of professional networks — Xing and LinkedIn are key sites — as people hedge against losing work and laid-off employees seek jobs.

U.S. unemployment hit a new 14-year high in October and according to online job advertising firm Monster, recruitment activity on the Web plunged to its lowest level in nearly three years. Jobless rates are also rising in Europe.

Traffic on the world's top professional Web networks has surged since the financial crisis started to make headlines, with top player, privately held LinkedIn, notching 25 percent more registrations in September than forecast.

"Nobody has ever seen anything like this before," said Kevin Eyres, head of LinkedIn's operations in Europe. "Now we are growing by almost one new user each second."

Membership on LinkedIn has jumped to more than 31 million from 18 million at the start of the year, growing fastest in the financial services, media, education and technology fields, Eyres said. The firm has not disclosed any financial details.

"Given that a lot of professionals are currently losing or are worried about losing their job, it makes sense that career-focused social networks such as LinkedIn should see a boost in traffic," said Martin Olausson, director of the digital media strategies unit at research firm Strategy Analytics.

He estimated the size of the online professional social networking market at about $170 million this year.

Professional sites seek to distance themselves from social networks such as Facebook with their more sober approach, and by giving members more control over their profiles.

Richard Evans, director at U.K.-based Sheridan Evans Executive Search, said he has seen a rising number of requests to connect on professional Web networks: these are increasingly about the need for a job.

Sheridan Evans uses both LinkedIn and Xing, but also Paris-headquartered Viadeo and the largest address-book site Plaxo, to identify potential candidates. It has directed many people to their new jobs using such networks, Evans said.

"The recruitment industry in general is being hit hard. In financial services it's clearly very bad. In construction it's bad. In retail it's getting bad," said Evans, adding a shortage of senior management was supporting the headhunting business.

Already an estimated 150,000 jobs have been lost globally in the financial sector alone, with more widely expected to go in investment banking and trading.

Arun Patre, a 25-year old analyst at a financial consultancy in India, said he has been looking for jobs on LinkedIn: "The economic situation has prompted me to widen my network as you would never know where things might turn lucrative."

Growth versus profits
LinkedIn said it had seen a slight fall in job offers, but no sharp declines, whereas smaller peer, Europe-focused Xing, reported increasing traffic toward job adverts.

But with the downturn hurting the recruitment business and advertising, social networks have struggled to find a balance between sharply rising usage and profitable growth. LinkedIn said last month it would cut 36 jobs -- 10 percent of its staff.

Both LinkedIn and Xing offer premium, paid-for services.

Hamburg-based Xing, which has 6.5 million users in total and whose half a million premium users pay 5.95 euros per month for extra services, has also seen a jump in registrations and connections to record levels, and believes the crisis could open opportunities to grow through acquisition.

"The crisis is very beneficial for us. We are debt-free, with over 40 million euros ($50.5 million) in cash, and the prices for competitors are dropping significantly," said Xing Chief Executive Lars Hinrichs.

Xing, the first online community to offer its shares to the public, is expected to report 2008 sales rising 77 percent to 34.7 million euros, with profits rising even faster, according to a consensus of analysts provided by the company.

"Anecdotal evidence suggests the macro slowdown might even boost subscriber growth and therefore Xing's core revenue source," HSBC analyst Dominik Klarmann said in a research note.

Looking for job
The fast-growing phenomenon of social networks has over the years attracted intense interest from investors and companies like Microsoft and News Corp, and earlier this year the largest U.S. cable service provider Comcast bought Plaxo.

Soumitra Dutta, professor at European business school Insead and co-author of a recently published social networking book "Throwing Sheep in the Boardroom," said new online ties could often lead to someone's next job.

"Networks are very good examples of weak ties. Traditionally it has been thought that we need strong ties to get jobs, but we often get jobs through weak ties, not strong ties," Dutta said.

This worked for Bryan Webb, a 57-year old sales manager with a manufacturing company in Canada. It took him a while to build up a network to find a job after he joined LinkedIn, but it paid off last year.

Webb started by sending an application in response to an advert, but later found three people from the firm including the head of operations in his LinkedIn network.

He asked his network friend to pass on a recommendation to a third person, who was connected to the chief at the new firm.

"I still don't know who it was ... but it really made the process smoother and got me the job," Webb said.