Yesterday Microsoft announced it was acquiring LinkedIn for just over $26bn (£18bn). The move, which came a little out of left field and surprised many, is by far the biggest acquisition made by Microsoft.
You will remember the software giant paid paid $8.5bn for Skype in 2011 and bought Nokia’s mobile phone business for $7.2bn in 2013. The LinkedIn acquisition also eclipses the $19bn that Facebook paid for WhatsApp in 2014.
In an email to employees at Microsoft, Satya Nadella – Microsoft CEO said, “This deal brings together the world’s leading professional cloud with the world’s leading professional network. I have been learning about LinkedIn for some time while also reflecting on how networks can truly differentiate cloud services.”
As Nadella explained in his interview with Business Insider, Microsoft asks three questions when looking at potential acquisitions:
- Does it help Microsoft expand the addressable market?
- Does it help “ride some new technology waves that are secular that are increasing engagement with users?”
- Is it core to Microsoft, “is it something where Microsoft can uniquely differentiate?”
“If you look at those three questions, LinkedIn checks all those boxes,” Nadella said.
So with these key questions in mind, here is why it makes total sense for Microsoft to acquire LinkedIn.
Because You Know It’s All About The Bass…Data.
With this acquisition Microsoft has obviously purchased a massive database of business professionals, which for the “world’s leading professional cloud” Company is a big deal.
But, what may be more valuable is that this database gives them access to millions of professional networks.
If you think of how many connections you currently have on LinkedIn. Your professional network is probably fairly substantial, built with a mix of colleagues, direct business connections, people you’ve networked with and potential new business leads.
With this acquisition Microsoft has the capacity to learn so much more about how people across businesses are connecting in today’s world.
They will be able to better understand what problems and challenges people are looking to address by building the relationships they do, how marketers launch their products to business customers, what skills are the most sought after currently by businesses and recruiters, and how businesses learn about and discover new leads.
For the Company that makes the most popular business applications and software, this information is huge.
As the CEO of LinkedIn, Jeff Weiner said, “The value of your network is greater than the value of the product or services that you provide”.
This is the value Microsoft will look to capitalise on.
A Lost Decade Of Innovation?
Microsoft have long been accused of lacking innovation. With the Guardian stating that because of the big leaps made by their competitors over recent years that, “Microsoft may have ‘lost a decade’ of market domination”.
With their recent acquisitions such as Nokia’s mobile phone business, many thought this would enable Microsoft to gain traction into mobile with some great new additions, but arguably this hasn’t materialised.
With LinkedIn, Microsoft has given itself another opportunity to add further key developments and improvements to many of the core offerings, with LinkedIn integration.
You can picture how powerful LinkedIn integrations could be in Dynamics CRM, video conferencing with Skype, their Slack competitor Yammer and naturally Office 365. With 59% of all LinkedIn members never working for a Company with more than 200+ employees i.e. the majority work at small/med businesses, this is the perfect market for Microsoft to expand its reach of Office 365 and many of its cloud offerings.
If you are a user of Dynamics CRM, how many ways could you envisage using it alongside a LinkedIn integration – probably a lot.
In fact this is something Nadella noted in his memo:
“The opportunity for Office 365 and Dynamics is just as profound. Over the past decade we have moved Office from a set of productivity tools to a cloud service across any platform and device. This deal is the next step forward for Office 365 and Dynamics as they connect to the world’s largest and most valuable professional network. In essence, we can reinvent ways to make professionals more productive while at the same time reinventing selling, marketing and talent management business processes”
That last phrase may give us an insight into already planned new offerings from Microsoft.
With 60% of LinkedIn’s income coming from job listings, could we also see Microsoft add a slick tool for recruiters to its products, or an expanded Dynamics CRM that works alongside your existing suite of office products?
Time will tell, but if they can get these integrations to work, which won’t be easy, and they can then use data captured around the challenges people are facing daily in their businesses from LinkedIn, then you can picture a great future for product development at Microsoft.
Social Network Market Share
LinkedIn describes it’s as the ‘world’s leading social network’, and it occupies space in the globes biggest social networks. With over 430 million users LinkedIn has a big social footprint and one that is attractive to Microsoft.
In recent years Facebook has been the dominating force in social. Not only with its size, but with its aggressive pursuit of emerging networks that may have threatened that dominance. You will remember that they tried very early to buy Twitter, which eventually didn’t happen, but have since gone on to purchase WhatsApp and Instagram.
Google have tried to break up this dominance with Google+, but it now appears that the search giant has started to withdraw from pushing the platform.
With the purchase of LinkedIn, Microsoft is able to enter the social networking market with one of the biggest remaining independent players.
In recent times LinkedIn has struggled in their transition to mobile and perhaps they haven’t had the engineering might that the likes of Facebook and Google have to throw at making improvements. So Microsoft has a phenomenal opportunity to use its engineering and financial resources to crack the areas in which LinkedIn has struggled.
If they can improve the offering LinkedIn has, and fix many of the issues users have been crying out for a while to just work better, then Microsoft has the chance to increase adoption and active users on LinkedIn, re-cementing its position as a major social player.
Although the purchase was announced yesterday, the deal is actually set to close closer to the end of the calendar year. This gives plenty of time for Microsoft’s engineers to work on the key product integrations they identify.
So if you’re a LinkedIn or Microsoft product user there looks to be some exciting times ahead. We will wait and see.
Update: On 8th December 2016 Microsoft announced it has completed the acquisition of LinkedIn