Networks such as Facebook and MySpace basically help us socialise and communicate with friends en-masse. LinkedIn, Xing and Viadeo concentrate on work-related communication on a variety of topics. The sites aimed at professionals, although much smaller than the ones for hanging out with friends, are having an interesting effect on job and job-search markets.

In many ways the world of commerce is a perfect place for a social network to flourish. Doing business, after all, boils down to managing a web of relationships with Customers, prospects, suppliers and others. Professional networks make it easier for people to maintain such relationships and to forge new ones. LinkedIn, for instance, has over 500,000 groups—some better than others—on specialised subjects that people can join to share ideas and make new contacts. Such connections may prove useful later on.

Research has shown that the more distant members of people’s professional networks are often the best source of new job leads. Job-hunters can also use their networks to gather intelligence about prospective employers and to solicit recommendations that strengthen their candidacies, and they can benefit from some of the career tools that networks provide. LinkedIn, for example, has launched a service that aggregates data it holds to show career paths for certain professions. So someone who wants to become, say, head of consulting at a large company in ten years’ time can see what sort of jobs have led to such roles for others in the past.

Online networks have attracted plenty of attention from corporate recruiters too. Olivier Fecherolle, the head of Viadeo’s French operations, says that for an employer the networks have several advantages over online job boards. One is that people visit them frequently, so profiles on the sites tend to be more up-to-date than those on job boards. Another benefit, he says, is that the networks’ rich profiles help recruiters get a good feel for a candidate without having to spend time on and delve into a detailed curriculum vitae.

But perhaps the biggest attraction is that the professional networks help firms to cut search costs.

Don Cooper, a recruiter at Intel, reckons that they save millions of dollars a year in fees by recruiting senior managers through LinkedIn rather than using headhunters or executive search firms. US Cellular, a telecoms company, says it saved over $1m last year by using LinkedIn that produced good candidates for its jobs faster than traditional recruitment channels.

Mr Piskorski of the Harvard Business School thinks professional networks have been successful because they offer a way for people to participate passively in the job market yet still claim plausibly that they are seeking out information to do their current job better. Companies put up with this, he says, because the benefit they get from better-informed workers more than offsets the cost of losing them when they get poached.

All this makes labor markets more efficient. By cutting out middlemen such as headhunters and executive search firms,  corporations save money. And by looking at rich online profiles of candidates, they can cut the time it takes to get the right people into jobs. Network users, for their part, get what Reid Hoffman, LinkedIn’s chairman, calls an “active sonar” system that publishes their skills to a broad marketplace with minimal effort and collects the responses that ping back with job opportunities.

Social networks have made the labour market more transparent in another way too. A survey by CareerBuilder.com of about 2,700 executives in America last year found that 45% of them looked at job candidates’ social-network pages as part of their research, and more than a third of those had unearthed information there that put them off hiring someone. Time to turn up those privacy settings?

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