Linkedin makes it possible for its members to acquire contacts and leads for a fraction of the cost of traditional lead generation methods. Here's how.
This is easy enough to understand if we're talking about tangible, commodity types of objects. I've got high quality widgets and am looking for people who need widgets and are willing to pay a quality premium. The concept gets a bit murkier when the object begins to become more conceptual than tangible. For example, dating services (and more subtly social networks) looking to promote emotional transactions.
Linkedin is unique. It is a network of networks. Its value is lies in its ability to connect people whose common intention is to expand their networks. If I sell widgets on the east coast and you sell widget holders on the west coast we can each benefit from accessing the other's contact list. Linkedin provides secure database technology and good tools for people to easily search it in very sophisticated ways. In exchange people provide the data.
I join Linkedin based on the expectation that I can expand the number and quality of my contacts in the world of widgets. I announce my self as a 'Widgiteer', and immediately the Linkedin technology begin the process of identifying other Widgiteers in the system. It's wizard helps me identify the ones I already know and quickly 'link in' with them. Next it identifies the ones that you might know but don't appear to be wired to either through your eMail, IM, or other supported messaging technology. The software then helps reach out and quickly wire these new people into my world. This process is repeated with each new connection. As we wire each other into our respective networks, the wizard identifies the 'widigiteers' we individually didn't already know and then give us each the chance to expand or widget worlds.
There are diminishing returns with each successive cycle and there are practical limits to how big a network ought to be. If my widgets can be described in mass marketing commodity pricing terms my contact list can be a lot larger than if they are complex and require a lot of individualized explanation. I don't want to waste my time trying to sell my widget to people who aren't interested in widgets, or my type of widget. With each new connection you risk diluting the quality of the list. The bigger the list grows the more the chances I've included people who don't belong. The compensating benefit here is that I may acquire a new customer, or might discover a new product that I could offer.
In the end I've connected with fairly well qualified individuals who are likely to be interested in my widgets and it doesn't cost me a single marketing or advertising dollar. That's simply good business