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LinkedIn: How it’s changing business (and how to make it work for you)

Shortly after Sallie Krawcheck got pushed out of Bank of America, the high-profile banker found herself in need of a professional makeover. As she tried to figure out what to do next, she wrote a few newspaper opinion pieces to build her reputation. She didn’t get much response. When she published something, she’d hear from a friend or two, but that was about it. Then, last fall, LinkedIn recruited her to be a member of its Influencer program, which publishes blog posts and promotes them to the social network’s members. In an early piece she offered advice on being fired. “No one cares about it nearly as much as you do,” she wrote.

LinkedIn readers loved it. The piece has garnered 212,000 page views to date, and several other publications have excerpted it. More than 1,300 people have commented on it, and for the most part their comments are civil, because they have logged on to LinkedIn with their real, professional identities. Not all of Krawcheck’s posts were so popular, but her writing consistently found a large audience, and so far 200,000 LinkedIn users have signed on to “follow” her. So in May, when she purchased the Wall Street women’s network 85 Broads, she broke the news on LinkedIn. Says Krawcheck: “I was really interested by the engagement that occurred. I just can’t beat the professional audience I find there.”

In the past year LinkedIn has emerged as one of the most powerful business tools on the planet. Long considered a repository for digital résumés, the network now reports 225 million members who have set up profiles and uploaded their education and job histories. These days they’re doing far more than prospecting for new gigs. LinkedIn users are building professional portfolios that showcase their best work, from publications to videos to PowerPoint presentations. They are relying on a growing array of LinkedIn apps, like CardMunch, which lets users scan business cards to upload contact information. They’re recommending one another for particular business attributes. And increasingly they’re logging on to read LinkedIn Today, which aggregates news from myriad sources, including LinkedIn Influencers like Krawcheck, Jack Welch, and Martha Stewart. Thanks to new features like those, the number of users who log on at least once a month on desktops alone (excluding mobile, that is) has climbed to 141 million worldwide, according to ComScore, a 37% jump over last year.

Among recruiters, LinkedIn has become the standard — 88 of the Fortune 100 have licensed the software to help find and track potential job candidates. But as new social technologies force businesses to shift from broadcast communications to two-way dialogues, LinkedIn’s utility is moving beyond HR departments. Citigroup has used LinkedIn as a platform to power Connect, its marketing effort to reach women. NetSuite is testing out a new LinkedIn sales product that provides insight into potential customers’ social networks. Dell is using LinkedIn for follow-up surveys of attendees at its annual Dell Women’s Entrepreneur Network conference, among other things. And this is just the beginning. LinkedIn has built a tool that allows it to push beyond recruiting into other business services such as sales, publishing, and technical training. In fact, it’s hard to overstate the potential power here: As it reaches critical mass, LinkedIn is becoming the dominant global forum for businesses of all kinds.

Much of LinkedIn’s success can be attributed to the hybrid nature of its business. Wall Street values it as an enterprise-software company. Even as the stock prices of its consumer cousins like Facebook, Groupon, and Zynga idle, LinkedIn’s stock has surged 81%, to $170, since its May 2011 initial public offering. Investors appreciate its diversified business model, which includes revenue from individual subscriptions and advertising in addition to the service that the company sells to recruiters. Revenue soared 86% year over year, to $972 million, in 2012, while profits jumped 82%, to $21 million. But CEO Jeff Weiner considers LinkedIn a consumer-facing company. After all, its most critical asset — the resource that makes the business possible — is the information that users voluntarily upload. Says Weiner: “Without our members, we don’t have LinkedIn — as a platform or an ecosystem.”

Weiner likes to say that running a hypergrowth company is like launching a rocket. “If you’re off by inches at launch, you will be off by miles in orbit,” he tells me. We are hiking the Bay Area’s Stevens Creek Trail, a path that runs from Cupertino north to the Mountain View shoreline, just behind the fast-mushrooming LinkedIn offices. A transplanted New York native with a bit of stubble, Weiner likes to double-knot his tennis shoes once or twice daily and hit the trail for “walking one-on-ones” with his direct reports.

Weiner took over the CEO role from the social network’s founder, Reid Hoffman, in 2008. Hoffman, who is chairman, still spends more than half of any given week in the LinkedIn offices, and the two men have complementary styles. Hoffman is a former Marshall Scholar who read philosophy at Oxford, the visionary who foresaw the value of a platform on which people could express their professional identities. Weiner is a disciplined manager who has added quarterly hack days, an incubator program, and other processes to keep the company organized and help it grow. He calls an all-hands meeting every other week to introduce new hires and go over the company’s business.

