LinkedIn Top-Down Market Sizing

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LinkedIn Top-Down Approach to Market Sizing

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Note: This post is part of a series on 8 B2B Market Sizing Approaches to Quickly Assess Market Opportunity

Top-Down Market SizingThis is a B2B market sizing approach that enables you to quickly estimate the number of companies by size, geography, and industry. The accuracy of this approach will vary depending on the penetration of LinkedIn in a given market. The best way to get a sense of the accuracy of this approach is to compare the penetration of LinkedIn to a given country or sector type. If this data cannot be found, the best rule of thumb is that this approach tends to work best with white collar and more technical industries.

One benefit of this method is that it has few duplicates and gives a more conservative view of the market as all of these companies can be voiced by actual individuals that work for them.

When is it Useful?

This is a worldwide top-down market sizing approach whereby you utilize the LinkedIn directory to quickly estimate the size of a given market based on its company search criteria.

Sizing a market with this approach can be done in no more than an hour, so it is great for validation and quick assessments of market opportunities with a limited investment of resources.

This makes it a great approach for:

  • Evaluating the potential of target market segments.
  • Getting a quick read on the potential market for a new product or product functionality and an acquisition target.
  • Validating other market opportunity assessments.
  • Other sizing situations that are not as sensitive to precision and have either tight time or resource constraints.

Market Definition Restrictions of the Approach

This approach is most successful when targeting markets that have high LinkedIn penetration. LinkedIn’s penetration is strongest in the US and with college graduate-led businesses. The network has made strong inroads into many other geographies and continues to grow in popularity amongst non-college graduate groups. It has over 225 million members in over 200 countries, which only accounts for a little over 3.2% of the entire world’s population. Consequently, this approach is best served in western markets with large percentages of college educated employees. There will be a sharp drop-off in accuracy with this approach when you get outside of these markets.

Markets can only be defined by characteristics that can be accounted for in LinkedIn’s company searches. These attributes include LinkedIn location, industry, employment, revenue (indirectly), year founded, ownership status, company age, hiring status, popularity on LinkedIn (number of followers), and specialties and description keywords.

Pros

  • Sizing a market can be done in a couple of hours, so it is great for validation and a quick assessment of an opportunity with a limited investment of resources.
  • Double counting companies and including companies that have gone “out of business” is not as big of a concern because LinkedIn has live members that vogue for each of these companies by listing themselves as current employees. These individuals also self-police the double counting of companies by reporting double listings.

 Cons

  • This approach provides a good estimate in terms of magnitude, but cannot give precise counts.
  • This approach does not provide a list of targets when completed only a count.

A Step-by-Step Guide to Set Up and Execute a LinkedIn Top-Down Market Sizing

Step 1: Determine your market definition. LinkedIn can only be used to size markets when the definition can be applied via the criteria it has available in its search function. Some of these characteristics require a premium account to access via the company search user interface.

Step 2: Figure out how to best apply the market definition via the LinkedIn company attributes. Below are the parameters that can be used and a short description on how they can be used and accessed:

LinkedIn Top-Down Market Sizing

  • Geography: Very flexible in this regard and is confirmed by members on LinkedIn, to the data is very accurate. This approach allows for sizing based on cities, metropolitan areas, regions, states and countries.
  • Industry: You are restricted to LinkedIn’s sectors which often times can be too large for what you are looking to size. Generally, you can qualify them pretty well with keyword search additions.
  • Keywords in Description: This is a good way to qualify companies that cannot otherwise be qualified. This is done via the search bar. It searches the company description and skills for matches.
  • Employment: This can be achieved via the self-reported company ranges, which are easily accessible, but not as accurate. It can also be achieved via the “Number of Employees” that are listed on Linked for each company. However, accessing this data requires either manually reviewing the companies returned in a search or accessing the LinkedIn API. Number of people listed on LinkedIn is a great proxy for actual number of employees that a company has in markets where LinkedIn has significant presence, but either of these approaches for gathering this information are very time intensive.
  • Revenue: This can be achieved indirectly using a publicly published revenue multiplier if you are also using industry qualifiers. It will be more difficult to come by otherwise. Many sources publish employee multipliers, so you should not have to look far to find these. You will have to look through the sources to find a match for your industry definition. One thing to keep in mind is that using a multiplier does throw off the accuracy of your estimates because you are adding an additional assumption to your model.
  • Founding Date: Can be accessed via a Premium account or via the API. This is only sometimes an option.
  • Companies that are Hiring:  You can restrict to only companies who are currently hiring on LinkedIn.
  • Company Type: Whether or not it is a public or private company. This requires you to either collect the data by visiting each company profile, pulling it via a LinkedIn API or having a premium account.
  • Number of Followers: This can be a proxy for brand awareness/popularity. I have never seen this used as a market descriptor but it could be used as such for this type of exercise.

For larger market opportunities that are not clearly defined via LinkedIn attributes, it is best to break down into parts based on the industry parameter. This will also help you come up with more accurate ASP figures later as well. Companies can only be listed in a single industry so you do not have to worry about double counting.

  1. To get the estimate just press search, and the counts will appear next to the specified geography.  These are number of unique companies.  Depending on how many opportunities exist at a specific company, this will be the count or have to be multiplied by a multiple to achieve number of potential opportunities.
  2. Now you will have to apply this figure to the average sales price to get a market opportunity value estimate. Make sure to annualize these prices so you have a one year value. That will be easier to convert into multiple year opportunity estimates or evaluate your addressable market.

Example of LinkedIn Top-Down Market Sizing in Action

Question: What is market size for firm who sells to US-based architecture firms with greater than $2.5M in revenue and an ASP of $5,000 per year?
How many US-based architecture firms are there with greater than $2.5M in revenue?
  • Employee to Revenue Conversion: 20 employee minimum
  • Identify parameters and determine if need to qualify by advanced keywords search.
  • Determine if opportunity at firm or location level.
  • Pull counts by company size ranges
  • Estimate composition of company size range that overlaps cut-off point using alternative source like Census Data.
  • Apply conversion ratio to LinkedIn estimate and calculate number of opportunities:
What is the overall market opportunity for this firm?
  • Target Market Opportunity = Number of Opportunities * ASP = (960+189) * 5,000 = $5,745,000

Additional B2B Market Sizing Approaches

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Marketing Manager, Pricing Strategy