Media Money with Julia Boorstin

Social Climbers: Companies' New Social Savvy


Business has always been based on relationships.

But now so many of those inter-personal interactions - cocktail parties, conferences, even hiring company meetings - can be replaced, or at least augmented, by virtual services. Trade all that handshaking for the click of a mouse and your network can expand beyond your backyard to the entire world.

While there are many competing social networks, there's only one leading global business network - .

This site enables connections between and within companies; it's the go-to site if you want to reach your boss' boss or the hiring manager at a rival company. With 43 million members it's not as huge as Facebook (250 million members), nor as glamorous. But LinkedIn is quietly chugging along, operating profitably since 2007. It's valued at $1 Billion based on its last financing, and it's reportedly considering an IPO. LinkedIn is one of the few social networks with a truly diverse revenue stream. It generates an estimated $100 million in annual revenue thanks to a combination of premium subscription services, self-service ads, and a corporate recruiting service.

LinkedIn has thrived through the recession as companies pare down staff and look for online solutions. You'd think that the corporate recruiting business would have suffered over the last year as hiring has come to screeching halt. In fact this part of the business has grown as companies cut back in their human resources departments and look for online solutions for key new hires. And the service seems to really work - it generates mergers and acquisitions, helps the unemployed generate job leads, and allows users to poll contacts or the whole network with a question. And everyone's doing it; executives at every single Fortune 500 company are members.

Other companies are going online in a more virtual way.

Linden Lab's Second Life is a virtual world known for its 3-D imagery and wacky avatars. But it's also a place for companies to establish a presence at very low cost. At first companies were simply using their presence in Second Life to reach the cutting edge users of the virtual world. But it's increasingly serving as a virtual way to cut real world expenses. Companies hold virtual conferences in the space. IBM invested about $80,000 to build a virtual convention center, saying it saved $350,000 on travel and productivity costs on its first conference alone. Northrop Grummanuses Second Life as a teaching tool. It's much cheaper to demonstrate and train employees on a virtual bomb disposal training tool in the virtual space than in real life. And according to IBM and Northrop Grumman, it works.

Meanwhile a company calls Ning allows companies or niche business groups to have social networks all their own. Ning allows anyone or company to build a custom social network, for free if Ning posts ads on the site. Ning hosts 1.2 million networks with 27 million registered users. Many of them are fan sites or for fun, but many are designed to help businesses. Saturn hosts a site for car owners, using the commentary and interactions on the site to inform design decisions. Nashville musicians have a site to help each other find jobs. The list goes on. What's impressive is that every special interest group doesn't have to bend its needs to the potential of the network, it can create the tools that work perfectly, just for them.

For full disclosure, CNBC and LinkedIn are parties to a content-sharing agreement.

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