Both Weiner and Hoffman imagine a future in which the professional social network plays a benevolent role in the economy. Hoffman expresses it this way: “If everyone in the country understood how to use LinkedIn, it would raise the GDP.” Weiner has a more elaborate theory. Just as Mark Zuckerberg refers to Facebook as a social graph that maps all human relationships, Weiner believes LinkedIn can be an economic graph. Sure, it will be the world’s largest professional network, says Weiner, but that’s only part of it. “Imagine a platform that can digitally represent every opportunity in the world,” he says. When everyone with a job — from a corporate salesman to a nurse practitioner to a construction manager to a fisherman — is connected and able to use those connections, then LinkedIn will provide a real-time measure of where jobs exist, where customers aren’t being served, and where people need training.

If that is the dream, Weiner has a practical, immediate goal for LinkedIn, one that benefits members at the same time it helps the company’s customers: He wants to connect everyone everywhere who has or wants a job in order to “match talent with opportunity.” Currently the site’s fastest-growing group is students, many of whom join LinkedIn as they are finishing college and beginning a job search. LinkedIn is available in 19 languages, including Malay and Turkish, and 64% of its members are outside the U.S. As these members log more information about their professional lives, the platform becomes more useful. In effect, Weiner and Hoffman have built a data company that’s more reliable because users update the data themselves. As one LinkedIn user who is also a customer explains, “There are other companies that sell you this information, but LinkedIn’s information is better because it’s more accurate. Heck, on LinkedIn people want it to be accurate. They are looking to be found.”

As I reported this story, I began to revise my own LinkedIn profile, adding the names and dates of significant stories I’d written. A colleague e-mailed: “Should I worry that you’re updating your LinkedIn profile?” he asked.

His concern reflects the common assumption that LinkedIn remains a tool for finding a new job. Indeed, an updated LinkedIn profile is arguably more important than a résumé for the 2013 job search. But the fact that my colleague noticed my increased activity reflects something else: People are paying attention to LinkedIn. If there’s information you’d like to share about your professional life, it won’t go unnoticed.

LinkedIn’s challenge has been to give its users urgent reasons to visit even when they’re not looking for a job. Shortly after the company’s 2011 IPO, LinkedIn’s engineering team rebuilt its infrastructure from the bottom up to make it insanely nimble. The technology has allowed the company to accelerate the speed with which it releases new products (and fixes bugs) from once every two weeks to three times a day. LinkedIn has redesigned the profile page so users can add more information, updated its search, and improved a tool called “people you may know” that makes connections. It has added rich-media capabilities so members can upload photos, videos, and presentations. And it has introduced “endorsements,” a gamelike feature that encourages members to recommend their connections for particular skills. (So far, 28 people have endorsed me for “social media”; unfortunately, just four have endorsed me for “storytelling.”)

The company is also tailoring its service to mobile users. It redesigned its apps for both the Apple iOS and Android so they are simpler and more intuitive. In addition to CardMunch, it recently launched Contacts, a free app that pulls all your contacts into one database and helps keep them current and organized. And in May, LinkedIn announced plans to acquire Pulse, a mobile news reader.

Perhaps most innovative, LinkedIn is remaking itself as a professional publishing platform. Weiner imagines that because LinkedIn can group users by job description, it has the potential to be a trade publisher. This effort began with LinkedIn Today, a daily digital newspaper that combines algorithms with the smart judgment of a small team of editors. Since it launched in March 2011, it has become a major source of referral traffic for business news publications like the Wall Street Journal and Fortune. Last fall LinkedIn launched its Influencer program and offered members the ability to subscribe to Influencers. More recently the company introduced channels. Members can now follow any of 20 different channels that pull together Influencer posts and news reports on particular topics.

Over time LinkedIn hopes to add information it collects from members, making itself a definitive source for business intelligence. Consider education, for example. Students still look to the U.S. News & World Report college rankings to determine the best schools each year. But what does “best” mean? LinkedIn has information about the jobs people get after college — if you want to be, say, a graphic designer, the service could show you the colleges whose grads got the most graphic design jobs. What’s more, LinkedIn could identify which skills are in demand and where they’re needed, and recommend the appropriate training.

