White Papers

White Papers

Vertical Networks – An Ecosystem for every Profession?

Vertical networks are being created for a growing number of industries and professions. They are designed to meet the specific needs of their specialist audiences, unlike ‘one-size-fits-all’ horizontal networks such as LinkedIn that seek to serve all industries and every profession.

In order to quickly appeal to their sectors, vertical networks need to offer high value functions that make life easier for members. The US doctors’ network Doximity is a case in point: Because of its strict membership controls and security standards, it is the only channel through which physicians can email each other to exchange confidential information about patients.

A high value function can quickly establish a vertical network as an essential part of daily life for members of an industry or profession. In doing so it lays the foundations for the network to become the ecosystem of the sector, gathering a wealth of rich data about the membership and the marketplace.

Some investors see great value in creating such ecosystems. Substantial sums are being invested in establishing dominant positions within specific sectors. One example of this is Edmodo for the education sector, which has more than 51 million members around the world. Reid Hoffman, co-founder of LinkedIn, is an investor and board member of Edmodo.

Advertising, recruitment and premium membership are amongst the most common ways in which operators monetize vertical networks. But each sector has different dynamics and no consistent business model has been established.

The technical challenge of building a vertical network platform is getting easier and ‘white label’ platforms promise to make it even simpler in future. This will accelerate the creation of vertical networks in many niche sectors.

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Vertical Networks – Origins and Outlook

Business communications were the birthplace of social networks, but faded from the spotlight with the rapid growth of consumer-focused platforms such as Facebook and Twitter. These served to cultivate widespread acceptance of the principles of social networking and thereby made it more popular among business professionals.

LinkedIn has been the biggest beneficiary of this cultural change. Not only is it the most successful business-focused platform. It is also home to more than two million groups meeting a multitude of business needs. LinkedIn serves a horizontal market of business people in all sectors. Many LinkedIn groups go some way to serving the needs of vertical markets, though a lack of dialogue between group owners and LinkedIn hampers their potential to bring commercial benefits to either party.

This unfulfilled potential has contributed to the growth of specialist business communities outside LinkedIn. These have been described using terms such as ‘Vertical Professional Network’, ‘Social Business Network’, ‘Vertical Social Network’, ‘Social Professional Network’ and ‘Specialized Vertical Social Network’. In this paper they are described simply as ‘Vertical Networks’.

Vertical Networks are now attracting increasing amounts of investment. The primary determinants of ‘investment readiness’ appear to be the scale and value of the market vertical being served and the existence of sector-specific facilities that drive regular, repeated usage.

Many Vertical Networks have been created and their numbers are growing rapidly. But most are still experimenting with methods of generating revenue and few have yet reached profitability. It is speculated that major corporations in technology, finance and media are considering some Vertical Networks as acquisition targets in the future. Amongst the most likely purchasers of Vertical Networks is said to be LinkedIn itself.

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