LinkedIn was founded on the premise that people could link together and network. As it grew and morphed, it has ultimately become a staffing company, one that now has the power to disintermediate the entire staffing market.
What LinkedIn has going for it is a database of constantly updated prospects. There is no recruiter who has a better database. This is not a strategic competitive advantage for LinkedIn, but arguably, it could take any potential competitor a long time to build up a comparable list .
LinkedIn, like staffing companies, sells its services with a direct sales force. They are reaching out to corporations to sell services to help corporations recruit talent. If you don't think that is what LinkedIn is doing, I suggest you read up about them.
This is from LinkedIn's Prospectus:
"We provide enterprises and professional organizations of all sizes with solutions designed to identify specific talent within our global network, enable their employees to be more productive and successful, build brand awareness, and market their products and services. Enterprises and professional organizations that use our solutions include large corporations, small- and medium-sized businesses, educational institutions, government agencies, non-profit organizations and other similar entities. Our current products for enterprises and professional organizations include hiring solutions, marketing solutions and premium subscriptions. Our hiring solutions are transforming the talent acquisition market by providing unique access not only to active job seekers but also to passive candidates who are not actively looking to change jobs. Our marketing solutions enable enterprises to reach a large audience of influential and affluent professionals and connect them to relevant products and services."
With a market capitalization, based on today's trading, LinkedIn is valued at $8.9 billion. Based on market capitalization that would make LinkedIn the world's third largest staffing company behind Randstad ($19B) and Adecco ($11.5B). So should staffing companies be afraid of LinkedIn? I would say yes, at least be very wary.