The state of expert networks and the rising role of LinkedIn


It is some years now since ‘expert networks’ have become a significant force, linking subject matter experts in science, technology, and business to clients, largely in funds management and finance, usually at very healthy hourly rates. Clients such as hedge funds that are investing in particular sectors or companies want to know more about issues such as the viability of drug development processes, or when they can, about internal issues like staff turnover. A survey showed that over 40% of institutional investors found that expert networks were an “extremely” or “very important” aspect of their company research.

Clearly there is the potential for insider information to be made available if people are currently, or even possibly recently, employed by the company in question. The expert networks, most notably Gerson Lehrman Group, which is reported to control two-thirds of the market, have strict clauses in their agreements about what can be discussed by experts. But sometimes things go too far. An FBI probe into a consultant working through Gerson Lehrman Group was launched in December. The New York Times recently reported that after their success convicting Raj Rajaratnam of Galleon of insider trading, federal authorities are turning their attention to expert networks.

The reality is that LinkedIn has been used as a proxy expert network by many for some time now. Simply search by company and role, and you can find people who have recently left the company you are researching who may be willing to take on a ‘short-term consulting contract’. It is a little more effort to negotiate terms and make payments than it is on an existing platform, but it isn’t hard to do.

In a recent conversation with the CEO of a technology company that is a client of ours, he told me that his senior staff were frequently approached within a week of leaving the company to provide insights into the company. He presumed that there were alerts on LinkedIn to identify when people left so that they could be approached.

These alerts are not provided by LinkedIn, but can fairly easily be created using LinkedIn APIs. TechCrunch reports that Job Change Identifier and Bullhorn are examples of services providing alerts when people leave companies.

A few quick thoughts on the implications:
* LinkedIn could provide an expert network service (which I am sure they have at least considered and could be planning).
* A third-party expert network could be built on LinkedIn APIs.
* Investigations into the expert networks or other pressures could mean that some clients go to LinkedIn directly to identify possible expert advisors.
* In a world in which anyone can be easily connected, whether explicit expert networks exist or not, the potential for inappropriate flows of insider information increase, and regulatory challenges soar.
* Everyone needs to be aware of the potential of breaching insider information regulations.