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Business

Linkedin Founder Predicts Consolidation of Internet Companies

Never mind the economic crisis, the internet will change the way people communicate, says Reid Hoffman. The founder of Linkedin told Deutsche Welle that his company has big plans for Europe this year.

Reid Hoffman, CEO of the social networking firm LinkedIN

LinkedIN CEO Hoffman says the Internet will change communication forever

Reid Hoffman is the founder, CEO and Chairman of Linkedin, the largest international professional networking site. Prior to founding Linkedin, Hoffman was Executive Vice President at e-commerce site Paypal. He is also an investor and a board member at various other internet companies.

DW-WORLD: Do you see an opportunity for internet companies such as Linkedin to actually benefit from the economic crisis?

Reid Hoffman: Benefiting from the crisis sounds bad. I do think that companies which empower individuals to be economically more successful hopefully will help us through the crisis and thereby it will help the whole eco system and the company itself. And I think Linkedin will be one of those companies because when you have a lot of layoffs, you have a reshuffle of economic circumstances, what now becomes more important is that individuals control their own economic destiny. They can become individual consultants, they could find other jobs or entrepreneurs can construct new products.

All these things are very important. Tools like Linkedin can be extremely good for this and I think other tools on the internet are also quite good. My previous company Paypal allows everyone to become a merchant. All these things can be helpful and I think not only is it important to use government action to try to work us through these troubled economic times, but also allow indviduals to pursue their own economic destinies better.

How has Linkedin felt the impact of the economic crisis?

We still look like we are growing pretty well. Maybe the growth is a little less than it would naturally be, but the company is doing quite well. Part of it is we enable not just corporations doing things like recruiting or finding experts. We also allow individuals doing job searching. Here is perhaps the thing that's not obvious: What's happening in recruiting is a company says we no longer need to recruit 800 people, but now we need to recruit 20. Well, Linkedin is the perfect solution for recruiting 20. So both the job-seeking and the recruiting side are booming for us.

In the whole business world there is a lot of downsizing, shrinking and merging happening. There are is wide spectrum of business networking portals, i.e., in Europe and specifically in Germany where I come from, there's Xing, there are others in Asia and Latin America. Do you see ta consolidation for your sector of the internet too?

I think that the companies that haven't gotten a certain strength in their business model and their revenue model will have difficulty raising capital. So I think we will see some consolidation. One thing about this cycle of internet businesses is that internet businesses are generally run on much lower cost structures. You don't need a strong revenue base in order to persist, so I don't think it will be nearly as much as had happened during the internet bust, but you will see some consolidation and reorganization.

Many people have signed up with all sorts of different networking portals like Facebook, Linkedin or Xing in order to see which one pans out in the end. It seems like Facebook has gotten a pretty good handle on managing all sorts of relationships and activities and a lot of business people are turning to Facebook as a one-size-fits-all model. Is that a danger for Linkedin, as a more specialized model?

We do see a lot of professionals also using Facebook. What we see them using Facebook, is what Facebook is used for. About fifty percent of Facebooks page views are photo sharing, the status update stuff is very cool, there's a lot games like poker and so on. So it's the same people that are using them. But, for example, if you are a journalist, you are looking for a source or an expert, or you are looking for the right person to do a deal with or to sell to at a company, or you are an entrpreneur and you are looking for advisors. For all those things, the functions on Linkedin are a hundred times better than they are on the social portals. So we don't really feel it's encroaching on our business use cases, but yes obviously some of the people who only formerly were using Linkedin, because they were 42 and a successful professional are now using both, but for different reasons.

How do you see the internet in general developing through this crisis?

The internet is transforming a lot of ways in which we communicate and collaborate. That was part of the idea in founding Linkedin. And I think it's a tidal wave. Maybe it gets accelerated in the troubles of 2009, but it's a massive transformation that's underway either way.

Where do see Linkedin going in Germany and Europe,do you have any plans to expand or introduce something new?

One of the reasons why I am here in Davos is we are going to be very serious about Europe this year. We have over nine million people in Europe. We are the largest European professional networking site. We are already in Spanish, we are in French, German will obviously be coming (the German version of Linkedin was in fact launched a few days after the inteview this week), as will some other European languages. We believe that we are already the best network to do cross European, we are also the best network to do internal for the U.K., internal for Scandinavia, internal for the Netherlands, so our goal is to achive that status everywhwere in Europe.

Let's talk about Barack Obama. He has been in office for roughly two weeks now. What is your sense of his first steps of his new administration?

I think he has been very good at being focused. That's extraordinarily important. From what I can see and I don't have inside information, but I can see him focusing on two things. One is stimulus package and fixing the economy. And he is soliciting ideas very broadly about how to do that well, which is very good, because it's open to a variety of new ideas. And the second one is the U.S. reputation internationally and communicating in the most tangible, possible way: We are a member of the world order, not ignoring it, not running roughshot over it. So I think those are the exact right things to focus on. You have to get to a bunch of other ones later, but those are the right two things to start focusing on.

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