Microsoft’s recent announcement of their intention to purchase LinkedIn surprised even the most well-connected technology reporter. If someone had told me Microsoft would offer $26.2 billion for LinkedIn or that Iceland would make a run to the Euro 2016 soccer quarterfinals, I would have sided with the tiny nation of 300,000 boisterous soccer fans. This marks Microsoft’s largest-ever acquisition, and might be instrumental to connecting its cloud business. The Microsoft – LinkedIn deal will also be the first major one by Microsoft CEO, Satya Nadella.
When I saw news of the purchase hit Techmeme, I had to back up and read the headline again because I assumed someone had accidentally used billion when they meant million. And while that’s a massive chunk of cash, even by Microsoft standards, the financial aspects of the deal are arguably the least interesting portion of the deal. Whether or not a company is worth its purchase price often takes years to determine, so I’m going to focus on the business potential of the purchase instead of the financials.
What’s LinkedIn? Value For Job Seekers & Recruiters
We’ve read the press releases and have now heard executives from Microsoft and LinkedIn describe it as the World’s Largest Professional Network but what does that mean? They have 430 million members across 200 countries. Around 2 million of those members are paid subscribers. Nadella described his newest member of the family as “how people find jobs, build skills, sell, market and get work done.” And while that’s a very ambitious way to describe it, LinkedIn does provide a lot of value for the job seeker and recruiter. This is generally how much casual users would describe the service.
A few years back, I began my job search by speaking with a recruiter I’d known for years. She was surprised when I told her I didn’t maintain a LinkedIn profile. This same recruiter described LinkedIn as the Facebook for job seekers, but that only captures a small part of what LinkedIn is. I’ve since spent a lot of time talking to those who use LinkedIn almost religiously, and they mention two primary benefits:
- Manage one’s professional profile, career achievements and skills.
- Connect with coworkers both present and past, and use those connections to take advantage of new opportunities.
LinkedIn includes many more features, but those two are the primary ones that have helped drive growth and adoption among professionals. I recently spoke with a friend who was leaving a senior marketing job at Microsoft. She had met with a number of recruiters to gauge a career change outside of technology, and each recruiter mentioned LinkedIn as the best place to start and one of the first places hiring managers will check when vetting potential hires. My friend was surprised to hear it was being used so extensively outside the technical sphere.
So that gives us a good idea of what LinkedIn is all about, but why would Microsoft, who is already an investor in Facebook, want to own LinkedIn?
Microsoft Buys a Social Graph To Connect Office365 Users
This might seem obvious, but Microsoft relies on others to provide the social graph to their products, and relying on others to make those decisions isn’t where Nadella wanted to be. For example, Microsoft has over 1.2 billion Office users but essentially no way to connect them.
That connection is key and incredibly valuable, and now Microsoft has a way to connect those users by integrating the features of LinkedIn into Office 365 and other cloud products like Microsoft Dynamics CRM. It will take some time to build these connections between products, but Microsoft has done this before and is well positioned to do it again.
If you have teenagers at home you’ve probably heard them discuss the intricacies of Minecraft. My kids play Minecraft for hours with their friends over Xbox Live, and those relationships and connections are something on which Microsoft places a high value. A lot of people believe Microsoft paid $2.5 billion to purchase Minecraft from Mojang, but I believe that’s only part of the reason. I believe Microsoft recognized how schools and clubs were using Minecraft to create social interactions among kids who enjoyed building, creating and sharing those creations with friends in person and online. Minecraft is merely the entry into introducing these kids to other Microsoft games, services and products.
Connecting over a billion Office users is big deal to Microsoft, and LinkedIn gives them a product to do just that. They tried with Skype. They tried again with Yammer, but neither has been very successful in driving new cloud business such as Office 365 or Azure services. Microsoft gave an example of LinkedIn providing Office users with a live news feed created by your professional connections. I envision a scenario where I’m unable to attend a meeting, but my LinkedIn profile knows that one of my friends was there and sets up a connection where her meeting notes are shared or sent to my inbox automatically.
Business often comes down to relationships and connections, and knowing how the dots connect can give one a big advantage. For example, before I accept a job at Amazon, I’m going to see if any of my connections have worked there before or work their today. I could ping them for tips on how to prepare for the interview, find out about the various departments and even learn about what parts of the offer are negotiable. We’ve all landed jobs based on our connections, and people are willing to pay a lot of money for a service that gives them a better chance at landing their dream job. Microsoft’s productivity apps combined with LinkedIn’s connections give them a powerful combination of products most every company needs.
LinkedIn Is The Glue That Will Connect Microsoft Cloud Services
A lot of business professionals are migrating their workspace to the cloud, and Microsoft has one of the best cloud offerings around. LinkedIn gives them one more reason to consider Microsoft Office 365 instead of Google Apps for Business. If Microsoft can integrate those business relationships and connections into their cloud offerings, you can bet anyone in sales or marketing will strongly consider Microsoft’s portfolio of products and services.
Back in the 80s, Microsoft brilliantly engineered a way to fend off challengers by making individual Office applications work together in harmony. I view LinkedIn as the glue Microsoft will use to link many of their cloud products, whereby the whole is greater than the sum of the individual products. This puts them in a good position to battle with the likes of Salesforce.com in the cloud-based enterprise CRM space with it’s own product called Microsoft Dynamics.
LinkedIn also brings a database of over 430 million professionals who are potential Office 365 customers. These aren’t just kids on Facebook who can’t afford Microsoft’s cloud products. I’m sure Microsoft plans to do everything they can to market their products to this new pool of customers. I also want to mention something that Microsoft didn’t fully touch on during their press release, but LinkedIn has seen big growth in China over the past two years. The sheer number of potential customers in China is something Microsoft cannot ignore, especially as growth in established products like Windows has slowed recently.
How LinkedIn’s Massive User Base Helps Achieve Microsoft Goals Faster
It’s important to understand Microsoft’s mission statement: Empower every person and every organization on the planet to achieve more. If you want to help individuals achieve more at work, it helps to get them up to speed on the needs and culture of the organization, and one can do that by speaking to a lot of people. Organizations need to understand the skillsets their employees possess and recognize where the gaps are.
I believe Microsoft looked around and realized that by buying LinkedIn they could achieve these goals faster than if they decided to build the network from scratch. LinkedIn had a 430 million user head start!
LinkedIn helps Microsoft achieve their mission statement at a time they are migrating products to the cloud. Sometimes the more simple explanation is the one that fits best, and that’s how I see his mega-deal playing out. Only time will tell if Nadella has other tricks up his sleeve.