LinkedIn, the professional networking platform owned by Microsoft, has recently been in the news regarding potential layoffs. With economic conditions deteriorating and fears of a recession growing, many tech companies have begun laying off staff. This has prompted speculation that LinkedIn may follow suit.
What is LinkedIn?
LinkedIn is the world’s largest professional networking platform with over 830 million members across 200 countries and territories. Founded in 2003, LinkedIn helps members connect with each other, find jobs, grow their careers, and build businesses. LinkedIn makes money through premium subscriptions, advertising sales, and recruiting tools offered to enterprises. LinkedIn was acquired by Microsoft in 2016 for $26 billion in cash.
Is LinkedIn profitable?
Yes, LinkedIn is a profitable company. In 2021, LinkedIn generated $10.3 billion in revenue, representing a 42% increase from 2020. LinkedIn’s net income in 2021 was $3.0 billion, up from $857 million in 2020. LinkedIn has three main revenue streams:
- Talent Solutions: LinkedIn’s recruiting products for enterprises contribute over 60% of total revenue.
- Marketing Solutions: Advertising and premium subscriptions account for approx 30% of revenue.
- Premium Subscriptions: Paid memberships for individuals make up around 10% of LinkedIn’s revenue.
LinkedIn has achieved double-digit growth for several consecutive years and has been consistently profitable since 2017.
What is LinkedIn’s employee headcount?
As of December 2021, LinkedIn had approximately 15,500 full-time employees globally. This was up 20% from 12,900 employees in 2020. The majority of LinkedIn’s staff is based in the United States, particularly in the San Francisco Bay Area where its headquarters is located. Other major offices are in New York City, Chicago, London, Dublin, Singapore, and Bengaluru.
Has LinkedIn laid off staff before?
Yes, LinkedIn has undertaken layoffs in previous years as part of larger restructuring initiatives. Some notable downsizing events include:
- October 2022 – LinkedIn laid off 960 employees globally, equal to approximately 6% of its workforce, citing macroeconomic conditions and a need to tighten resources.
- July 2020 – Around 960 employees were laid off, equal to 6% of LinkedIn’s staff, as the company restructured some sales and hiring divisions.
- June 2017 – LinkedIn eliminated around 3,730 positions, about 10% of employees, after Microsoft completed its acquisition.
The 2022 and 2020 layoffs both equaled around 6% of LinkedIn’s total workforce. The larger 2017 downsizing was tied to Microsoft’s post-acquisition integration strategy.
What factors might lead LinkedIn to further layoffs?
Here are some of the factors that could potentially compel LinkedIn to undertake additional layoffs and downsizing measures:
- Economic slowdown – With high inflation and rising recession risk, LinkedIn may cut costs including labor to protect profitability.
- Advertising decline – Weakening ad spending by businesses amidst economic uncertainty could hurt LinkedIn’s revenue.
- Hiring freezes – Lower corporate hiring means less demand for LinkedIn’s talent solutions products.
- Integration synergies – As part of Microsoft, redundancies may be eliminated to improve efficiency.
- Product prioritization – LinkedIn may refocus on more profitable product lines and trim others.
What is LinkedIn’s current hiring outlook?
LinkedIn has not imposed a comprehensive hiring freeze as of late 2022. Job listings on LinkedIn’s career site show thousands of open positions across engineering, sales, marketing, and other functions.
However, LinkedIn CEO Ryan Roslansky did announce in August 2022 that the company would “slow down the rate at which we are bringing new staff on board” amidst the uncertain economy. While still hiring, LinkedIn is expected to be more selective and strategic with headcount growth going forward.
What potential benefits could layoffs create for LinkedIn?
Here are some ways that layoffs could potentially help LinkedIn operationally and financially if they were undertaken:
- Lower costs – Reducing headcount decreases salary, benefit, and facility costs. This helps profit margins.
- Rightsize workforce – Layoffs allow aligning staff levels with business needs. Removes redundancy.
- Refocus priorities – Can help emphasize more profitable business lines and products.
- Increase efficiency – Eliminates overlapping roles or bloated teams to empower lean operations.
- Rejuvenate culture – Layoffs prompt remaining employees to work harder and avoid job loss.
- Bolster investor confidence – Cost-cutting can signal financial discipline and lead to higher valuations.
What are the risks of layoffs for LinkedIn?
While layoffs can have some benefits, here are some of the major risks LinkedIn would face:
- Damaged employer brand – Being perceived as unstable/risky by tech talent makes hiring and retention harder.
- Loss of skills and knowledge – Valuable expertise and institutional know-how disappear when long-tenured people leave.
- Lower morale – Layoff survivor syndrome causes anxiety, overwork, and disengagement in remaining staff.
- Disruption and instability – Operations suffer from loss of continuity and resources.
- Reputation impact – Tech community backlash and bad press hurts consumer and B2B credibility.
What steps does LinkedIn take during layoffs?
Based on past layoffs, LinkedIn can be expected to take the following typical steps:
- The CEO or senior executives inform managers about upcoming layoffs.
- Managers have to decide which direct reports will be laid off based on performance, skills, etc.
- Employees losing their jobs are privately notified and asked to transition knowledge before leaving.
- Remaining employees are told about layoffs through email, townhalls, and team meetings.
- Laid off staff receive severance pay, career transition help, and mental health support.
- Public PR statements explain the reasons for the layoffs and reaffirm company strengths.
LinkedIn aims to conduct layoffs in a humane, transparent, and responsible way to ease impact on those affected.
Could Microsoft’s acquisition impact layoff decisions?
It’s possible that Microsoft influences or mandates some layoff decisions as LinkedIn’s corporate parent. Microsoft could direct cuts to eliminate overlap with its other products and sales teams. The 2022 layoffs were the first since Microsoft bought LinkedIn, so its impact remains to be seen.
However, LinkedIn does operate with a high degree of autonomy. Its leadership team makes most routine business decisions independently of Microsoft.
Will economic conditions lead to layoffs at LinkedIn in 2023?
It remains uncertain whether macroeconomic factors will compel LinkedIn to conduct more layoffs in 2023. Much depends on:
- Depth and duration of an economic slowdown – Deeper downturn increases layoff odds.
- Hiring demand – If talent solutions remain resilient, cuts may be avoided.
- Microsoft strategy – Close oversight of costs could lead to workforce reductions.
- Advertising market – Weakness in this key revenue channel raises likelihood of layoffs.
Given the October 2022 job cuts, massive layoffs in the near term seem less likely unless conditions significantly deteriorate. But smaller targeted layoffs remain possible depending on LinkedIn’s 2023 business performance.
Conclusion
LinkedIn has demonstrated a willingness to shed jobs during periods of economic uncertainty or as part of restructuring initiatives. While unlikely to resort to massive company-wide layoffs, localized reductions in staff remain a possibility if growth stagnates. However, LinkedIn enters 2023 after having just trimmed 6% of roles, meaning substantial near term layoffs are improbable barring severe macro shocks.