Will Big Fish In a Small Pond Survive?

Race

If you read this blog, chances are you’ve heard of LinkedIn, the largest professional networking site in the world. It currently has over 35 million of registered users and the number grows by 1 million every 17 days. This growth rate might not be very impressive if compared to Facebook, but LinkedIn has been profitable for 2 years now and reportedly has $80 million in cash in their bank account. The private valuation of LinkedIn today is over $1 billion.

Today LinkedIn announced that they are moving into Germany with localized version of the service, which puts them on a collision course with Xing, the largest professional networking site in the country. The clash between global giant and local big fish deserves special attention. Let’s look at some numbers to remember:

Currently the LinkedIn user base in Europe amounts to 9 million. Last year they launched Spanish and French versions of their service and currently there are 200,000 registered users in Spain (population of 46 million) and 700,000 in France (population of 65 million). In Germany today LinkedIn has 500,000 registered users using English version out of 82 million population. In the other corner is Xing with over 6.5 million registered users. Although Xing has many language versions, it is safe to assume that a large part of this user pool are Germans. Xing is a public company, valued now at $182 million.

For us, Europeans, certainly language does matter because large part of European population does not speak or read English. This simple fact creates a market space for all sorts of copycats, essentially cloning the popular global services without any added value, except for speaking familiar language (no offence, Xing, it is not about your great service, but for instance in Poland there are at least 4 different clones of Twitter). Some of them gain ground and grow their user base significantly because, indeed, they offer a good service for their users. This phenomenon has been called by TechCrunch a copy/paste innovation.

I’ve been inclined to think that social networks have no real reason to be constrained by country borders. This should be specifically true for the 27 member states of the European Union where freedom of movement is one of the fundamental rights and people do move. Yet we speak at least 23 different languages in three entirely different alphabets. To what extent the language barrier is an obstacle to global social networks’ expansion in non-English speaking country? To what degree local social media incumbents, such as Xing, should feel threatened by the fact that a global player simply localizes their user interface? Will people abandon their local social network for the benefit of having one global professional identity and one global social graph? How quickly? I think this is the question that the LinkedIn vs. Xing competition will help to answer and I’m going to watch it closely.

What do you think? If you wanted to integrate your local (say: German) product in some way with professional networking service and if you had to pick one – would you now bet on LinkedIn or on Xing?

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4 responses to “Will Big Fish In a Small Pond Survive?

  1. Holger Zscheyge

    Hi Greg,

    interesting blog, interesting thoughts on LinkedIn and local “me-too’s”. I don’t get the big idea of “LinkedIn/Twitter/MySpace is entering the Spanish/German/Russian market”. Are we talking about a localized interface? I’ve seen open source projects on a shoestring budget starting with 20 language interfaces right away. Too little, too late.

    At the end of the day, it is about opening a local office to pursue local advertisers. If you start to think about your potential members (let’s make it easy for those non-English speaking Germans to use our service) at this stage, it’s too late. They are already at Xing, Lokalisten and whatever some twisted mind came up as a copy of it. You see it in Russia where those with English language capabilities are on LinkedIn, the rest (that’s 20 million by now) is on Odnoklassniki.ru. And they will stay there even if LinkedIn will sometime in the future gloriously enter the Russian market. Because you create content on those sites, you make friends there and you do not want to manage 10 accounts on different social media sites.

    So if I would have to integrate my product or service with a social network (and my target group would be confined within my country), than I certainly would go with the local incumbent (provided their local user base is bigger than that of the newcomer, of course).

  2. @Holger
    Thanks for feedback. I would agree with your point 100% but here is what keeps me thinking. Since 2004 it’s over 2 million people who moved from Poland to other EU countries. They develop their social relationships there (including online) while maintaining relationships with friends in Poland. Should they get tired with maintaining two different profiles, they would create a pressure on their friends to migrate.
    This pressure is supported by global brands like Facebook or LinkedIn and their exponential growth. Especially if they remove the language barrier (and FB already did in Poland). I’m not sure whether or not this will be enough to convert people from local me-toos to global networks or how fast but I think it is going to be a factor. We’ll have to wait and see.

  3. Holger Zscheyge

    Greg, absolutely, as soon as your network leaves the confinement of one country (friends or colleagues abroad), global sites are better positioned. Actually, they might be the compromise option if your friends pressure you or you pressure your friends to switch (although I am not sure on that). But with countries like Russia or China, which rely on non-latin characters, it would be hard to make anybody switch without true language support. Would it be Medvediev, Medvedieff or Medvedyev? I know that LI supports Cyrillic characters, but those two worlds seem to live mostly separated lives ;)). Anyway, it will be interesting to watch. Competition will lead to better service.

  4. Pingback: Facebook Leapfrogs Rivals in France « iSearchlight

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