The new features are beginning to have the desired effect. LinkedIn’s active users spent 20 minutes on the site in April, up 17% in a year. That might not seem like a lot — but readers spent just 10 minutes on the Wall Street Journal website in April.

LinkedIn has already disrupted the traditional recruiting industry. For years now, companies like Unilever have licensed LinkedIn’s recruiting software — which accounted for 54% of the company’s 2012 revenues — to find, for example, Chinese nationals getting postgraduate degrees in molecular food science at American universities to staff a Shanghai R&D facility. “We didn’t have to pay a headhunter,” says Paul Maxin, head of global recruiting for Unilever. Maxin says that among recruiters, LinkedIn is table stakes. (It’s no wonder LinkedIn raised its prices this spring.)

More recently, companies are becoming more strategic about the ways LinkedIn can help them connect to employees, potential job candidates, and the professional community at large. For 13 years Citigroup has worked to build its brand among women, mostly through an online personal-finance resource called Women & Co. A year ago the bank partnered with LinkedIn to launch a women’s network called Connect on the LinkedIn platform. A LinkedIn community manager tends to the group by posting videos and articles, starting conversations, and conducting polls. (A recent poll question: Does your employer offer “summer Fridays”? No, said 84% of the respondents.)

Citi has seen impressive results from its LinkedIn partnership. So far, 120,000 people have joined the group. Discussions hosted on the LinkedIn platform have an authenticity that is rare for a digital-only web venue. An Australian man looking for advice from female professionals posted a three-minute video he’d made for his company with a request for feedback; 242 members offered lengthy, useful comments, suggesting he cut the length and focus his message. The group has spawned a number of in-person meetings in cities across the U.S.

Citi’s marketing effort falls under LinkedIn’s second-largest business category, advertising, which made up 27% of its revenue in 2012. Companies spent $258 million last year on banner ads, marketing campaigns, and native advertising — sponsored stories that, as on Facebook and Twitter, show up in members’ news feeds on the LinkedIn homepage. The rest of LinkedIn’s sales come from a subscription service that gives individuals more access to one another’s networks.

Weiner believes that LinkedIn has lots of other ways to make money. A year ago the company began testing Sales Navigator, a tool that gives salespeople insight into their customers’ social networks. Jake Hofwegen, who runs the global sales operations at NetSuite, signed on early to try it. The tool offers NetSuite sales reps insight into whom their customers know. “It has helped us shorten our sales cycle,” Hofwegen says.

Unlike the recruiting industry, however, which had no similar tools, the sales industry already has several other vendors that sell data about social networks, including Jigsaw, a company Salesforce bought in 2010. LinkedIn will need to provide a superior experience to win business. The best way to do that, not surprisingly, is to entice members to keep improving their profiles — and spend even more time on the platform.

A curious aspect of LinkedIn’s rise is that the company has been able to build such a massive business even though the site’s design is not great. Sure, the idea of the service is brilliant, but the actual physical site can be confusing to the uninitiated. Nearly everyone I interviewed for this story, from recruiters to an American professor to a Peruvian entrepreneur, said it was confusing. “I know I need to figure it out better,” said the entrepreneur, a distributor of children’s clothing, when I asked her to show me how she used it. “I just need to put some time into it.”

That confusion would drive users away from lesser sites. Not from LinkedIn. In an age of short attention spans, LinkedIn’s members are doubling down, and the service has spawned an industry of people offering instructions on how to optimize it. Amazon lists dozens of books like How to Write a Killer LinkedIn Profile and LinkedIn for Dummies. (What’s crazy is that LinkedIn didn’t sponsor any of the manuals.) Career consultants are available to coach professionals on how to get the most out of the site. One analyst called it “SEO for my professional life” (meaning “search engine optimization”).

It’s been 10 years now since Hoffman made the prescient call that people would need a professional network in the same way they needed a personal network to construct a digital identity. At the time, as faddish websites from hi5 to Dogster vied to pull attention away from Facebook, LinkedIn seemed like the boring, nerdy network. Very little has changed about what LinkedIn has been trying to do, but that persistence of vision — the direction in which LinkedIn has aimed its rocketship — is its greatest strength. Because eventually nearly everybody you and I know will have signed on. Even those of us who are not active social networkers will cave in on occasion to the “Please join my network” requests that gather in our in-boxes. That’s what makes LinkedIn, regardless of how user-friendly the website appears, the single biggest repository for user-generated career data. Or to put it another way, that’s why LinkedIn is changing business.

This story is from the July 1, 2013 issue of Fortune.